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Mark Keenan looks at those aspects of the Irish economy which, after four years of austerity, stubbornly continue to behave like it's the good old days of 2007
BUDGET 2013 won't just be unlucky for some, but is likely to hurt all. Or almost all. It's likely to be the most painful yet on Ireland's rocky road to economic recovery as Finance Minister Michael Noonan moves up from the now bare branches that once held the famous "low hanging fruit" and takes his scalpel further up the tree as the troika prod and direct.
Now comes the real pain. Measures thought to be under consideration include means- testing child allowance, removal of automatic medical cards for the over-70s, property tax for all and means testing of farmer's stock as assets when means-testing their children for college grants. The trick for Mr Noonan will be to appear to be fair.
However, in recent months, the normally approving troika has been heard to emit more than a few genuine whistles of shock and disbelief as they encounter aspects and sectors of Irish society which continue to behave as if it's 2007 -- whether it is specific professions charging even more than they did in the boom years, sectors which so far appear to have escaped cuts entirely, or those still charging boom-era prices for services or taxes to the detriment of the overall economy.
Whether it's our high-priced 'big law' sector or the crippling taxes levied on battered businesses by broke local authorities, all these boom-era hangovers have a detrimental effect on the recovery and on the best efforts of the rest of us.
1. Boom-cost hospitality
Only in the pub industry do those who have lost so much business continue to increase the price of the product they are selling.
The typical pint cost €3.74 at the height of the boom in 2006 and now in the belly of the crash, it costs €4.50. Or if you're in Temple Bar after midnight, as many tourists might be, it could cost you €6.
This compares with €3.60 in Chicago and €4.32 in New York City, and ranks around 170pc higher than the European average.
A cup of coffee, meanwhile, used to cost under €2 in Dublin according to the Mercer's Global Cost of Living Survey from 2009.
More recent figures cite the capital's cuppa at closer to €3 -- more expensive than 'big city' destinations like London and New York and only slightly cheaper than Paris and Berlin.
The price of a pint and of a coffee is hugely significant for tourists, who use them as markers, along with food in restaurants and hotel costs, to determine how expensive a destination is. Not surprisingly, foreign tourist numbers went into a tailspin from 2007.
Figures by Eurostat from June last year showed that Ireland had the third-highest cost of restaurants and hotels in the EU -- only cheaper than Denmark and Sweden.
The June CPI Index shows Alcoholic Beverages and Tobacco up 4.3pc. The international UBS survey for tourism competitiveness for 2011 showed that Dublin had lost over half of its competitiveness for tourism since 2009 and much of this is down to our comparative high costs for tourists spending on the streets.
How does it cost the recovery?
It reduces competitiveness and kills tourism.
2. Boom-cost rates
While the Irish Small and Medium Enterprises Association (ISME) estimates that commercial rates to businesses have come down by just 3pc since the crash kicked in, turnover and profits required to pay boom-era rates bills have been decimated -- a recent survey by Vision-net showed 49pc of small Irish businesses are on the brink of collapse.
In the long-term absence of domestic rates, or residential property tax, businesses have had to bear the brunt of the burden for local taxation.
In the absence of boom-era development charges and cuts of 10pc in central funding, staff- bloated and broke councils are leaning on businesses even more.
The Dublin Chamber of Commerce estimates that rates paid by businesses now account for 40pc of all local authority spending -- an unusually high percentage compared with other European countries, were local taxation is shared by householders.
Mark Fielding of ISME adds: "Businesses are paying much the same as they were in 2007 in rates but now they're getting much less for it. In the past, rates covered them for waste collections, water and so forth."
The hangover of boom-era rates have now become a key factor in closing businesses and thus reducing the tax base further.
While local authorities will soon get their hands on domestic property taxes, the fact that so many of them are in financial difficulties means rates for businesses are unlikely to be cut in the immediate years ahead.
"We'd like to see domestic property tax and rates put into the same pot from which local authority costs are paid," says Mr Fielding. "But there's three chances of that happening. None, none and none."
How does it cost the recovery?
By crippling business growth and contributing to inflation as the costs are passed on to the consumer and tourist.
3. Boom-cost healthcare
Troika member Istvan Szekely, the Commission's director of economic affairs, was famously flabbergasted when he visited a GP in Ireland late last year -- pointing out that he was charged twice as much as in Brussels, where he lives -- a city not noted for being cheap.
Doctors have been among the professions accused of ripping us off since the boom ended, and many Irish GPs have, in fact, increased their cost of a visit since the downturn kicked in 2008.
Prices for a GP visit range from €40 to €70, with an average of €50 now the norm. There have been reports of patients being asked for €60 for a repeat prescription, leading the Irish Patients' Association to call for the first time for us to "shop around" for value in a GP.
Meanwhile, private medical health insurance has more than doubled since the crash kicked in with the equivalent of an old-style 'Plan B' policy from 2008, which cost €720 then, setting you back €1,622 today.
Ireland's 2,300 hospital consultants are now paid so much that Health Minister James Reilly was moved in June to say that their six-figure salaries "must be cut" after it recently emerged that more than 300 are earning more than the Taoiseach's €200,000 pay.
Their pay from the HSE, which has run from €135,000 to €250,000, compares with a range of €88,000 to €125,000 paid to their equivalents in the British NHS.
Even so, 70 consultants were fined last year for treating too many private patients at public hospitals while being retained for public service (with almost half of those 70 caught devoting more than half their time to private patients).
James Reilly said upon taking the reins at Health that there had been an automatic acceptance that medical inflation will always run at 9pc per year. "I don't buy that," he said. Just as well, because the Irish Medical Organisation has already said it will not discuss GP prices due to "competition law."
How does it cost the recovery?
The cost of healthcare impacts on everyone and is a major consideration for foreign direct investment companies considering locating here. The cost to the Irish consumer means they spend less elsewhere.
4. Boom-cost big name lawyers
Lawyers were the other profession singled out by the troika as charging exorbitant fees in Ireland.
However, not all in the profession are guilty as charged -- plenty of small practices are struggling to get by.
But a small number of big name firms continue to charge large and dominate the scene. ISME's Mark Fielding accuses the big name firms of "thinking they're in London".
"In fact, you could probably go to London and get a big name firm for cheaper in many cases.
"Our members are being crippled by banks calling in big name firms to perform legal tasks for rescheduled loans.
"Our members don't get the choice of who gets picked, but they have to pick up the big bill of €15,000, or whatever it is."
A handful of big law firms have been making hay out of Ireland's woes with big fees due from NAMA as well as from the Department of Finance and from big banks needing more due diligence.
Market sources say the big name firms are charging more than €400 per hour for the services of a partner, down to €100 per hour for the services of a trainee.
How does it cost the recovery?
It adds to the cost of everything -- from selling property, to rescheduling loans to the cost of running Government.
5. Boom-cost education
Irish teachers are paid 54pc more than those in Finland despite Finland's education system being ranked among the top three education systems in the world, while Ireland's didn't make the top 20 ( OECD).
In France, where results are more comparable to Ireland's, teachers take home 75pc less than the Irish muinteoir, who demanded 30pc pay increases in the boom on the basis of claiming creation rights for the Celtic Tiger.
Irish schools continue to stick with outrageously priced books (written mainly by teachers) when the technology has been around for years to put these on Kindle for a fraction of the price. However, slight changes continue to be made to books -- meaning that older versions cannot be reused and new versions need to be bought.
Like most public sector salaries on increment systems, teachers' and lecturers' pay has only gone up since the crash while the rest of us have experienced cut after cut to our salaries.
Ironically, third-level education is fast increasing its cost to the degree that private colleges are now looking cheaper in some instances (their enrolments are up 15pc to 20pc this year).
Meanwhile, Ireland's top 50 academics get more than €200,000, says information obtained by this newspaper under the Freedom of Information Act in 2009.
Professors get more than €138,00 and senior lecturers make over €89,000. The Minister for Education has already said that third-level fees will increase to €3,000 by 2015 while the Higher Education Authority has estimated that this could double to €6,000.
At the same time, hundreds of lecturers and staff are entitled to a free education for their children (490 at Trinity, 431 at UCC) -- a perk which is carried by other fee-paying students. The June CPI Index shows education costs up by 9.4 percentage points.
How does it cost the
recovery?
Restricting access to education has obvious implications for the future growth of the economy.
6. Boom-cost public sector
The increments system, which has guaranteed public sector employees increases in their pay at intervals through their career, means that public sector workers are now paid significantly more than in the boom years.
A recent report claimed that increments had cost the Exchequer more than €250m last year -- which works out at about €800 extra per civil servant.
Had this amount instead been spread across the entire workforce of 1.6 million, it would have been enough to add an additional 7.8 cent an hour to everyone's rate in that year.
Indeed, increments and increasing civil service pay were a key factor in causing the average Irish hourly rate of pay to rise, rather than fall since 2007, even despite recruitment agency estimates that wages had fallen by at least 15pc in the private sector, where almost all the unemployment has taken place during the same period.
How does it cost the recovery?
It dampens spending. Everyone else has to earn more to pay the tax to pay the annual increases for civil servants.
7. Boom-cost welfare
The Department of Social Protection now spends one-third of the country's total budget each year.
However, welfare costs have generally been cut back thanks to the elimination of wastage and of illicit and erroneous claims. But Ireland's €188 basic rate of jobseeker's allowance remains higher than the basic weekly wage in many former East Bloc counties -- whose citizens make up high numbers of the unemployed here -- and is almost twice as much as our neighbours in the UK receive. Recently, the IMF blamed high dole payments by international standards for "low exit rates from the live register."
How does it cost the
recovery?
There's a larger burden for remaining taxpayers, less incentive to get younger people working and a difficulty among businesses in filling lower-level service jobs with English speakers. The attractive benefits are also a draw for international dole tourists.
8. Boom-cost power and fuel
One of the first things the Government did when it came into power was to curtail the existing grants payable for insulating private homes and increasing domestic energy consumption efficiency.
Now gas, electricity and petrol prices are set to go up once again, not least because we buy the latter in dollars, currently strengthening against the euro.
The June CPI index showed energy costs up 9 points over the year with worse likely to come as tensions increase around Iran and in the Middle East, which is likely to cause petrol costs to surge further.
While there's usually little we can do about power and fuel prices, the Government is still estimated to be taking 70pc of petrol prices in tax (AA Roadwatch) and these have risen from €1.35 per litre in 2008 to €1.65 today.
A recent report by Byrne O'Cleirigh shows that Irish power and fuel costs have fluctuated in relation to charges in the rest of Europe. Business electricity costs were 37pc higher than the EU average in 2008 and are now the 16th most expensive today. Overall, despite our relative placing for prices, costs of power are expected to continue increasing through the next 10 years.
How does it cost the recovery?
Increasing power and fuel costs are the most potent ingredients for widespread inflation. Everything has to be transported.
