Tag Archives: Colm McCarthy

Economist Colm McCarthy

This morning.

Jack Horgan-Jones, in The Irish Times, reports that the Department of Communications has said Eir’s €1bn proposal to deliver rural broadband – as an alternative to that of the more expensive Granahan McCourt’s National Broadband Plan – “has not met” the State’s criteria for the project.

It follows Peter O’Dwyer reporting in The Sunday Business Post yesterday that Eir – which was previously in the bidding process until it dropped out in January 2018 –  had rubbished the Government’s claim that up to 81,000 premises across Ireland would have to pay higher bills for high-speed fibre broadband under Eir’s plan. Eir said the figure would, instead, be 9,000.

CEO of Eir Carolan Lennon, who told an Oireachtas committee just last week that it could do the project for €1billion, has an op-ed piece in today’s Irish Times claiming it warned the Government about “unnecessary costs and complexity for almost two years while we were in the process”.

Ms Lennon writes:

“For €1 billion we could build a network which would pass all the rural premises in the NBP with high-speed broadband and connect all those who want it to their broadband provider of choice.

“We would use Eir’s existing infrastructure, rather than building over it like National Broadband Ireland has chosen to do. Most significantly we would use the expertise Eir has gained over the past three years rolling out fibre at pace and scale in rural Ireland, passing 340,000 rural premises later this summer (more than 70 per cent of the number of rural premises in the NBP).”

“…The vast majority of homes in rural Ireland already have an Eir connection and we would reuse the existing overhead or underground plant where available. This would deliver affordable connections to customers across rural Ireland but be cheaper than the NBP approach because it reuses existing infrastructure rather than building new connections.”

Meanwhile, yesterday, on RTÉ Radio One’s Marian, hosted by Brendan O’Connor…

During a segment on the National Broadband Plan, economist Colm McCarthy called for a judge-led inquiries into the cost overruns for both the National Broadband Plan and the National Children’s Hospital.

He said:

“Every time there is a really big cock-up in the Irish public capital programme – and there have been lots of them, the National Children’s Hospital was another one – there doesn’t seem to be a threshold, above which the Government says ‘we really should have a detailed inquiry going back to the beginning in this case’.

“And I think we should.

I think there should be a judge-led public, sworn, inquiry into both the broadband plan and the National Children’s Hospital.

“…The temptation always is to say, ‘ah sure what’s €2bn or what’s €1bn on the national….sign the cheque and God is good and we’re off to the elections’ and so on.

The cock-ups, just this year, have been so big that it’s a wake-up call to anybody. We have a great big National Development Plan, a great big public capital programme, heading for €7bn per annum to be spent on all sorts of different kinds of infrastructure.

“There is no chance of a rational, careful programme of public investment here in the years ahead unless the errors that have arisen in these two cases are fully documented, names are named and the lessons are drawn to avoid a repetition.

We’ve been screwing up things in the public capital programme, Brendan, since I was a kid. There have been shocking cost overruns, huge mistakes made…”

“…it is feasible to learn the lessons from these two fiascos.”

Eir best-placed to provide rural broadband solution (Carolan Lennon, The Irish Times)

Eir broadband plan looks set to be rejected by State (Jack Horgan-Jones, The Irish Times)

Eir’s claim puts broadband cat amongst the pigeons (Peter O’Dwyer, The Sunday Business Post)

Listen back to Marian in full here

colm[Colm McCarthy]

Further to the publication of the government’s Construction 2020 plan for the building industry and the possibility of state support for first time buyers economist Colm McCarthy appeared on Prime Time last night with David McCullough.

He wasn’t happy.

David McCullough: “Colm McCarthy, there’s a lot in this document, but just to deal with one item in it first, this idea of a mortgage guarantee – a lot of media attention on it, it seems to be thing that’s been picked out – helping young people get on the property ladder, surely that’s a good thing?”

Colm McCarthy: “Ah well, we tried it, and it wasn’t. One of the biggest mistakes we made, and we made lots of them last time around, was to create an expectation that you could buy a house with no money down. And the suggestion that the Minister for Finance made the other day – it’s not actually in the document, but he made it in his speech – he complained that it was unreasonable that people should have to have 20% as a deposit and suggested there would be 95% available, so they would only need a 5% deposit. If we hadn’t made that same mistake so recently, you could forgive it, but it is really dangerous to be pumping up what is a very regional property bubble . The idea that Ireland is back into a property bubble – if you spend any time anywhere outside the M50, and I do – you do not believe that. There are parts of the country, towns and villages, parts of the Midlands, 50 or 60 miles from Dublin that are disfigured with abandoned and vandalised ghost estates.”

McCullough: “Sure, but if the idea is that a couple can maybe come with 10% of the purchase price, the bank is willing to lend them 80% as a mortgage, you know, bridging that little gap may make a big difference for them?”

McCarthy: “That’s the problem, and the confusion of supply with demand is a pretty fundamental confusion. There is currently a problem in Dublin, a little bit in the provincial cities, but not that much – it’s mostly in Dublin. There is a demand for three and four bedroom houses – it’ll be there for a while, the demographic suggests that it won’t actually last forever, but that’s another day’s work – the average house size is still declining in the longer term. The solution to that problem is to build more three and four bedroom houses.
A lot of people find this difficult to believe, but until about 1975, the price of a house in Dublin and the price of house in the rest of the country was about the same. And people have got so used to this idea that housing must be much dearer in Dublin than elsewhere – it’s a relatively recent thing. It started with the 90’s Free Planning Act and nimbyism and,  ‘We don’t want any more houses around here’. The result is that Dublin is one of the lowest density cities in Western Europe – there is undeveloped land all over the place. The problem is a supply problem – and if the Government wants to put a stop to this incipient house price bubble in Dublin and the way to do it is to build more houses in Dublin.”

Watch here

McCarthyEconomist Colm McCarthy spoke with Myles Dungan on Today with Pat Kenny on RTE R1 earlier in relation to this morning’s Anglo tapes story in the Irish Independent.

Things have certainly moved up a gear, in fairness like.

Colm McCarthy: “It’s remarkable that almost five years on, from these events now we still haven’t had a proper inquiry.

Myles Dungan: “And should this material now form the basis of an inquiry by the BAC for example?”

McCarthy: ‘Well there was a referendum run and lost by the Government about 18 months ago which would have re-empowered parliamentary committees to conduct proper inquiries. There powers had been circumscribed by the Abbeylara judgement as you may recall, it was about something completely different, but the courts decided that there were limits to the power of parliamentary inquiries. Limits that do not apply to parliaments in other countries, I might add. And the Government ran a referendum to restore those powers and they were kind of ambushed at the end of a poor campaign by a group of barristers and the referendum was narrowly defeated. There’s a very interesting piece on page 25 of today’s (Irish) Independent by John Downing , one of their regular columnists, in which he makes the point that it might be best now to actually rerun that  referendum and win it this time.”

Dungan: Talk to us a little bit about the mentality of those involved in this conversation, because the tone is very strange. I was suggesting to Fionnan Sheahan this morning that it does not appear that those involved felt particularly stressed by the circumstances or by the enormity of the situation that faced their institution?”

 

McCarthy: “Well, you know banks, when they begin to face a run on liquidity,  react in a manner which says ‘let’s, let’s find the fingers to stick in the dyke’ and that might be the finger of the Central Bank and that comes across a bit from the tapes. It’s worth recalling that for a couple of months after the guarantee, I mean these tapes relate to the middle of September, the guarantee was at the end of September 2008, but for a month or two after that, public officials were still pretending that the Irish banks were sound, that they had adequate capital buffers and so on. And, one of the implications of today’s revelations is that they may have been better informed than that.”

Dungan: “Now this conversation took place just a couple of days after Lehman Brothers had been allowed to collapse. A huge institution.”

McCarthy: “Yeah.”

Dungan: “It had been allowed to collapse by the US Government. The Anglo officials didn’t seem to think that that was going to happen in their case or they didn’t seem to be concerned.”

McCarthy: “Well I’m sure they must have been concerned but at that stage the Irish Government had not prepared bank resolution legislation and they had ample time to have done that because Northern Rock, in the United Kingdom, got into trouble 12 months earlier. The Bear Stearns bank in  New York had been rescued by  the Federal Government in March of 2008. The Feds obviously decided they’d had enough of that and they decided to let Lehman’s go. So one of the unexplained mysteries of the whole affair is why the Irish Government had not equipped itself for some broader options by the time the decision was taken to guarantee all its liabilities, or virtually all its liabilities of the Irish banking system.”

Dungan: “Would you agree that one of the other things that comes across from this transcript is that there was scant respect in Anglo Irish Bank for the Financial Regulator?”

McCarthy: “It has that air to it but I, I don’t think one should draw broad conclusions like that until there’s been a full inquiry. What this shows to me again is that journalists have written books about Anglo, they’ve written books about Irish Nationwide, it has been left to journalists to try and dig up as much as they can about what really happened. Nobody who was directly involved is saying anything, they’re all getting advice from lawyers, and so on. This is a classic example of a situation that needs a well-resourced, patient public inquiry and inquiries of that kind have been conducted and long since completed in various other jurisdictions.”

Dungan: “But this underscores the need for a properly constructed inquiry in this jurisdiction?”

McCarthy: “Yes, and it needs to be properly resourced. And if it requires a rerun of the referendum that was rather carelessly lost by the Government then so be it. But the public I think must now begin to realise that the country has been bankrupted and we still don’t really know why.”

Tapes make overwhelming case for full inquiry into banks (John Downing, Irish Independent)

Eamonn Farrell/Photocall Ireland