Colm’s columns

Colm Rapple
Irish Mail on Sunday, August 12th, 2007

With the annual inflation rate hovering over 5% again, it’s little wonder that SIPTU general president Jack O’Connor was trying to rewrite history during the week – not by demanding a renegotiation of the current totally inadequate national pay deal but rather by suggesting that he and his union had recognised its potential shortcomings from the very beginning.

If they did, it’s the first we’ve heard about it.

The plain truth is that Mr O’Connor and many of his fellow establishment trade unionists got it wrong and workers are losing out as a result.

So what can be done about it? Mr O’Connor offered two suggestions, neither of which amounts to much.

He wants negotiations on the next deal brought forward in what would simply be a PR exercise. It would lend itself to some headline grabbing posturing but wouldn’t add a cent to pay increases under the current deal. Understandably neither the government nor the employers want anything to do with that.

Mr O’Connor’s only real demand is for an increase in mortgage interest relief. It’s not much of a demand since it is already specifically included in the Programme for Government to be introduced in the December budget.

It was already on the Fianna Fáil agenda maybe with an eye to possible union demands. But whether it was or not, it’s a change that doesn’t have to be looked for any more. The change has been outlined in detail and it’s going to happen. Mr O’Connor’s plea for it to be introduced in the current year rather than from January 1 next would be a small improvement but it is unlikely to be a runner because of the administrative problems that such a mid-year change would create for the Revenue Commissioners.

In any case, the increase in mortgage tax relief, promised in the Programme for Government, will have a very limited impact benefiting only those with relatively large mortgages who bought their homes as first-time buyers in the past seven years.

Assuming a mortgage rate of 5% a couple qualifies for the maximum tax relief on a mortgage of €320,000. If the mortgage is less than that they gain nothing from the proposed increase from €16,000 to €20,000 in the annual interest qualifying for relief. The bigger the loan the more you have to gain up to the new limit of €400,000.

It will be a welcomed relief for many but it won’t be of any help to the many low paid workers who don’t have big mortgages but are currently losing out in the pay stakes.

The latest inflation figure was announced on Thursday and it was on RTE’s News at One programme that Mr O’Connor gave an impression of having being dragged unwillingly into acceptance of the pay deal. He said that he and his officials had been ridiculed when they predicted that consumer prices would rise by 4% last year and by more than 3% this year.

The poor sensitive souls must have been hurt by the ridicule because they accepted the forecasts of what Mr O’Connor described as “so called independent commentators” and encouraged their members to accept the deal. Had he paid attention to this column he would have been better informed. In May of last year I wrote

“The current annual rate of 3.8% that grabbed the headlines during the week is worrying enough but it actually understates the ongoing problem. With interest rates set to rise further and the sharp increase in energy costs still working its way through the system, the annual rate of inflation could well hit 5% by the end of the year.”

Even allowing for some tax cuts the figures at the time supported the view presented in the column that a claim of 15% over two years was justified to cover inflation and provide workers with a share of economic growth.

It’s hard to believe that similar calculations were not being done within the trade unions. They should, at least, have given rise to some doubts about what was on the table. But any doubts that the trade union establishment had were carefully hidden from their members who were encouraged by SIPTU’s national executive to back the deal.

It provides for a total pay increase of 10.4% in four phases over 27 months.  There was an initial increase of 3% to cover six months followed by 2% for the next nine months, a third phase of 2.5% covering six months and a final phase of 2.5% also covering six months. That’s 10% in all but when compounded it means that pay at the end of the period should be 10.4% higher than at the beginning.

In recommending the deal, the union’s executive told members that the proposed 10% pay increase “would exceed all available projections of inflation for the twenty-seven month period, and should also provide members with a share of the benefits of productivity growth in the economy”. SIPTU was predicting higher inflation than the employers were willing to accept but the difference was slight enough.

General secretary Joe O’Flynn assured members that the deal would protect their living standards so it was little wonder than the vote went 72% in favour of acceptance. ICTU’s general secretary David Beggs subsequently declared that the level of inflation would remain comfortably below the level of the pay increase.

It hasn’t worked that way. Consumer prices are up 5% on a year ago when the deal was agreed and over 8% on January 2006. Pay is lagging well behind prices.

Colm Rapple
Irish Daily Mail, August 2, 2007

Not one cent from the promised higher tax on offshore oil or gas finds will flow into the exchequer for at least ten years. That’s a fact although it is an admission that had to be forced out of Minister Éamon Ryan yesterday. He initially said that the tax might start to flow in five years but when pressed he was advised by one of his officials that ten years was nearer the mark. And the extra tax will only flow if there are massive oil or gas finds in the particularly inhospitable areas on the Porcupine Basin in the Atlantic some 200 km (125 miles) off the west coast.