Colm’s columns

It’s unusual for RTE’s Economics correspondent, George Lee, to take the optimistic view but he did see some hope in the inflation figures released on Thursday. And he wasn’t alone in reporting a drop in inflation, good for those hoping for a new pay deal. To be fair to George he did stress that inflation was only down “by a smidgen”.

But he could just as easily have reported that it was up. It’s all a matter of how you look at it. As the man said “there are lies, damn lies and statistics” and there are those, not including George, who use statistics like a drunken man, more for support than illumination.

It certainly suited some to have a drop in inflation, however slight, reported during the pay negotiations.  But it would have been just as accurate, and more illuminating, to have reported a rise in inflation.

Of course George, and the other commentators who reported a downturn, were correct in saying that the annual rate of inflation was down from 4.4% in July to 4.3% in August. Given that the Central Statistics Office produce the figures to one decimal point the actual drop might have been only from 4.36% to 4.35%, but a drop is a drop.

Given the smallness of the change, however, it’s strange to be zoning in on the annual figure, particularly when the underlying trend is upwards.

The plain fact is that while consumer prices actually fell by 0.3% during July, they rose by 0.5% during August. That may look like a small rise but if prices rose by 0.5% each month for a year, consumer prices at the end of that year would be almost 8% higher than they were at the beginning (Ok, 7.96% to be accurate).

It won’t be that bad but there are some significant energy prices increases in the offing. Apart from the direct impact on households, businesses are reported to be facing a 75% increase in energy costs next year which will undoubtedly be passed on to consumers. Also, food prices seen set to continue rising.

The August figure was, of course, affected by the  sharp 17.5% jump in electricity prices imposed from August 1. But that was only the first of a two phase increase. The second increase, due to be implemented from January 1, won’t be as sharp but it will be significant, and the inflation figures have yet to reflect the proposed 20% increase in natural gas prices.

It’s easy to accept the claim by some union leaders that consumer prices will rise by 5% this year. That may even be a conservative estimate. It certainly understates the impact of the energy price hikes on the poorer members of society who are forced to spend a very high proportion of their income on fuel and light.

The average household spends just under 4% of its income on fuel and light. But it’s 11% for those in the very lowest income category (lowest ten percent) and over 7% for those in the next lowest category. Those latest CSO figures for household spending relate to 2004 and the percentages have undoubtedly risen since then, given the spiralling increase in energy costs. But there’s also no doubt that the gap between rich and poor undoubtedly remains. Indeed it may have widened.

That alone justifies the emphasis being placed by the trade unions on the lower paid, a emphasis that hopefully extends to those on social welfare who comprise the vast majority of those in the lower income groups. Mind you there was a lot of lip service paid to low earners in advance of the last pay deal. But very little was delivered.

This unequal impact of inflation is not, of course, evident from the headline figures but it deserves more attention.

While the inflation figures have been reported as being better than the underlying trend suggests, the jobs figures have been made to look worse.

Of course, the rise in unemployment is a clear matter of concern. The suffering caused by involuntary unemployment can’t be over estimated. And there has been a significant rise in the number affected. But just what number should we use.

Most commentators have in recent times been using the Live Register figure and that even seems to suit the Government at this time. If you want to be particularly gloomy about it, you can imagine lining up 247,384 people currently on the Live Register into a single national dole queue. Allowing a metre between them they’d stretch from Dublin all the way to the outskirts of Cork.

But the Live Register was officially discredited as a measure of unemployment many years ago. It includes many part-time, casual and seasonal workers. As the Central Statistics Office still stresses it’s not designed to measure unemployment. The official jobless figures, based on May’s household enquiry, is 115,100. .

Undoubtedly it’s a bit higher now but not as high as the Live Register suggests. In the bad old days every effort was made to play down the bad news. Now many commentators seem to delight in generating doom and gloom. The news is generally bad, but not as bad as many would have us believe.

So let me end with a bit of good news. Employment levels are at a record high. There have never been so many people at work in the country, not since the famine in any case.  The latest official figures, for May of this year, put the number at 2.1 million, up 7,000 on May 2007 and 98,000 up on May 2006.

Colm Rapple
Irish Mail on Sunday, August 31, 2008

The banks are to pick up the tab for the major breach of payment card security which hit Galway and the east coast in recent weeks. Over 10,000 credit and debit cards were illegally skimmed and cloned for fraudulent use abroad. While customers won’t be out of pocket as a result of the scam, they have every reason to be concerned. It should never have happened and it highlights the somewhat lackadaisical attitude adopted by the card issuers to fraud.

In this case they’ll have to bear the cost themselves but, all too often, it’s the customer who bears the cost. One of the less publicised consequences of the switch to chip-and-pin cards was a major transfer of liability from card issuer to customer.  That shift was built into the assumption that only the card holder should or could ever know the PIN number associated with a card.

Once case brought to the Financial Ombudsman involved an elderly cardholder who had €7,000 withdrawn from her account over the course of ten days at ATM machines. She was in a nursing home and had never before used the card to withdraw money. She was only awarded €1,500 compensation while no negligence was attributed to the bank.

The Financial Regulated did raise the matter with the Irish Banking Federation suggesting that the banks should have procedures in place for quickly identifying potential fraudulent withdrawals. But if there were any action taken or guidelines drawn up, the details have yet to be published.

If a fraudster does manage to get hold of both card and PIN, the assumption is that the card holder had been negligent. There may not be any negligence involved in losing a card. It’s admitted that it can be stolen. But, under the terms and conditions, the PIN number should be firmly locked inside the cardholder’s brain, never written down or divulged.

The loss of a PIN is automatically deemed to be the cardholder’s fault unless he or she can conclusively prove otherwise.

You’ll even be deemed negligent if you reveal your PIN to a mugger who demands not only your wallet but also those four magic figures that can turn your credit or debit card into cash.

There is a certain logic in that. If a mugger took your cash, you’d have to bear the cost yourself so it makes some sense for you to also bear the cost of losing your card and pin, at least up until the time that you report them lost.

Just be aware that the lost of your card and pin cost you substantially more than the amount of cash that you might normally carry about with you.

But the fact is that you don’t have to be blatantly negligent to lose both your card and pin. Even without the addition of skimming devices the pin input pads in use at retail checkouts and restaurants are not secure from prying eyes and a would-be fraudster can quickly become very skilled at reading the number being input, even at some distance.  He or she doesn’t even have to become skilled if working in a retail outlet which customers regularly frequent.

In some retail outlets security cameras are trained on cash points, a practice that can make it easy for in-store fraudsters to read PIN numbers.

Of course, along with the PIN, the fraudster needs the actual card if it is to be used in a country that has embraced the chip and pin technology. That’s why our recent fraudsters quickly used their skimmed cards in Italy and Canada. All they had to do was put the PINs onto old type, for us, magnetic strip cards.

But, in any case, getting both your card and PIN need not be too difficult. A person moving away from a checkout or cash point is particularly vulnerable to having a card stolen before they put it back into a wallet, pocket or purse. A well organised fraudster, having simply read the PIN over the card holders shoulder, could spent thousands of euros before the shocked victim had time to ring the bank.

You may be liable for that loss. To realise the extend of that exposure you need to read all the fine print of your credit or debit card agreement.

In Britain your liability is capped at £50 sterling unless the bank can show that you acted fraudulenty or without reasonable care. In Ireland, however, the onus is on you to prove that you didn’t act fraudulently.

The Bank of Ireland places particularly onerous conditions on its card holders. While it accepts liability for any transactions carried out after a loss has been reported, the onus is on the customers to prove fraud in other cases.

A clause in the terms and conditions states that “Use of the PIN, in conjunction with the credit card shall be regarded as conclusive evidence that the relevant transaction was carried out by the cardholder.”

That type of clause transfer liability very firmly onto the shoulders of the cardholder. It’s time that the balance was redressed. Since the banks have obviously failed to adequately tackle fraud, it’s time that the Financial Regulator took some firm and decisive action. Given it’s record, however, that may be asking too much.