A positive approach
It is striking how ‘supply side’ views dominate amongst this month’s panel of nine financial sector economists on the next Budget. Similar surveys published in Finance, as long ago as the early 1990s, would not have been as clearly oriented towards the supply side. There are a few reasons for this. One is the success of the Irish economy, which, increasingly these days, is being attributed to the implementation of supply side policies.
In the labour market, and in the many spheres where institutions of the State and combines, be they professional, corporate or individual, conspire to restrict competition. Another may derive from the confidence that leads to an emphasis on positive policies, such as promoting increased supply in the economy as opposed to a negative perspective which would see the problem of the economy as one of excessive demand, which should be curbed, for example through higher taxes.
Despite the success of the Irish economy there is no justification for complacency - yes the Celtic Tiger economy should be allowed to become even more broadly based than it has become, including all social groups and regions, and, yes, many old economy inefficiencies persist.
Visitors to Ireland are met with two of them on their first entry to the country, for example, in overcrowded airports, and long taxi queues - both of which stem from ‘old economy’ restrictive practices.
An interesting by-product of the survey is the emergence of a series of recommendations on the finance sector. These include proposals to abolish DIRT, and SPIAs, an increase in the limit on personal pension contributions from 15 p.c. to 30 p.c., a cut in CGT on employee share options, and an abolition of the stamp duty on share transactions on the Irish Stock Exchange. All of these proposals are win-win proposals for the Minister. They hurt nobody, are politically uncontroversial, will be revenue-positive, (in the way that the cut in CGT was), and, above all, do two important things that are needed from a macro perspective they would promote savings over consumption, and improve the supply of capital to industry.
Recruitment consultants speak
‘This is a capitalistic environment’ notes one of the respondents in the Finance recruitment survey which starts on page 7. It was not said to shrug shoulders at increasing wages costs, but to make the point that people who jump ship regularly for no reason other than salary increases will ultimately suffer.
There is a lively debate on regulation, with the great majority favouring the introduction of stronger measures to ensure quality standards. While there is disagreement over whether it should be self-regulation or by Government, there is a need for some assurance about standards. It is not acceptable to recruiters and to their client companies that only a quarter (or perhaps less) of the 450-plus recruitment agencies are members of the only body setting out standards, the Irish Federation of Personnel Services.
The view of recruitment consultants is that salaries have increased in the mid-teens in the last year for financial services and that further increases of at least 10 per cent are on the cards in the coming year. Employers are reported to be more savvy about making counter-offer bonuses to keep key staff. As yet, sign-on bonuses are not commonplace in financial services, unlike the larger, IT sector. But there is a feeling that where the IT trend goes, internationally-competitive financial services cannot be far behind.
Treasury concerns
‘Prudent risk management decisions may be compromised by the need for conformity in accounting rules’ writes Jimmy Doyle about the proposed accounting standard on Accounting for Derivative Instruments and Hedging Activities (FAS 133 - page 25). Doyle, the Irish Association of Corporate Treasurer’s delegate to the International Group of Treasury Associations says the crux is that ‘increased flexibility will come at the expense of greater volatility in company earnings’ statements. One would imagine that international regulators and professional bodies should be capable of finding a workable solution which will not put the treasurer and the accountant in conflict. |
