Tuesday 14 August 2018

Brendan Keenan: Why do we still resist change despite persistent failings?

An artist’s impression of the metro scheme – a project with a troubled history
An artist’s impression of the metro scheme – a project with a troubled history
Brendan Keenan

Brendan Keenan

They've come up with a wizard idea in Britain to ease the pressure on GPs' surgeries and A&E units. Paramedics in their estate car ambulances will be trained and authorised to write prescriptions for people with everyday ailments in their own homes, with only a visit to the chemist required.

Don't even think about it.

Can you imagine the objections, the scaremongering, the threats of industrial action, the pay claims, the lobbying by the professional interest groups if anything like it was proposed here? And if something was done, there would be the whittling away of changes until the previous situation was more or less restored.

One of the most striking aspects of Irish society - and one which is hardly ever commented upon - is the implacable resistance to change. Two national bankruptcies in the space of 30 years have not been enough to persuade the country that there must be fundamental flaws in the way it does things.

When solutions are put forward, they are nearly always for more old hat rather than anything radically different.

Even the changes wrought by the Great Recession were often the abolition of reforms introduced years before.

The remedies - to preserve central government spending at the expense of capital investment, local authorities and outside agencies - GPs for instance - were the same old remedies which caused so much damage in the 1980s.

That is why something like last month's OECD report on Ireland can seem a bit like old hat itself. The issues it identifies are all current, but many have been around so long they could perhaps be included in the centenary commemorations of the foundation of the State.

Much of the content in such reports is based on work done by domestic analysts, with useful additions from its own, admittedly excellent, staff.

But they are organisations of governments and reports pass through various levels of official scrutiny before publication - including the government of the country being analysed.

In this one, some commentators have noticed the absence of the EU commission's corporation tax plans among threats to the Irish economy. At best, one might interpret the section on the OECD's own anti-avoidance programme as an endorsement of that approach rather than internal EU arrangements.

The real value of these reports is the scale and depth of their analyses.

With so much included, one cannot fail to notice how long many of the problems have been around, and how many have been the subject of repeated plans for change and reform.

One also cannot avoid the realisation of just how difficult it will be, politically, socially and technically, for Irish society to come to grips with them successfully. This is also the case with the enormous problem which really is current - housing. Not only was this unexpected, it came after 30 years when it was widely assumed that relatively few would require social housing in the future.

Now, thanks to bubble and burst, we may be short 70,000 units.

Social housing must be part of the answer. But even on conservative estimates, some €5bn a year will have to be spent on construction for the next 10-20 years. Public housing can be only be a minority in that. House construction is increasing rapidly but meeting anything like that demand will be an enormous challenge for the industry, providers of finance and government.

The OECD report has no particularly original ideas either, but it does point to two very old characteristics in this new failure - the reluctance to upset vested interests and inexplicably high costs.

If the reports are correct, there will be an acid test in the question of 900 social and affordable housing units in the massive former Irish Glass Bottle site. This may indeed reduce the profit on the development as compared with little or no such housing. But it is impossible to envisage the shortage being met if, as it has in the past, government reneges on this kind of scheme.

As for building costs, the OECD cites work by Prof Ronan Lyons which finds they are significantly higher than in other EU countries.

Various reasons are given but it is hard to see that they fully explain the gap. As with healthcare costs, childcare costs and many other Irish costs, what might be called the story of why rarely, if ever, emerges.

What emerges all too clearly is that the cost of building an average dwelling, in Dublin especially, is more than would be prudent for the average household to borrow. With the Central Bank imposing prudence, the solution must be found in cost reductions, not increases in purchasing power; whether through borrowing limits or government grants.

The politics of that are unattractive and politics are behind much of the wearisome list in the report.

The most pertinent now, in view of the farcical Dublin transport plans, is the need for evidence-based decisions on launching major capital projects.

The omnishambles that is the Dublin Luas/Metro scheme is just the latest of many examples. A combination of keeping constituencies and property developers happy is never likely to bring any net benefit to the community.

There are also deeper, long-lasting structural problems which have proved resistant to change and reform. One is the poor quality of management in native Irish companies. It is better than it used to be, but not as good as it needs to be. Firms which struggled with going online will find it very hard to survive a hard Brexit. This is part of a general failure in training, further education and lifelong learning - managers included. The training system is better known for financial mismanagement that notable achievement.

There is also one that is easy to miss - the low levels of employment compared with most of the EU.

The OECD charts are depressing.

They show that only Spain took a bigger hit from the crash in its labour market. In Ireland, the same numbers are at work as in 2008 but the population is bigger. Participation rates are back to the low pre-boom levels, particularly for women.

This may go very deep. As the charts also show, Ireland is unique in having just about the highest earnings in the OECD before tax and deductions.

Naturally, that creates some of the highest levels of inequality when these record earnings are compared with those who have little or no earnings for want of work. But after tax and deductions, there is the biggest transfer of income in the OECD, leaving the country with average inequality. Even leaving aside the fact that this is hardly ever acknowledged, there is something badly wrong here - and the suspicion at least is that those in work are crowding others out of jobs with high levels of pay and then - usually quite willingly in Ireland - compensating them with taxes to pay for benefits for the underemployed.

One consequence is the difficulty this creates in making it financially sensible to move from welfare to work.

Changing that would take some doing, although it would help if debate took place around the known facts instead of the fake ones regularly on view.

They say there is an election coming. Anyone fancy having a try?

Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business