Further letter to Leo Varadkar about Aer Lingus

Minister,

the recent controversy about Ryanair proposing to sell off Aer Lingus' slots at Heathrow should underline the importance of these slots for Ireland. Michael Vaughan of the Hotels Federation made a strong case for their retention on Morning Ireland before Christmas.

I have written to you about this before, but to reitirate:

• we acquired these slots (and all our international slots) easily, at a time when airport slots were freely available and under a far sighted government policy of improving our flight connections. Because we acquired them so easily, we do not appreciate their value and the difficulty there would be in replacing these slots at any reasonable price once they are surrendered. If you recall my previous letter, I suggested that an oil rich state with lots of cash and poor connections would probably make a bid for AL to gain control of the slots. This appears to already be underway.
• a sell off of Aer Lingus will not be able to provide necessary surety that the slots would be protected. Safeguard clauses in the sale could lose their effect if the carrier was subsequently reflagged, bankrupted etc.. Allowing Aer Lingus to be sold with its slots is not an acceptable safeguard of our needs as an island to maintain connections.
• the slots should be returned to State ownership and held in a holding company which would ensure that they would be used for flights into Ireland. There are 3 steps necessary to achieve this:

1. A sale-and-leaseback agreement must be agreed with AL in regard to the slots. This agreement should take place as part of the overall deal on selling the State's share and settling the question over the pension scheme. The slots should be sold to the state and leased back on a long term lease to the airline.
2. The slots should then be transferred to a holding company within state control
3. Once (in the far distance) the leases have expired, the slots should be rented out to any airline (foreign or domestic) to service flights into ireland. This should be spelled out at the beginning as a long term commitment of the slots to AL would probably fall foul of State-aid rules. A mere sale and leaseback arrangement that brought assets within state control should be OK though -and indeed, the protection of transport links for islands is specifically provided for in EU state aid rules.

So Minister, I urge you, as part of the overall negotiations on pensions and the sale of the shareholding -please ensure that AL's overseas slots are held in the title of the State. Clever clauses in any sale agreement are no substitute for ownership and we should not lightly give away an incredibly valuable legacy of previous state policy -one of the few things we got right in the last century.

 

Further letter to Simon Coveney

Dear Minister,
I am writing to update you about the situation in Sralagagh, Ballycastle, where the road over your lands had become dangerous for people using the right of way.

As you you can see from the photos, some well meaning, but poorly conceived repairs have been done by people locally. They seem to have used gravel to fill up the cavity that had developed in the bridge and make it passable again. However, these repairs resulted in a blockage to the drain, which then overflowed and tore the side off the bridge on the downstream side.

Basically, what would have been a relatively minor repair a few months ago when I first wrote to you, has now become a more expensive job. The bridge is likely to deteriorate further with every heavy rainfall.

I urge you not to delay in doing something about this as the bridge is still dangerous and the side of it could give way under any vehicle at any time.

Letter to several European Commission staff on the topic of the Internal market for Services

Dear sirs/madams,

I am writing to urge you to bring forward a proposal for a new services directive.

 

 

In particular, I am urging you to bring forward a proposal based on mutual recognition of services between member States -as is already in effect for Goods -and which unfortunately had to be removed from the previous services directive.

 

 

Despite that earlier setback, I believe that now is a politick time to bring forward such a proposal again -for 2 reasons. Firstly, unemployment levels across the Union have been climbing and jobs are a focus for most of the Governments across Europe.

 

 

Secondly, and more importantly, the escalating talk of a British exit from the EU gives other Member States a powerful incentive to make EU membership more attractive to the UK. I believe that any proposal for mutual recognition of services will benefit from the desire of the other Member States to entice the UK to remain within the Union. A decision to deepen the services market at this time would be a powerful incentive for the UK to remain within the Union to benefit from access to the emerging services market and also to retain a voice as the rules of the services market are developed.

 

 

Furthermore, those British who are upset by the proposed Banking Union would also be among the main beneficiaries of a services market -thereby giving some political cover for the British Government to cooperate with the Eurozone Banking Union proposals.

 

 

I would suggest a Directive with a strong and universal principle of mutual recognition for services -with a long implementation period, possibly staggered across different sectors. Such a proposal, would be less intimidating to the MSs than immediate universal opening of services.

 

 

In any event, I believe we should use the present angst over a possible British exit to develop the services market. Whatever the UK's ultimate choice, the uncertainty created by their possible departure will be a powerful motivational tool for agreement. Agreeing to launch the services market will never be easy, but right now is as good a chance as we are likely to receive -I think the Commission should seize the chance.

Letter to Simon Coveney

Simon Coveney,

Minister for Agriculture

 

Dear minister,

I am writing to you as the successor to the Minister for Lands. In particular I am writing to you as the owner of lands in Sralagagh, Ballycastle, Co. Mayo (Folio 647f).

 

These lands are burdened by a right of way to allow for turfcutting by individuals. Unfortunately, the road through the land has degraded over many years and is in poor shape. I am not asking for the road to be upgraded to a high standard –however, the road has become quite dangerous in at least two locations, and I am concerned that if nothing is done to rectify this then it is really only a matter of time before a serious accident occurs. The lands are used by turfcutters and a handful of tourists/hunters. Though most are familiar with the road and the dangers of these 2 locations, not everyone is.

 

Therefore, as the landowner, I am asking you to take steps to make the roadway safe. It would not be a big job as there are only really 2 locations that are actually dangerous, and it could save a life someday soon (not to mention legal proceedings against the Minister as landowner). Perhaps also, someday in the future when finances are not so constrained, it would be possible to do a more general improvement on the road, but in the short term, I urge you to address these immediate problem spots.

A clarion call for sceptics of the current bank regulation system

Andrew Haldane, well respected expert in banking and bank regulation has recently delivered a devastating speech in the USA on the topic of complexity in bank regulation. In it, he says that not only has bank regulation become much more complex and expensive (by orders of magnitude) in recent decades, but these exceedingly complex analyses of risk within banks may in fact produce inferior results when compared to simpler regulatory strategies.

This echoes my own thoughts on the matter, and indeed I wrote to the Basel committee on this topic in 2008. The excessive complexity of risk analysis included within regulatory structures is unnecessary and only create loopholes for banks to exploit. Rather, blunt, robust regulation is what is needed.

Haldane goes on to give dozens of examples of risk analysis by banks and regulators where their complex models in key prudential areas are outperformed by simple (occasionally linear) assessments in predicting future outcomes.

This must be incredibly depressing for regulators and banks: they have employed hundreds of thousands of highly qualified staff, at massive expense, to conduct risk analysis within the current complex regulatory framework -and their outcomes are not just poor, but actually underperform simple linear models. To say that it calls into question the current, expensive prudential regime is an understatement.

Haldane is a senior figure in the Bank of England and a respected voice worldwide, his opinions have also been echoed in other quarters -including the former head of the FDIC (and of course myself -only 4 years earlier). His assessment carries weight and it is a welcome intervention in the ever expanding mess that is the current prudential framework.

Haldane is pessimistic that his advocated simpler approach to regulation (focusing on uncertainty itself, rather than pointlessly trying to measure risk to a certainty) will be adopted in international regulation. In particular, he feels the zeal for reform has been defused by Basel III (which is essentially Basel II with more capital). I hope he is wrong, because apart from too many loopholes, Basel II/III incorporate market influenced risk metrics that actively magnify financial crises. These should have been addressed instead of ignored (along with the absurd overcomplexity of these agreements).

My logic is simple. If Basel II did not cause the crisis, then what was the point of Basel III? If it did contribute to the crisis, then why is Basel III essentially the same thing only more-so?

Personally, I go further than Haldane. I don't believe that regulation should focus on trying to prevent bank failures (i.e. ensuring adequate capital for the banks risk profile). This is impossible given the size of the task and the uncertainty inherent in every lending decision. Rather, I think regulation should address the symptoms of bank failures and then simply let them happen. I would leave in place 100% deposit guarantees (for demand or short-notice accounts anyway) and have the deposit protection schemes administered and guaranteed by the Central Banks. In this way, depositors would be assured that their money was safe and bank runs would be averted. More controversially, I would also severely curtail inter bank lending or ownership. For many banks, this would mean a sea-change in their business models. Banking would still be international, but it would be banks themselves that would cross borders, rather than simply capital. The "distribute to originate" (sic) process of interbank lending would end.

This approach basically isolates every bank, leaving the only exposed parties to a bank failure as investors, investment lenders, and the future contributors to the deposit guarantee scheme (in that order). In such a situation, bank failures would cause investors to lose money, but no bank runs and no systemic crises. The cost of protecting depositors would be paid by all banks (and hence depositors) over the long term. Supervisors would withdraw from prudential regulation altogether and let investors worry about it. 

This approach basically abandons all pretence of prudential regulation -whether it is complex (as at present) or simple (as advocated by Haldane). In my view, regulation is more for the reassurance of society than any real positive impact it has on risks taken by banks. Indeed, regulation and compliance has become so expensive that it would need to deliver a high degree of safety to justify its own cost -clearly it has not done so, banking crises are just as frequent now as they were in the era before regulation. The only reason the recent crisis was any less worse than the 1930s was state intervention, not expensive prudential regulation in the pre-crisis period.

http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech596.pdf

Glinsk Hydro project -letter to Mayo County Councillors

Dear Councillor,
I am writing to you about the proposed hydro storage plant at Glinsk -Glenamoy.
I am sceptical of the merits of this plan for the area and the county. I am particularly concerned that the company may fail after a few years, leaving noone to restore the environment in this location.

This project combines a very high environmental impact, with a very speculative business model. High up front capital costs, slow repayment and fast moving developments in rival technologies combine to make this a very vulnerable business model.

On the other hand, the scale of interference with the landscape that is proposed in this scheme is very significant, visible and permanent.
Therefore, I am concerned that if the project fails, or is overtaken by technological or other developments in the energy sector, then we will be left with a defunct, derelict, dangerous and disfiguring plant, which noone will realistically return to its previous condition.

Considering the very limited benefits that will accrue to the locality (a handful of jobs, and possibly a connection to the local grid at some unspecified stage in the future) and the risk of the project failing and leaving behind a uselessly disfigured landscape -I think we should be very sceptical about it.

We need to either establish more convincing benefits for the area, or some sort of provision for cleaning up the site in the event of the project being abandoned. At present, though the project has merit -it has significant risk built into it, which we should address now, before approval, all the time hoping that such preparations will never be needed.

Letter to Phil Hogan about Property Tax

4 Sept 2012
Phil hogan,
Minister of Environment.

Dear Phil,
I am writing to you about a property tax. I am a homeowner in Dublin.
Firstly, I support the intoduction of a property tax. Without rehearsing commonplace observations -a property tax will broaden and stabilise the tax base, without milking already overburdened revenue streams such as VAT and income.
Secondly, I am in favour of the tax being levied in relation to the value of the home. It amazes me how much controversy this has caused -often from people who normally advocate a wealth tax. But to me, it is obvious, that the value of the home, rather than the size, location or whatever else, should be the key determinant of the tax rate. Taxing people with less valuable assets, simply because they occupy more space is not only silly, it is regressive to those living in poorer areas -be they rural or urban. I would particularly like you to identify the property tax as a wealth tax, as I am truly fed up of hearing people talking out of both sides of their mouth on this wealth tax issue.
Thirdly, though I believe the value should determine the rate of tax -I also firmly believe, it must be the value of the site that must be taxed -not the value of the building. If we start taxing people for the value of their buildings/homes, there is an incentive to leave empty buildings derelict. Much like the old "window tax", I feel that a tax on the value of the building will simply lead to people adapting their homes to be squalid and unattractive, delaying upgrades and redevelopment. Much better to tax the value of the site, which ultimately is the value of the locality, rather than the building. Leaving people with the full benefit of any improvements they make by spending money on construction/renovation. Also, Multi-Unit Developments will need some sort of special method of collection in a site valuation tax -possibly via the OMCs.
Fourthly, I am quite opposed to linking these rates to local authority budgets. Local authorities in ireland are extremely efficient at wasting money and should not be given an independent income stream. That's one man's opinion, but it is sincerely held.
Fifthly, I think that non-payment of the property tax (and indeed the household charge) should simply be assigned as a burden on the property with penalties accumulating each year. That sidesteps the issue of having paid revenue staff collecting the money from a hostile public -and what is more, people would hurry to pay it if they felt it was linked to their ownership of the property.
Sixthly, i don't think there should be any exceptions to the property tax. Even if the homeowner is mortgaged, or on a low income, the fact that they own a high value asset should be indication enough of their ability to pay. Income tax reliefs should be for people on low incomes, mortgage interest relief is targeted at those with mortgages -I therefore see no reason to relieve such people from a property tax which is based on the value of the assets they own, quite seperate from their income or debts (and I say this as a low income, mortgaged man). However, i do think that the lowest band of housing should be either exempt or very lightly taxed. People owning homes in low value areas, should not have to pay a substantial tax for the pleasure.
Finally, i think you should move early to announce a target rate of taxation levied from property. If we have 4 months of speculation about how much individual householders might pay, then the psycho brigade in the Sindo will work themselves and everyone else up into a tizzy. I think it would be better for you, and everyone else if you made clear now that there will be x number of tax bands, with a range of rates from Y to Z euros per 1000 euros of site value. Once people feel there is an upper limit to what they may end up paying, they won't be as animated over the whole thing.