Saturday 20 April 2019

We're still a long way from hearing any sound advice

First Donna Hartnett wrote a letter, then Brian Hayes made a speech. Maybe there is hope after all.

Donna Hartnett, who has given up work. Michael Mac Sweeney/Provision
Donna Hartnett, who has given up work. Michael Mac Sweeney/Provision

Marc Coleman

A few years ago there was some talk of changing the national anthem. Maybe soon there'll be a referendum on the subject, as part of the 1916 centenary commemorations.

If there is then I'd like to suggest a contender to capture the national zeitgeist: 'Is There Anybody Out There?', by Pink Floyd. From the chanting masses to the cri de coeur from Donna Hartnett, an entire nation now believes the powers that be don't understand the people's plight. Worse still, we feel they don't understand that they don't understand.

It seems to be a generational thing. The policy-making elites who have pushed governments to increase our taxes are largely over 50, have their mortgages paid off and their children have either flown the nest or are about to. And like most government ministers, they are protected from economic reality by generous pensions. But maybe we're wrong. Last week, there was one politician who seemed to understand what Donna Hartnett is all about.

Maybe it's because he too is the parent of a young family who grapples with a mortgage (and, as a politician, with the pressure of job insecurity). Or maybe it's because he's a good politician doing his job. Or maybe it's because to get elected to the European Parliament he had to fight for every vote and, having succeeded, is now free from the party whip system.

For whatever reason, when Brian Hayes got up to speak to the Banking and Payments Federation Ireland Conference last week, he finally expressed the views of hundreds of thousands of people. Hundreds of thousands of people who until now had to resort to shouting at the telly as commentators told us how higher deposits on mortgages were needed to avert a "boom".

Commentators who seem oblivious to the fact that mortgage draw-downs are at their lowest level since the mid-1970s, that housing construction levels are on the floor and mortgage credit is declining.

As Ronan Lyons's excellent report on Prime Time last Thursday showed, Ireland doesn't have a housing boom. What Ireland has is a chronic housing shortage. And the way to tackle it is to raise housing supply and control over all credit growth. Not that the Central Bank was wrong to get this debate started. But the Central Bank wanted public discussion, not group think.

Yet for weeks, group think is what we got. The 'negative equity alliance' - my term for those who want to keep families trapped forever in financial prison - have never forgiven those of us who wanted to raise our families in secure accommodation.

Countries like France have large deposit requirements for mortgage deposits. So, they tell us, should we. The President of the ECB's Supervisory Board, France's Daniele Nouy, made this point in response to Hayes in the European Parliament earlier this month: "I have grown up in a country [France] where this was just the normal mortgage". She added: "We have seen with the sub-prime crisis in the US that a number of people were poorer after this acquisition than before, so lending has to be prudent". But this is where we need a Donna Hartnett voice. Firstly, there is no connection between Ireland's housing bubble and the US sub-prime mortgage market. The latter was a Frankenstein created to win ethnic votes for US Democrats through legislation that forced banks to give loans worth 10 times the income to those who could never afford to repay them.

Ireland's boom was caused by low interest rates and low housing supply and credit regulations not being enforced. Between the extremely high sub-prime loan-to-income ratio and the Central Bank's rather low proposal of 3.5, the OECD's recommended level of 4.5 is sufficiently close to the Central Bank and sufficiently far away from sub-prime madness to act as a sensible compromise.

Secondly, yes France has 20pc deposit requirements. But there are other things France has that we don't. And there are things we have that France doesn't. And when added together you suddenly realise why the policy-making response to the crisis has been so dysfunctional. Despite best intentions, policy-makers often don't understand crucial realities on the ground here that make one-size-fits-all policies not only bad, but dangerous.

France may have high deposit requirements. But it also has high-quality residential accommodation with strong security of tenure and excellent municipal governance. Nor do French local or water authorities pay their staff anything like what we do.

France has something else too. Something Hayes called for this week: a system of fixed mortgage interest rates. For these reasons, France's property market is stable and offers families a real choice with stable mortgage costs and efficient local government. Hence higher mortgage deposits and local taxes are accepted by French voters.

We have got all the onerous taxes and strictures from continental Europe but none of the positive reforms. We desperately need policy-makers who understand this. And us. And what we are going through. Lastly, it is time to realise that popular anger has a common source - the yawning gap between policy-makers and people. Until now Brian Hayes has been a rare voice of sanity and reform. But Donna Hartnett showed us that rare voices are no longer enough. Like Tsar Nicholas a century ago, the Government is discovering that being well intentioned will not protect you from the people if you are getting advice that isn't grounded in the experience of the people.

It isn't so much our politicians who have let us down but the advice they have been getting, which has come from a theoretical and academic, rather than a real- world, point of view. Unless the Irish Water debacle is to become a prelude to something even worse, then our policy advice-giving system needs new people and perspectives. Immediately.

Marc Coleman presents 'The Marc Coleman Show' each Sunday from 9pm on Newstalk 106-108fm

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