Jim Power: RTÉ and FAI chaos is drawing attention away from urgent economic issues

A real case in point is the extreme pressures that are mounting for significant components of the retail and hospitality sector.

Over the past week, we have been treated to another deluge of evidence demonstrating the lack of respect that certain agencies have for taxpayers’ money.

The FAI apparently used some of its covid support funding to pay down some of its debt rather than using it for mandated purposes. Over at RTÉ the circus continues with evidence that the largely taxpayer-funded state broadcasting service paid significant severance packages to senior management who departed the company on the back of corporate failure on many different levels. While these severance packages were being paid, the agency sought and received another bailout from the Exchequer.

While our media and political classes are going into convulsions, the real problems and issues facing the economy are not getting anything like the attention that they deserve.

A real case in point is the extreme pressures that are mounting for significant components of the retail and hospitality sector. We are being treated to a daily flow of restaurants being forced to shut down. All of this was quite predictable, but yet the Government pressed ahead with a disastrous increase in the Vat rate last September and, despite many warnings, it increased the minimum wage by 12.4% on January 1, taking it to the second highest in the EU. Other measures including new rules on statutory sick pay, an impending increase in the PRSI rate for employers and plans for the introduction of auto enrolment in the pensions space will just serve to exacerbate the pressures. But the Government doesn’t seem to care as it is not reacting with anything resembling the sense of extreme urgency that is required.

Marked level of stupidity

None of these developments on their own would be sufficient to create significant problems, but it is the confluence of the package of measures that is causing the damage. Quite simply in my view, the timing of the increase in the Vat rate could not have been worse and displayed a marked level of stupidity from someone.

There was a strong sense of indignation last week when a pub in Temple Bar charged €10.40 for a pint of cider. Before criticising the public, it would be worth considering the cost burden that caused this exorbitant price to be charged.

There is a saying that for every upside, there is generally a downside. The latest labour market data is a case in point. In the year to December last, total employment in the economy increased by 3.4% or 89,600 to reach a new record high of 2.7 million. This is by any standards an incredible achievement and one for which the Government should be commended.

However, the business reality is that in such a hot labour market, recruitment, retention, and upward pressure on the total cost of labour are presenting significant challenges. The challenge is particularly acute for the already very pressurised hospitality and retail sectors. The Government should not be exacerbating these pressures with the range of measures. It is no fun being an SME in Ireland now.

It is also no fun if one is trying to buy or rent residential property at the moment. Unfortunately, the housing market issues were highlighted again over the past week. Central Statistics Office data show that national average residential property prices increased by 1.5% in December, which was the fastest pace of monthly growth in two years.

Simultaneously the latest rental data from Daft.ie showed the extent of the ongoing pressures in the rental sector.

I would prefer to see our political classes and media exercised by these issues rather than the failures at RTÉ and the FAI.

• Jim Power is a leading Irish economist