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!!

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.

There is little Ode to Joy for Irish Consumers!!

Quelle Surprise! Another report tells us that we are being ripped off compared to our EU counterparts. Forfas published a report last week which reminds us again just how much over the odds we are paying for everything. Well that is all very good, but what we need now is an action plan to actually address the underlying reasons why the cost of living is so high here. We need a co-ordinated Government response to inflation, we need to overhaul the consumer redress system, we need to either reform or if necessary replace the underperforming regulators and we need to take on the vested interests and inject more competition into the economy. And of course I would say this....we need to make sure CAI and others coming from a consumer perspective are at the table when key decisions are being made to ensure the voice of consumers is heard.

Also last week Paul Kelly in the Irish Examiner did an excellent piece on inflation for everyday costs, in particular food. Its shows that flour has gone up 52%, butter up 27%, milk up 22%, eggs up 16% to name a few. While the overall inflation rate has come down to 4.3% (still very high) in January 2008 these everyday costs have skyrocketed, which hits vulnerable consumers on low and fixed incomes the hardest.

Well what can the EU do to address our inflation problem? The single internal market was supposed to bring extra choice and competition. I think we have got the choice, but the competition has been slow to arrive. Yes, large International and European multinationals have come into the Irish market, but in most cases (perhaps Bank of Scotland-Ireland concerning mortgages is an exception to the rule) rather than shake up the market, seeing how cosy and easy it was to overcharge, they nestled into the Irish way of doing things. So as is confirmed by the Forfas report, Irish consumers have not seen much of the benefits of a single market.


Ode to Joy for Irish Consumers?

The debate on Europe will dominate the political agenda in the coming weeks and months. On a personal basis I am pro-EU and will vote yes for the Lisbon Treaty. It would be easy to blame Brussels for the failure of the single market to benefit consumers. Thats not to say that the EU couldn't do more and I do worry about the army of business and corporate lobbyists who descend on the EU institutions every day to press the case of vested interests. However as with environmental and social legislation, some of our more progressive consumer legislation has been driven by the EU and the actions on flight rights and mobile roaming have been welcome.

What we need to see is a commitment by our own Government and the regulatory bodies here to ensure the full benefits of the single market are passed onto consumers, and that unfortunately has been mostly lacking to date.