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News : Irish Last Updated: Feb 28, 2013 - 7:50 AM


Thursday Newspaper Review - - Irish Business News - - February 28, 2013
By Finfacts Team
Feb 28, 2013 - 7:40 AM

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The Irish Independent reports that the prospect of the Croke Park deal being backed by public servants has been dealt a major blow due to "paltry" cuts to top politicians' pensions.

State employees earning over €65,000 a year face cuts of up to 10pc in their pay, but the highest cut for retired staff is just 5pc. Unions were led to believe that the cuts to the best-paid pensioners, including former Taoisigh Bertie Ahern and Brian Cowen, would be much deeper.

Brendan Howlin's Department of Public Expenditure and Reform argued that those on pensions over €32,500 will take cuts that are roughly half the pay cuts being suffered by staff. This is because their pensions are worth half their final pay.

But former senior politicians, and civil servants like Dermot McCarthy, whose €713,000 retirement package caused outrage, enjoy much bigger pensions than current staff will get.

This is because they retired before pensions were hit by cuts to reflect a previous public sector pay cut, which came into force after February last year.

Unions were promised there would be a substantial cut for the top pensioners. They believed this would help them sell the new deal to members.

The pension cuts, which will reduce Mr Ahern and Mr Cowen's €150,000-plus pensions by €7,500, were revealed by government officials on Tuesday night. They said it would "mirror" the pay cut.

They said the cuts would be in the region of 2pc to 5pc on salaries over €32,500, with the 5pc cut expected to apply to pensions over €100,000.

The extent of the pension cuts is not mentioned in the final document outlining the proposed new Croke Park deal, although they are promised.

It says the Government intends to "align" the pension reduction with the pay cut applied to serving staff. It adds the measure will apply to pensions greater than €32,500.

"Public servants think this minor adjustment to pensions in no way reflects what's happening on the ground," said CPSU leader, Eoin Ronayne.

"This is not a big hit. It's small beer for people on the big pensions. Our guys can only look on in envy at people on pensions of €32,500 or more. The measure is insulting to people on low pay. It is offensive."

He said the only acceptable cut to a pension of over €150,000 would be in the region of €20,000.

Other union leaders were reluctant to publicly condemn the pension cuts, but admitted they were "miffed".

"This is an issue of fairness," said a senior source. "Top politicians and civil servants are taking minimal pain on pre-austerity pension deals. It was clearly indicated to the negotiators that they would face a big hit, but these are paltry cuts."

A key union negotiator also told the Irish Independent they believed the pension cut at the top would be "much steeper".

General Secretary of the Association of Higher Civil and Public Servants, Dave Thomas, said he had been contacted by members who want to know exactly what pension cuts will apply, but the department has not formally issued details.

The union, which traditionally backs national agreements, has recommended a 'no' vote on the Croke Park deal to members.

It represents over 2,700 higher-paid civil servants who face pay cuts as well as a three-year increment freeze, as they earn more than €65,000 a year.

The Department of Public Expenditure said the thresholds at which the pension cuts would apply had not been decided.

It previously introduced a 20pc tax on pensions over €100,000, but those with multiple pensions avoided the cut if their individual pensions were worth less than this.

Former ministers, including Charlie McCreevy, Dermot Ahern, John O'Donoghue and Mary Harney, escaped the tax because of the loophole.

The Irish Independent also reports that the number of people working has risen for the first time in five years.

New figures reveal promising signs in the labour market as the numbers out of work have dropped and long-term unemployment is also falling.

The latest Central Statistics Office report shows that the numbers working increased by 1,200 to 1.848 million in the final quarter of 2012.

That's the first annual increase in employment since early 2008.

And the unemployment rate has also fallen and now stands at 14.1pc compared with a high of 15pc this time last year.

Even more importantly, long-term unemployment is also falling – the numbers out of work for over a year dropped by nearly 20,000 in the last year to 176,400.

That brings the long-term unemployment rate down from 9.1pc to 8.2pc, the Quarterly National Household Survey shows.

Adjusted

Over the last year employment fell in the public sector, construction, transport and industry, but rose in agriculture and fishing and in the information and communication sectors.

The public sector has shed 27,300 people over the last three years, almost 7pc of its total, compared with 15,400 jobs in the private sector since 2009, or 1.3pc of its total employment.

There are now 428,876 people signing on the Live Register – which is over 10,000 less than this time last year.

And on a seasonally adjusted basis, the numbers signing on fell by 1,400 in February.

Jobs Minister Richard Bruton welcomed the improved figures.

"While the numbers today showing jobs growth in our economy for the first time in five years are welcome, all in government recognise we have much more to do to rebuild the shattered economy we inherited two years ago," he said.

The Construction Industry Federation (CIF) said that building jobs rose for the second quarter in a row at the end of 2012 – the first time this had happened since the boom.

The numbers were up from 99,600 in mid-2012 to 103,200, which CIF director general Tom Parlon said showed a "tangible improvement in the fortunes for our sector".

KBC Bank economist Austin Hughes said that the "surprisingly large drop in unemployment rate reflects emigration, re-entry into education and retirement as well as a slightly better jobs climate".

The 14.1pc unemployment rate was the lowest since autumn 2010 and is going in a healthier direction than in many other euro countries.

Business group Ibec said the jobs data was "further evidence that the recovery is firmly under way".

The Irish National Organisation of the Unemployed warned that though the drop in long-term unemployment was welcome, there was also a 19,800 increase in the numbers outside the labour force, suggesting some had become discouraged in the search for work.

There's been a huge drop in the number of women engaged in "home duties" in the last year, down from 521,000 at the end of 2011 to 491,000 now.

The pro-Catholic Church Iona Institute warned many of these women were being forced to work by economic need.

"The sharp increase in the number of women leaving home for the workplace is almost certainly due to the recession," said Maria Steen.

However, the figures indicate a much sharper rise in the number of women who described themselves as retired.

Meanwhile, over 130 new jobs were announced for Dublin yesterday.

Guidewire, which provides software to the insurance industry, is creating 75 jobs at its offices in Blanchardstown, Dublin.

Ecocem Ireland, a cement company based at Dublin Port, also plans to create 61 jobs directly and indirectly in a new plant.

The Irish Times reports that family-owned feed milling business Henry Good was placed in receivership yesterday, brought down by a historic debt of close to €4 million.

The company, which supplies all kinds of livestock feed in the domestic market, tried to resolve its cashflow problems by seeking to cut costs while also trying to bring a new investor on board but such moves proved too difficult to achieve.

The business, which is based in Kinsale, Co Cork, and currently employs 50 people, will continue to trade as receivers Kieran Wallace and David Swinburn of KPMG look to sell the business as a going concern.

Mr Wallace and Mr Swinburn were appointed as joint receivers yesterday to the company which was established in the Cork town in 1927.

Restructuring efforts 

In a statement, the receivers acknowledged that “for many months, the directors of Henry Good attempted to restructure the business, following difficulties with a significant debtor in the summer of 2012”.

Last August, it emerged that Henry Good was owed €3.9 million for chicken feed by Cappoquin Poultry in west Waterford, to whom the Kinsale-based company had been supplying feed for years.

During a High Court hearing where Henry Good successfully sought to have an interim examiner appointed to Cappoquin Poultry, the court was told that the company’s debt to Henry Good rose from €346,000 in December 2010 to €3.9 million in August 2012.

Henry Good had also been a supplier to Cappoquin Chicken, Cappoquin Poultry’s predecessor which had gone into liquidation in 2008 owing it money.

In a statement issued on behalf of Henry Good Ltd, the receivers yesterday acknowledged that it was a particularly difficult day for the directors of the company given the business had been in the family for over 80 years.

The directors thanked their loyal suppliers, customers and employees over the years and, together with the receivers, expressed confidence that a buyer will be found for the business and its assets as a going concern.

‘Sad day for Kinsale’ 

Local historian Dermot Ryan said yesterday’s news was a sad day for the town given the company’s long association with Kinsale, with the Goods providing employment for generations of local people.

“Tom Good set up the mill in Kinsale in the 1920s on the site of the old RIC barracks, where the car park is now, and he continued there until the 1950s when a fire destroyed the building,” said Mr Ryan, a former mayor of Kinsale. “But he rebuilt the mill and it continued to thrive.

“It’s a sad day for Kinsale because the Goods and Kinsale are synonymous.

“They provided good employment over the years for many families in the town, not just directly in the mill but also to hauliers and so forth. Hopefully a buyer can be found and the jobs maintained.”

The Irish Times also reports that State energy group the ESB will divest its 50 per cent stake in two international power stations to fulfil a Government order to dispose of non-strategic assets.

Last October, the Government called on the energy provider to dispose of €400 million in non-strategic generating assets by 2014. The funds raised are to be paid to the exchequer as a “special dividend”.

Yesterday the ESB said it would sell its 50 per cent stake in both the UK-based Marchwood Power and Spanish power station Bizkaia Energia.

In a statement, the energy provider said both power stations “have been good investments for ESB”.

A spokeswoman for the ESB declined to comment on how much the sale of its stake in the stations might generate, but it is understood that Marchwood Power has a value of about €500 million, while Bizkaia Energia cost €690 million to develop.

Dividend 

The ESB jointly owns – with Scottish Southern Energy (SSE) – Marchwood Power, a 840MW power station in Marchwood, near Southampton. It was constructed in 2007 and started commercial operations in late 2009. In 2011 the station paid a dividend of €7.4 million to the ESB, down from €17.6 million in 2010.

Bizkaia Energia, jointly owned with Osaka Gas of Japan, runs a 755MW power station in Amorebieta, near Bilbao in the Basque Region of northern Spain. The plant was the first internationally owned Independent Power Producer in Spain, and has been in commercial operation since 2005.

The station paid the ESB a dividend of €7.4 million in 2011.

At the time of investing in Bizkaia Energia in 2003, then ESB chief executive Pádraig McManus said the international business was “core”.

The Irish Examiner reports that Justice Minister Alan Shatter is trying to eliminate abuses of bankruptcy laws in other countries through proposals for modernising EU-wide insolvency legislation.

Irish property developers have attracted widespread criticism over the past few years for availing of much more lenient bankruptcy laws in the UK in what has been described as “bankruptcy tourism”.

Mr Shatter said he had arranged that the initial discussion on the proposed regulation took place at the informal Justice and Home Affairs Council meeting of EU justice ministers held in Dublin Castle on Jan 17 and 18.

“I emphasised the importance of a more uniform approach across the EU in regard to the establishment of the centre of main interest so as to combat potential abuses which have given rise to allegations of ‘bankruptcy tourism’,” said Mr Shatter in response to a Dáil question tabled by Sinn Féin’s Pearse Doherty.

Central to the EU proposals will be tightening up on guidelines on what is known as the centre of main interest. This will impose a higher burden of proof on people who want to apply for bankruptcy that they have moved their business interests and families to that country for a requisite time before they can start proceedings.

Steve Thatcher, a UK lawyer and bankruptcy specialist who has dealt with Irish clients, says the most effective way for Mr Shatter to eliminate bankruptcy tourism would be to implement personal insolvency legislation in this country “instead of drip-feeding it in”.

Moreover, it is highly unlikely that the UK minister for justice will change existing legislation because of Irish people seeking bankruptcy protection in that jurisdiction, said Mr Thatcher.

However, Mr Doherty said there has to be an urgent tightening up of EU-wide legislation. “This is something that has been going on for some time and the minister needs to crack down hard on it,” he said.

“For example, we have all heard of the Nama developers who’ve been able to declare themselves bankrupt outside of the State, to avoid this State coming after their assets.

“We cannot have a situation where those who can afford it can avail of more lenient bankruptcy regimes, while the ordinary person is left waiting at home, in this instance for a personal insolvency bill that we’re not even sure will assist people. Bankruptcy laws need to be fair to the individual and the state and they need to be declared in the state that person is resident.”

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