Thursday 14 November 2019

Thomas Molloy: Unlucky for some -- State's focus on car sales steers clear of real problem

SOMETIMES it is the small things that tell us just how bad things are.

The news last week that the Government plans to change car licence plates next year to avoid using the number 13 is confirmation of two things we will have always suspected; that the Government is in thrall to the motor lobby and that this Government is so populist that it will stoop to almost any level.

A country that makes fear of the number 13 official policy is a country that has lost the right to be taken seriously. What next? A ban on black cats?

This will undoubtedly have a knock-on effect on investment. In the US, states that insist on teaching creationism find it harder to attract investment than states that promote rational teaching. Countries such as Saudi Arabia, which are also governed by superstition, struggle to get good people to move there despite sky-high salaries. It will be interesting to see what foreign investors make of a Government that is scared of a number.

It will also be interesting to see what else Finance Minister Michael Noonan has in store for the industry in December's Budget.

The latest memorandum of understanding, published last Friday, makes no mention of the number 13 so this can't be blamed on the troika but it does make it clear that the system of motor taxation will be completely restructured.

The memorandum gives us no more detail but past experience suggests this is code for changing the taxation system in another futile attempt to boost car sales. Leaks suggest that those who have bought cars that cause little pollution are about to be hammered. Common sense suggests that VRT will be reduced to encourage sales, which will bring in more tax while covertly stealing from any existing vehicle owners by reducing the second-hand value of their cars.

By now, it should be clear that the car scrappage scheme didn't work; all it did was encourage people to speed up car purchases that might have happened in future years. The average age of a car here is now 7.96 years, according to research conducted by Cartell last month. This is only slightly higher than the UK figure of 7.44 years. That suggests, despite the car lobby's squeals, that there is nothing much to worry about; if a country that is not bankrupt and still has a significant motor industry can get by with 7.4 years, we can get by with cars six months older.

The average age of national fleets everywhere has been ageing rapidly because of the recession but also because cars are much better quality than they used to be.

Another reason for the decline in car sales in the West is that fewer people want to own cars. Most people under 30 value their mobile phones more than their cars, while less job security and better public transport makes car ownership less attractive.

It is time that taxation policy reflected the fact that importing cars is not good for the economy while using Irish labour to fix cars is good for the economy. Endless stimulus measures to force people to buy cars will distort the market, confuse consumers and make the motor sector lazy and reluctant to innovate when it comes to attracting younger drivers.

Irish language special interests are making us less employable

IT took a long time, but the news that first year university students are turning towards science and engineering is undoubtedly good news for the economy.

The only surprise is that it took so long. Employers and organisations such as IDA Ireland have been banging on about the lack of science graduates for years. The other bugbear has been the inability of the education system to produce linguists.

Taoiseach Enda Kenny promised to address this issue by abolishing compulsory Irish after the Junior Certificate, but Education Minister Ruairi Quinn has been prevented from making good on the promise by his party leader, Eamon Gilmore, and the industry that has grown up around compulsory Irish.

This is a personal tragedy for the many people who will be forced to emigrate to Australia or Canada for work when there are thousands of jobs for linguists going begging at home. It is also a tragedy for the employers trying to fill jobs or export their products abroad. Too bad that Mr Gilmore has been allowed to overrule the Taoiseach and his education minister.

As things look set to get tougher, we get set to shop

CONSUMER confidence and retail sales are up but it is difficult to understand why. The next three weeks are likely to be the most difficult we have experienced since the crisis began. The ECB holds its monthly meeting next Thursday amid expectations that the bank will begin a bond buying programme for Spain and Italy. The problem is Bundesbank opposition and the German constitutional court, which is due to give a verdict on the ESM rescue fund a few days later. It is hard to understand how ECB president Mario Draghi can settle the markets until the court has spoken, which means he will have to wait until the October meeting.

While this matters for Ireland, the meeting of finance ministers on September 13 in Cyprus looks to be make-or-break for plans to forge a deal on the cost of bailing out Anglo Irish. The Government's record on this score is mixed and there is no reason to think a deal will be reached.

The good news is in three weeks we may have an idea of where we stand. The bad news is Germany's constitutional court may reject the ESM while the rest of Europe goes cold on burden sharing with Ireland.

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