Friday, June 27, 2008

Capital Punishment!

I got a call from Newstalk 106 last week to discuss with Eamon Keane on their lunchtime show a survey they had done on different prices in Dublin, Cork, Limerick and Galway. Overall it shows that the cost of fuel, hairdressing, cinema, drink and take-aways work out a lot more expensive in Dublin than in the other cities. For example, a wash, cut and blow dry costs on average €64.2o in Dublin, while it only costs €41.40 in Galway. A cheeseburger and chips costs €4.96 in the capital, while it is only €3.96 in Limerick. An adult evening ticket is €9.50 in Dublin, while only €8 in the "real capital" of Cork. But just in case Dublin people feel they are always getting ripped off, the price of petrol and diesel was cheapest in Dublin compared to the other three. In fact Galway came out worse here, with the highest prices for petrol and diesel at 135.9 and 145.7 respectively, interestingly the research found that of the 5 petrol stations surveyed, 4 had the same price while a fifth was slightly dearer. This highlights the lack of competition down there and is mirrored across the economy where lack of competition leads to higher prices and costs for consumers.

This survey matches the analysis by the CSO which also found that average price levels were 4.9% higher in Dublin. Funnily enough though, some products like flour, milk and bread are on average cheaper in Dublin. So while the consumers in the capital take the biggest hit in the pocket overall, there are some areas where they save money. Overall though as the ESRI report
confirmed last week, the celtic tiger era is over and inevitably some prices will have to fall if retailers and providers want to do business, because at current costs people do not have the disposable income they had previously.

Anyhow I am glad to say that I have survived my eight day in recession!

Aah the Good Old Days!!

Wednesday, June 18, 2008

Money is too tight to mention

Consumers are really feeling the pinch, the cost of ordinary and essential items such as food, petrol/diesel, electricity and gas have soared in the last 12 months. Inflation has been at or near 5% since December 2006. Like the Trocaire ad about climate change, the surge in the cost of living is affecting everybody but not equally. People on low and fixed incomes are under huge pressure.

That was borne out by the recent initial report on financial capability by the Financial Regulator (FR). They define financial capability "as a broad measure of the knowledge, skills, attitudes and behaviours necessary to manage personal finances and to choose and make appropriate use of financial products"

Now I have been critical of the FR on some issues, but I want to praise them for this piece of work. Even though it is an initial report, it looks like being a very useful report. However it is vital that the findings are used to guide the work of the FR over the coming years.

Simply Red and Simply Sung...Money is too tight to mention!

The key findings of the report are;

  • 37% of consumers are having some degree of difficulty keeping up with bills and credit commitments.
  • 60% and 66.2% respectively of recently divorced and separated people have some degree of difficulty keeping up with bills and credit commitments.
  • 13% have found themselves in financial difficulty (3 or more months behind payments with regular commitments) in the last 5 years.
  • 27% of consumers have no idea how to make a complaint to a financial services firm and 26% say they only have some idea of how to complain.
  • 25% of respondents or their partners have experienced a large drop of income in the past three years.
  • 53% would strongly agree or tend to agree that they would trust the advice of financial advisers and accept what they recommend.
  • 63% would strongly agree or tend to agree that they have a clear idea of the what financial products they need without consulting a financial adviser.
  • Only 36% understood that the value of a tracker bond would be directly affected by stock market performance.

Interesting stuff, but what does it all mean or what can be done you might ask.

Well its clear that many people are finding it hard to make ends meet. It's important that they know there are excellent services out there that can help such as the Money Advice and Budgeting Service who can assist if people have debts and are struggling to make ends meet. They cannot give you money, but they can help you manage your income better and draw up a reasonable plan to pay off debts. I know some people may find it difficult to accept they have a problem but its a free and in my experience good service.

Perhaps the FR and MABS could link up and run a publicity campaign.

Also people still don't know how to complain or perhaps if they have a valid complaint. Thats a worry. One thing the FR could do is to publicise the consumer protection code and make sure lots of copies are available in all financial institutions. They already have a very good summary, called the little red book which should be circulated widely. Consumers should know that the code says that financial institutions have to act in the best interests of customers.

Despite all the publicity and contoversy over the last decade about wrongdoing and misselling (and even in the last few weeks concerning older people) by financial institutions and advisers, its clear many people (up to 53%) still find dealing with finance and financial institutions challenging and appear to be saying they trust what they tell them. That's disturbing, because recent evidence has suggested that front line staff are under pressure to sell you products which may not always be in the best interests of the consumer. Would you go into a garage and tell the salesman that you want to buy a car and let them decide what is good for you. No you wouldn't and the same should apply to financial products, consumers should always get some advice and/or a second opinion.

Tuesday, June 3, 2008

Stuff, stuff and more stuff!

I have just returned from Istanbul where I was attending the European Foundation Centre Annual General Assembly at the invitation of the Carnegie UK Trust where I am a trustee. It’s an amazing city, 16 million people, thousands of years old, known previously as Byzantium and Constantinople, the crossroads between Europe and Asia, Christianity and Islam and a major trading centre.

I spoke at one of the sessions, but the most interesting part of the conference for me was a workshop entitled “Slowing the treadmill of consumption”. Now you might think as Chair of a consumer organisation that I wouldn’t be entertaining such heresy! However I don’t promote or support rampant consumerism, the concept that people need to buy, buy, buy and shop till they drop. I am a consumerist,(consumer activist) essentially I want people to get value when they buy goods or services and if things go awry I want to ensure their rights are upheld and vindicated. I would also encourage people to be conscious consumers, taking into account the consequences of their spending on their personal finances and on our planet. Yes, people should be able to enjoy their disposal income and buy goods and services that will enhance their lives, but it is important to know the limits of consumerism as well.

Anyhow at this session Annie Leonard in person gave her amazing presentation on the impact of the rampant consumerism in the western world on natural resources. Its called “The Story of Stuff” and you can watch her here. Her work has had a big impact already, having been watched by over 2 million people. Some of the more sobering facts are that if the rest of the world consumed at the rate of American consumers, we would need 5 planets. Of course we only have one!

She also talked about how planned obsolescence, the way in which manufacturers deliberately produce goods that will break easily and will have to be replaced in a very short period. That struck me recently when I was doing a bit of spring cleaning, I came across an old electric kettle which hasn’t been used for years and must be 40 years old and it still works, whereas an electric kettle that can only be 2 years old won’t. I used to think that the buy it cheap and throw it away and buy another one was the modern and best solution and that the annoyance of my mother at the fact that goods didn’t last any time and couldn’t be repaired was a bit dated. But in fact she was right all along, our planet cannot sustain the throwaway culture. Of course this is not an attitude that has happened by accident, it has been driven by the corporations involved aided and abetted by the advertising industry, which bombards us with ads every day telling us that we need to buy, spend and consume in a certain way to be happy, cool and successful.

The other speaker at the session was Sam Thompson from the New Economics Foundation in London. His presentation was also very interesting, particularly their work on the Happy Planet Index. He outlined that conventional economic theory suggests that rising consumption is strongly related to individuals well-being, however that is not the full story. Yes studies show that people living in poverty are less happy than those on better incomes, makes a lot of sense. However he argued that their research also shows that once we achieve certain levels of income and consumption and that our basic needs are met that the happiness levels of the population reaches a plateau. For example the overall happiness and well being of people with incomes of €30-40,000 is not all that different than people on incomes of €200,000.

So that would suggest that the 3rd plasma TV won’t make us 50% happier than the neighbours who only have 2! Of course that runs counter to the constant barrage of marketing and advertising that tells us the more we buy and consume the happier we will be. And of course a lot of the economic growth of recent years has been built on consumer spending and the more recent discussion on the global economic downturn has focused on declining consumer confidence. I know a lot of jobs in our western economies depend on consumer spending, but as both presentations outlined our current consumption patterns are unsustainable. A lot of food for thought!!

The Grand Bazaar

After that session I felt very guilty for visiting the Grand Bazaar in Istanbul, which for centuries has been all about buying and spending….there are over 4,000 shops…but taking on board all I had heard I only bought stuff I really needed….I swear!