Last October, one of the biggest property companies in England, Nelson Bakewell, had £35 million worth of sites and buildings to sell, writes Fintan O'Toole.
It announced it had established an Irish desk and was targeting investors here. It reckoned that there would be a ready market here for everything from the Argos shop in Grimsby to Clinton Cards in Southend-on-Sea, and from Adams Children's Wear in Dorchester to a go-cart track in Beddington.
Whereas, even a decade ago, the assumption was that the Irish were the navvies who sweated blood to build these things, now they were the obvious landlords. Absentee landlords, perhaps, but what's a historical irony between friends?
Nelson Bakewell - and Lisney's and Richard Ellis Gunne and Sherry FitzGerald and all the other companies who broker these deals - knew what they were doing. Over the last decade, the amount of private Irish money invested in the UK property market has risen six-fold. In the last three years, at least €4.5 billion of Irish money has been spent on British properties.
The amount, moreover, is rising by around half a billion a year. In 2001, it was €1 billion. In 2002, €1.5 billion. And this year so far it has reached over €2 billion. While, in those years, the Irish economy was in decline and the public finances were getting tighter, ever increasing amounts of Irish capital were flowing into shops, development sites and houses in Britain.
The scale of investment is such that there is now more Irish than American or Saudi investment in UK property. An astonishing 20 per cent of all UK property investment now comes from Ireland. Only the Germans invest more. And since Irish investors seem to be buying up half of Spain, Portugal, Florida, Hungary, and Poland as well, the scale of the outflow is quite extraordinary.
However much all of this may satisfy some atavistic historical need to reverse the Cromwellian appropriation of Irish property, it is obviously a bad thing. The huge outflow of funds affects Ireland's balance of payments. Perhaps more importantly, all of this is money which could be productively invested in Ireland. The next phase of Irish economic development is supposed to be one in which the capital accumulated in the boom years is put back into the development of innovative Irish industries. But buying shopping centres in Surrey isn't going to create a dynamic new business culture in Ireland.
Yet this unproductive use of wealth is actively encouraged by the State.
According to Business Plus magazine last January, the Irish funds that buy up almost anything that doesn't move in the UK "leverage borrowings off the equity invested, enabling investors to scale up their investment. And banks like Anglo Irish have been lending big time to these fund investors, contenting themselves with taking just interest payments for now. Such schemes are also very attractive for the self-employed and shareholder directors who have self-administered pension funds. Using this mechanism, investors can get 42 per cent relief on, say, paying €100,000 into their pension fund and then use the cash to redeem the borrowings incurred on the property investment."
It seems, then, that tax relief on private pensions is helping to fuel an ever-accelerating rush of Irish money into Britain, and increasingly into Prague, Budapest, the Algarve and Warsaw. (Irish property investment on continental Europe is estimated to be 10 per cent of that in the UK, which would put it this year at around €200 million.)
All of this tells us a few things about the way Ireland is now. There is clearly a vast amount of money being made by a significant number of people. If you can afford to put €100,000 into your pension fund every year, it's fair to say that you're pretty well off.
The justification for this kind of wealth is that those who have it will use their spare cash to invest in businesses, encourage new ideas, and thus create jobs and further wealth. The theory breaks down, though, when you have a wealthy élite that puts its faith in bricks and mortar and that sees Britain, rather than Ireland, as the place where you can guarantee your future. Thus, while small, innovative Irish companies generally find it extremely hard to raise capital, wealthy Irish people are queuing up to put their money into go-cart tracks in Beddington.
And we can't even blame all of this on the operation of the free market. The McCreevy Government actually encourages, with its myriad tax breaks, the idea that the best way to use spare money is to put it into a scheme that cleverly avoids tax. The ingenuity that should be lavished on genuine entrepreneurship is channelled instead into thinking up the most efficient legal way to foil the Revenue.
And this culture is safe under Charlie McCreevy. In the run-up to last year's budget - and more importantly to the last election - he made tough noises about closing down tax shelters.
What did he do in last week's Budget? He extended a whole range of property-based tax reliefs that were due to end next year until at least the middle of 2006.