The Irish Independent reports that
the Government's promise to cap public sector pay is being seriously
undermined as it is increasingly forced to provide for "exceptional" salaries to
attract top talent.
In the latest breach of the much-vaunted pay ceiling, Finance Minister
Michael Noonan has had to sanction a salary, technically €50,000 above the
limit, for the new deputy governor of the Central Bank. The approval of the
€250,000 pay packet for Swedish economist Professor Stefan Gerlach came just
weeks after the Government introduced lower pay ceilings for senior public
A special request was made to the minister by Central Bank Governor Patrick
Honohan, according to correspondence obtained by the Irish Independent.
Mr Honohan sought approval for the salary just a week after Public
Expenditure Minister Brendan Howlin capped maximum pay levels for higher
positions across the public service at €200,000.
And the correspondence shows how Mr Noonan rubber-stamped Prof Gerlach's
appointment two weeks later.
The latest revelation will refocus attention on:
- The viability of maintaining government-imposed salary caps while still
attracting talent to top jobs.
- The lack of transparent guidelines which would reveal exactly why
exceptions are made for certain candidates.
The Government has already breached its own guidelines several times -- most
notably in approving higher salaries for ministers' advisers.
In approving €127,000 for two ministerial special advisers, the Government
risked the public's anger.
The pay is €35,000 more than the standard €92,000 rate for the position and
was approved for Ciaran Conlon, a friend and former PR adviser to Taoiseach Enda
Kenny, and Edward Brophy who is now an adviser to Minister Joan Burton.
Prof Gerlach is undoubtedly well qualified for the Central Bank role. Most
recently he was managing director of the Institute for Monetary and Financial
Stability at Goethe University Frankfurt.
But approving his new salary was a rigmarole for Prof Honohan who felt he
needed to make a case to the Finance Minster.
He stressed the "scarce and exceptional skills" that Prof Gerlach could
offer. The aim was to match Prof Gerlach's earnings as managing director of the
Institute of Monetary and Financial Stability in Frankfurt.
Mr Honohan says it is "seen as the minimum required to secure his services"
in correspondence sent earlier this year.
But pay in the public sector was politically sensitive at the time as Mr
Howlin had just announced "a general pay ceiling of €200,000 for future
appointments to higher positions across the public service".
There is a grey area when it comes to pay ceilings at the Central Bank,
National Treasury Management Agency (NTMA) and the National Asset Management
Agency (NAMA). Technically these were not included in the bodies subject to the
But after announcing the €200,000 pay cap in June, Mr Howlin said he would
like to see leadership and transparency within the financial bodies.
Records seen by the Irish Independent show how Prof Honohan wrote to Mr
Noonan eight days afterwards.
"Minister Howlin's statement allows for a small number of exceptional cases
and the (Central Bank) Commission are of the view that this appointment would
fall into this category," he wrote.
Prof Gerlach took up his post as deputy governor on September 1.
A spokeswoman for the Finance Department said that Mr Noonan does not set the
levels of pay for deputy governors.
The Central Bank has confirmed that Prof Gerlach's salary is €250,000, and
added that "the appointment was made with the consent of the Minister for
A spokeswoman said: "The Minister for Public Expenditure and Reform was also
consulted and it was confirmed that the appointment was not contrary to
government decisions on higher level pay in the public service."
The Irish Independent also reports that
the British government will give its full backing today to a shake-up of the
banking sector proposed by the country's Independent Commission on Banking (ICB).
"Our financial services sector needs
reform," British business secretary Vince Cable said
yesterday. "Our big banks were at the very centre of
the financial crisis, what the Europeans call Anglo-Saxon financial capitalism.
It needs reform."
"That's why the government is going to launch
this initiative on the banks accepting in full the Vickers commission.
"We're going to proceed with the
separation of the banks, the casinos and the retail business lending parts of
the bank," the Liberal Democrat minister told the BBC.
In September, the ICB -- headed by Oxford
University academic Sir John Vickers -- said top British banks should
"ring-fence" or protect their retail banking operations from their riskier
investment banking arms, in order to give better protection to taxpayers in case
of future financial crises.
It said banks should hold core capital of 10pc,
plus a further seven to 10pc of capital that could take the form of "bail-in"
bonds -- debt that can take a loss or convert into equity to recapitalise a bank
if it hits trouble.
There would also be limits to the extent to which
a bank could use money in its retail arm for its investment bank -- a move that
will increase funding costs for British lenders.
The ICB stopped short of seeking a full split of
a retail and investment bank into two, separate companies. Instead, it said
banks could keep their parent holding company but should set a "ring-fence"
between the retail and investment arms. Britain's top banks have lobbied against
much of the reforms.
They have argued they could be put at a
competitive disadvantage to rivals in Europe, Asia and the United States, who do
not face the same sort of shake-up.
The Irish Times reports that
the Government is engaged in talks with EU institutions and the International
Monetary Fund to try to find a way of reducing the debt burden on the country
for the bank bailout, Minister for Finance Michael Noonan has confirmed.
Mr Noonan told The Irish Times yesterday
that the best approach to the problem was to negotiate with the relevant
international institutions before looking for a political solution to the
The Minister added that the isolation of Britain
after David Cameron vetoed an EU treaty on fiscal disciplines for the euro zone
showed the importance of choosing an opportune time to pursue national
On the question of whether a referendum on the
treaty would represent an opportunity to press for a deal on the debt, Mr Noonan
said it was far too early to say if a referendum would be required.
Meanwhile, the new head of the European Central
Bank, Mario Draghi, has warned of the high costs of a euro zone break-up,
breaching a taboo for a president of the ECB, even as he sought to play down
market expectations about its role in combating the sovereign debt crisis.
In his first interview since becoming ECB
president on November 1st, Mr Draghi told the Financial Times that
struggling euro zone countries that quit the currency bloc would face still
greater economic pain. For remaining members, European Union law would have been
broken, and “you never know how it ends”, he said.
Mr Draghi stressed the importance of measures
taken by the ECB to shore- up euro-zone banks, which include its first-ever
offer of unlimited three-year loans this week. But he emphasised that the
region’s politicians had to take the lead in rebuilding investor confidence in
euro zone public finances.
Mr Draghi also appeared to rule out US or
UK-style “quantitative easing” – embarking on large-scale government bond
purchases to boost economic growth.
At home, Minister of State at the Department of
Finance Brian Hayes said yesterday that if a referendum was needed in Ireland to
approve the EU treaty it might strengthen the country’s hands in negotiations on
“It is difficult to see a referendum
being successful unless we can strike a deal on the debt,” said Mr Hayes.
He added, however, that it was not clear if a
referendum would be needed and the cabinet would await the advice of the
“It would be crazy to have a referendum
unless we need to have one. A referendum would be about whether we want to stay
in the euro and the consequences of the instability that could be created during
the campaign could have devastating consequences for the economy and prompt a
flight of capital from the country,” said Mr Hayes.
Mr Hayes said that Ireland had already won major
concessions from the EU. One was the reduction in the interest rate on the
overall debt and the other was the terms of the liquidity being provided to the
Irish banks by the ECB. The final element that needed to be put in place was a
mechanism to stretch out the repayments on bank debt over a longer period of
According to Government sources the key
negotiations on the bank debt involve the EU Commission and the ECB.
The sources added that linking further
concessions on the debt to a referendum campaign could be very dangerous, given
that there was nothing to prevent the rest of the euro zone from moving on
A leading German member of the European
Parliament, Elmar Broc, also dismissed the possibility of linking a
restructuring of the Irish debt to a referendum on a treaty designed to
strengthen the euro.
Speaking on RTÉ Radio’s This Week programme
he said that the two issues should be kept separate.
Mr Broc said that if everyone put forward
conditions for approving the treaty then nothing would happen. He added that
everyone had to give something to arrive at a point of common interest.
The Irish Times also reports that
even before its DVD release, this year’s highest-grossing Irish movie, The
Guard, could be downloaded from the internet for free.
Higher bandwidths and more capacity mean films
and games are being increasingly downloaded for free.
Andrew Lowe, head of Element Pictures, which
produced and distributed The Guard, says he was recently complimented on the
film by two people who had unintentionally watched a pirated version.
He says the problem is potentially
“disastrous” for the industry here, which the Government funds directly
through its support of the Irish Film Board, and indirectly through section 481
“The film industry sustains a lot of
livelihoods, and illegal downloads will make it harder to retain that,”
he says. “They are cannibalising sales, which also
means that there is no VAT being collected, so the State is also losing out.”
The Government plans to tackle the problem of
illegal downloading by enacting a statutory instrument that will plug a gap in
the existing Copyright Act identified by Mr Justice Peter Charleton in a High
Court case in October 2010.
The loophole means copyright holders cannot ask
the courts to order internet service providers (ISPs) to block access to sites
that allow illegal downloading.
EMI Ireland sought an injunction ordering
internet service provider UPC to prevent illegal downloading from websites
accessed via its service. UPC was not directly involved; it only provided the
Justice Charleton agreed that EMI’s intellectual
property rights were being infringed, but said that he could not make the order,
as the Copyright Act did not allow it. However, he pointed out that the
legislation should include such a provision in order to bring it into line with
EU law, which the Republic is obliged to follow.
The remedy was the statutory instrument, or
ministerial order, adding to the act in order to update it. The original order,
put forward by the last government, got lost in the pre-election chaos.
The Coalition published its own draft in July,
and then, unusually for a ministerial order, sought submissions from interested
parties. It received almost 60, some of whom had got their own legal advice, and
so the order made a number of return trips to the Attorney General’s office.
Seán Sherlock, Minister of State for Enterprise,
Innovation and Jobs, has responsibility for this area and last week told the
Dáil that he hoped to make progress in January. The department has written to
Willie Kavanagh, chief executive of EMI Ireland, telling him that the order
would be enacted in January and it should meet his industry’s requirements.
Mr Kavanagh says his company recently wrote to
the Government threatening legal action against the State if action was not
taken. He has not ruled this out if the statutory instrument does not give
companies such as his the right to get injunctions against ISPs.
EMI has lost €60 million in revenues over the
last six years, and its boss says illegal downloading is to blame for a
significant chunk of this. Industry figures show that the value of music sales
has shrunk from €145 million in 2006 to €56 million last year.
Not everybody agrees that the approach sought by
EMI is going to work, or is right in the first place. Lawyer TJ McIntyre,
chairman of the Digital Rights organisation, says that what the music and film
industries are seeking is completely disproportionate.
He argues that they already have a remedy against
the websites that are providing the pirated material, and they simply want carte
blanche to control all online operators. He also points out that EU law requires
internet users’ privacy to be protected. “Is the statutory instrument going
to address that?” he asks.
However, Peter O’Grady Walshe of Birchall
Investments, the main shareholder in home-entertainment chain Xtravision, whose
business is also suffering, says that what rights holders want is a solution
that is proportionate and reasonable.
Xtravision has no direct rights over the films it
rents, as it is a distributor, and so it has been watching developments from the
sidelines. He points out that if a high-street retailer were told that they were
inadvertently distributing material that breached copyright, they would simply
stop stocking it. The same rules, he says, should apply to the internet.
The Irish Examiner reports that
the annual pay of Irish tax specialists has soared by 15.6% this year compared
to a 3% fall across the professional services industry, according torecruitment
firm Marks Sattin.
Research by accountancy and finance recruiter
Marks Sattin found the pay of tax specialists increased by an average 15.6% this
year, with salaries for tax partners exceeding €150,000 and tax directors
throughout the country now able to access salaries above €100,000.
The manager of professional services and taxation at Marks Sattin in Dublin,
Clinton Donkin, said this compares to a 3% fall across the professional services
industry in Ireland, with salaries falling to an average of €38,500 from €40,500
in the third quarter of 2010.
He said: "The adoption in January of the OECD Transfer Pricing Guidelines has
put TP specialists under the spotlight and employers are fighting for those with
expertise in the new regime.
"This has boosted salaries and job creation at every level of seniority,
especially among the Big 4 firms, who are taking the lead in developing their
transfer pricing expertise."
The managing director of Marks Sattin, Dave Way, said: "Tax has been one of
the biggest areas for expansion in accountancy firms over the last year as well
as among in-house employers as regulatory changes have put professionals with
tax expertise front and centre.
"Taxation requirements on companies trading in the EU have become increasingly
complex as the array of obligations, deductions and rates, as well as the
requirements for completing intrasat returns and EC sales lists have grown."
Mr Way continued: "On top of this, the passing of FATCA has put the focus
squarely on hiring prof-essionals with a comprehensive knowledge of compliance
"Major financial institutions have started pushing hard to ensure they are as
tax efficient as possible. For many employers, the value of the cost savings
which can be generated by accountants with these skills has become clear.
"The rise of salaries in industry since the second quarter of 2011 has caused
practice — especially the Big 4 — to improve their packages too.
"So successful has this policy been, many tax specialists have reversed the
normal trend to move out of industry to take advantage of the excellent offers
being made," Mr Way said.
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