Pat Byrne: How we can light a fuse for change
There is no 'somebody' to do something about this crisis because that somebody needs to be you
Published 04/11/2012 | 05:00
LAST weekend, I took one of life's little risks by sharing my views in public, and I was heartened by the depth of outpouring and endorsement I subsequently received from members of the public for the simple ideas which I expressed in my interview with Brendan O'Connor on the Saturday Night Show on RTE.
It was just 12 minutes or so, but what a connection seems to have been made with people who obviously harbour very similar views and convictions on the way the Government has marginalised so many, and especially those business-owners and their employees in the small-to-medium-sized private domestic sector and those who have lost their jobs in this sector.
I have found it incredible that so many people have taken the time to articulate how they feel. I'm not a politician but a realist, and as I tried to get across on Brendan's show, an Irishman who cares deeply about what is happening to our country at the hands of politicians, many of whom are motivated by self-betterment, a wholly unfit public sector management structure, public sector unions who are drunk on the power bestowed on them by a couple of decades of 'social partnership' and an inner circle of elite 'experts' favoured with 'well-priced' public contracts. Of course, and not unique to Ireland, the banks continue to call the shots -- their way, unchallenged.
We need more voices to channel this cry for change and we need to find a way of joining the dots of disaffection into a well-structured and repeatable mantra that is focused on just a small number of crucial issues. To begin, we must resolve to put aside the old cliche of "somebody should do something about it" because that somebody actually needs to be you.
We need to recruit good people from our own business and social networks and get the challenge honed and aligned. Whether it is at family gatherings, social occasions or over pints in the pub, the fuse has to be lit.
Focusing on not the most crucial but certainly the most urgent of these issues, that of personal debt forgiveness, my plan is not complicated and is aimed at bringing about a workable solution with which all parties should be capable of living.
I believe that banks should offer to all of their private residential mortgage customers the opportunity to enter into
a voluntary personal debt re-structuring arrangement. This should not be specific to borrowers who unfortunately find themselves in arrears and in negative equity, but to everyone who wishes to avail of the method of personal debt re-structuring regardless of the status of their loan repayments and home equity.
This is not about debt forgiveness for the sake of it, but it is about giving the domestic economy engine what it so desperately needs -- oil, in the form of cash in circulation. The harsh reality is there is insufficient money in circulation to lubricate the local economy because people are so hard-pressed to make the mortgage payments and pay the essential household bills that there is simply not enough left over for discretionary spending. This is what has choked domestic Ireland and why jobs have been lost. The sheer nonsense of Government ministers talking about creating jobs is just that, sheer nonsense. Money in circulation creates the environment for enterprise and enterprise creates jobs. Water find its own level, always!
So back to my simple big idea for personal debt forgiveness. The banks should offer all of their primary residential customers a deal. The bank wipes off a percentage of the outstanding mortgage balance on a scale of say up to 25 per cent, depending on length of term to run, eg, 20 years being optimum. In exchange for this significant reduction in debt, the borrower agrees to surrender whatever interest rate set-up they are currently on and agrees to pay a higher rate of interest, eg 5 to 6 per cent on the newly slimmed down balance.
The borrower will see a significant reduction in the overall monthly outflow in respect of the combined principal and interest payment, and this provides the much needed oil that can start to flow in the local economy. Meanwhile the bank takes a hit on the write-off, but this has been somewhat provisioned for anyway in the funding given to banks by the taxpayer. The bank is comp- ensated to a large degree by earning 'super-profits' on the reduced mortgage balance at the higher rate of interest over the remaining term of the loan. The bank also greatly reduces risk of default and is forced to crystallise the reality of its loan book in respect of what is going to be repaid and what is fantasy. It's called recognising reality and moving on. In cutting customers some slack, the bank will also hasten the day when it will have the opportunity to do more new business with those same customers who will get back on their feet faster.
The second big shot in the arm the local economy needs is a stimulus to get people to go out and spend in their community. The way to do this is to introduce a simple SSIA-style VAT refund scheme based on a percentage, (say 20 per cent) of VAT paid on purchases after, say, two or three years. The records of purchases can be validated by assigning PPS numbers at point of sale. Don't say it can't be done. Just look at all those American tourists queuing up at the VAT refund desk at the airport.
The toughest of the critical issues is the way we are governed. I'm not talking about our elected representatives because the sad reality is that it matters little who we may elect as they get sucked in and become dominated by the 'not fit for purpose' management structure of the senior civil service, which in effect is the real instrument of permanent governance in Ireland.
It is this utterly failed management structure that has created such a treacherous divide in our society. This management tolerates a self-serving public sector workforce represented by an over-strength trade union collective which sustains the privileged and protected against those of us caught in Middle Ireland.
This is the management structure which presides over the scandalous inequity of totally unfunded 'gold-plated' public pensions for themselves and their staff versus the meagre defined contributions model for the rest of us. Croke Park is more than an outrage. There is something quite immoral about an administration that is bankrupt but yet enters into such a 'preferred' luxurious arrangement for one segment of our society. I know everyone of us in the 'squeezed middle' could go on with citing the components of what is the most disgusting 'stitch-up' of a majority of a nation's citizens by a supposedly democratic Government and its overly protected and privileged public sector employees.
So what can be done about such inequity?
There is to my mind only one way to fix this. We must campaign vigorously for a new structure in public administration. We need to force change that sees the appointment of suitably proven people from outside of the ranks of the civil service to the roles of chief executive officer, chief financial officer, chief information officer and HR director in each of our government departments. These appointments should be on a five-year renewable basis and subject to stringent performance criteria. The minister of the day should fulfil the role of chairman of the board of his or her department.
It is only when we advance to a pragmatic professional management structure like this that we will begin to see meaningful reform in the way the public sector conducts its business. Certainly leaving this task to a member of the Labour Party to oversee is akin to giving turkeys the vote.
Meanwhile, the stubborn adherence to proven failure that is austerity and the futile pursuit of appeasement of our European masters employed by our Taoiseach and his 'inner cabinet ' is bewildering to anyone with experience of negotiation. Nobody in business ever succeeds in negotiation by being 'nice'. You have to be firm and clear in what you are looking for. When it is not forthcoming, you have to get tough. When it is still not working, you have to display extreme tendencies that cause maximum fear of consequences.
It is when you finally have your counterpart's full and undivided attention that you have created the conditions for a successful outcome. It never pays to sit quietly in class, hoping that the goodwill attaching to the apple you bring teacher every day will eventually pay dividends, mainly because there are too many other unruly pupils stamping their feet and demanding teacher's attention.
It is time to declare we will not cut €3.5bn in the budget, we will only cut half of that. Also it is time to declare we will not repay €3.1bn to bondholders next March. That will get teacher's attention. Change happens when enough people demand the application of pragmatism. Maybe an Irish Spring is beckoning!
Pat Byrne is founder and current chairman of Cityjet and CEO of Rainmaker Business Technologies.