The election campaign heard much talk of “the rich”, with many of the left-wing parties advocating a wealth tax or higher income tax on top earners to pay for the increased investment they want to see in public services. Timely, then, that Forbes’s annual ranking of global billionaires showed Ireland has six of them.
With a combined net worth of more than $30 billion (€27.6 billion), just three of them were born in the Republic, while two of them maintain their main residence here for tax purposes. The richest Irish-born billionaire is Digicel founder Denis O’Brien, whose fortune is estimated at $5.7 billion, more than $1 billion lower than last year.
Of course, the argument against a wealth tax is that it could drive away foreign direct investment. Figures this week show US investment in Ireland surged to a record $58.1 billion in 2014, accounting for more than 20 per cent of US investment flows to Europe, and making Ireland, as a destination for US investment, bigger than many regions in the world.
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The Central Statistics Office (CSO) had more good news as its figures showed unemployment falling by 0.1 per cent in February to 8.8 per cent, which marked its lowest level since December 2008 when the State was in the throes of the economic crisis. The CSO also reported that the number of people signing on the Live Register fell by 0.8 per cent last month and was down 10 per cent annually.
That increase in employment, as well as surging car sales, contributed to an increase in tax collection. Exchequer figures showed this rose by €478 million in the first two months of the year as Revenue collected €7.2 billion by the end of February.
This represented a 7.1 per cent increase on the same period last year, and the rate of increase was higher than the 5.8 per cent foreseen in the October budget for the entire year.
As we keep hearing though, none of this is likely to mean very much in the event of another “external shock”, and there was more disappointing economic data for the euro zone, which is likely to put ECB chief Mario Draghi under more pressure to take aggressive action.
The post-election political instability did have repercussions for some as the absence of a new government means there probably won’t now be an initial public offering of AIB shares before the summer. However, given the right market and political conditions, the bank appears to be ready to go. Things are generally looking a lot rosier as the results showed it made a pre-tax profit of €1.9 billion in 2015, an increase of 72 per cent on 2014. A key factor was that previous write-offs for bad loans were overly pessimistic, allowing the bank to put cash back into its profit-and-loss account.
This meant it could afford to pay its chief executive, Bernard Byrne, €587,000 in total remuneration last year, an increase of 3 per cent on 2014. The good results have benefited customers as well, with €604.3 million worth of residential mortgage loans written off last year.
The other big player to report results during the week was CRH. The building materials group signalled that it could make further large acquisitions this year as banks force rivals to sell to clear recession-era debts. The group reported a 36 per cent increase in pre-tax profits to €1.03 billion for 2015 on the back of a strong US performance. Chief executive Albert Manifold said that CRH would consider further big deals if the right opportunity arose.
The controversy surrounding the sale of Nama’s Northern Ireland property portfolio, dubbed Project Eagle, gathered fresh momentum following an exposé on BBC Northern Ireland’s ‘Spotlight’ programme.
In a recorded conversation, Nama’s former adviser Frank Cushnahan claimed the £6 million that found its way into an Isle of Man bank account was meant for him as he had been “secretly involved” with a bid by Cerberus, the US company that bought Project Eagle.
It was the clearest indication yet that he believed he was to benefit from Project Eagle, although it has been pointed out he could conceivably have worked “secretly” on the deal without talking to the winning bidder.
It was a bad week in terms of insurance, with FBD warning customers to expect another year of rising rates as it looks to bridge the gap between claims and premiums.
Separately, motorists are likely to face an average once-off premium hike of €50 following a ruling that forces the Motor Insurance Bureau of Ireland to assume €90 million in liabilities from the collapse of Setanta Insurance. There is a feeling from industry figures that the motor insurance market has been thrown into flux after the judgment and, meanwhile, the hard-pressed motorist has little alternative but to pay up. In a week dominated by the result of the general election, all eyes were on what that might mean for the economy.
Initially, at least, the warnings of chaos in the event of an inconclusive vote seem to have been misplaced, although it’s still very early days. The markets reacted in a subdued manner, with long-term interest rates remaining below 1 per cent and a senior Dublin bond trader exclaiming: “My God, what a muted reaction.”
The same trader suggested that, perhaps from the outside looking in, there is an obvious stable government waiting to be formed, in the shape of a Fine Gael coalition with Fianna Fáil, but that remains to be seen.
For the moment, Irish borrowing costs held at low levels, in common with the European trend, and credit rating agencies were not getting overly concerned about what might lie ahead. Fitch said it still expects the next government to pursue further deficit reductions, but expressed unease about the prospect of it relying on “more radical political elements” to function.
It pointed out that opinion polls had consistently pointed to a hung Dáil, and that the parties’ promises of more spending and less taxes indicated a slowdown of the austerity agenda rather than its disbandment.
The message from Standard and Poor’s was similar. It said it did not expect the new government, when it is formed, to deviate significantly “from the existing economic and fiscal policy path”.
Moody’s was also low-key about the result producing a dramatically different political and economic reality. It said it was unlikely to prompt any material change in Irish fiscal policy. The agency said the two largest parties had made it clear that any promises made were contingent upon economic growth, so there was no need to be too worried about a return to the days of reckless spending that would “jeopardise the course of fiscal consolidation”.
Ibec, which had warned beforehand that instability after the election would hit businesses and “threaten” hiring plans, softened its stance, saying that while the result had led to uncertainty, it had not brought about the radicalisation of Irish politics that business leaders feared.
The group’s chief executive, Danny McCoy, told an event in Brussels on Thursday that Irish business still retains a “very positive outlook” and that despite the economic firefighting of the past few years, Irish politics has remained “resilient and broadly pro-business”.
Like the rating agencies, he said we were unlikely to see any fundamental shift in the government’s economic approach over the coming years.
“This is very good news for those planning on creating new jobs and investing in the country,” he added.
