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.

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!

VRT and Motor Tax, Cowen will still be singing all the way to the bank!

Last December when Brian Cowen delivered his last Budget as Minister for Finance many people were watching to see what he would do on stamp duty, how much he would increase social welfare or how much in excise duty he would add to drink and cigarettes. However in the midst of all this stuff, Cowen also announced a major reform of Vehicle Registration Tax (VRT) and motor tax. VRT is a tax you pay for registering your car, but effectively it is a tax on a new car purchase, while motor tax is an annual tax which goes into the Local Government Fund, which is distributed to Local Authorities.

At present all cars are taxed on the basis of engine size. However from July 1st 2008 all cars purchased will be taxed based on their CO2 emissions ratings. Therefore cars that are cleaner and more environmentally friendly will be taxed at a lower rate and the gas guzzlers will face increased taxation. The change in price for some cars will not be much, but for others it could be quite a lot more. For example, a Toyota Avensis 2.2 D4D should based on my calculations (all prices quoted by me here need to be confirmed by Revenue Commissioners as I am going on the basis of information available to me on third party websites) would be liable to less VRT and therefore reduce in price from €35,105 to €31,896 a drop of over 3k. BMW assert that the price of some of their models will reduce by up to €8,000 as a result of the changes, although some of their models may also increase in price. Of course some models will increase in price, for example one of the most popular sellers in Ireland, the Ford Focus will increase by about €500. The gas guzzling Land Rover Discovery will increase by about €5,500.


New regime could be good for sale of some BMW models!

Likewise the motor tax charges on all newly registered car from July 1st 2008 be based on a CO2 emissions rating. There will be 8 bands and again the annual motor tax charge will change significantly for some models. The aforementioned Toyota Avensis will reduce from €791 pa to €431, a cut of €361. Others will increase, for example a Saab 9-5 2.0t petrol will increase from €591 pa to €1000. In general it seems diesel cars will become cheaper and the percentage of diesel car sales should increase from the current 20%. Cars registered bought between Jan 1st and June 30th 2008 can be taxed at the engine size rate or co2 emissions rate depending on which is lower.

Car sales are down over 9% on this time last year. Some blame the confusion over the new system, although many people may be holding out for their choice to reduce in price.

I have two main concerns. Firstly the lack of information on the changes available on the relevant Government website. The Department of Finance, Revenue Commissioners and Department of the Environment only have generic information on the new system. As a potential purchaser of a new car now or after July 1st, I wouldn't get any information on the impact of the new VRT and motor tax system on any of these websites. The only information available I am aware of is on third party websites. The Society of the Irish Motor Industry have a VRT and motor tax calculator on their website while motorcheck.ie also have a VRT price calculator. While this information is welcome and very useful, neither bodies have the final say on changes and cannot probably state 100% that all calculations they give will be the ones applied by State bodies.

The other issue I am concerned about is making sure that the reduction in VRT is passed onto the purchaser. If this measure was introduced to encourage motorists to buy greener cars, then the savings should be passed on fully to the consumer in the same way that I am sure the increases in VRT will be. This is something I plan to follow up on.

VRT brought in €1.4bn and motor tax about €1bn to the state coffers in 2007. I am sure whatever consumers do, the Brian Cowen and the Government will continue to sing all the way to the bank!


Our new Taoiseach Brian lashing out the verses in Clara!

Charges of the Heavy Brigade!!

The news was dominated this week by misdeeds in the financial services sector. First we had the disclosure that Bank of Ireland had lost 4 laptops containing the personal, financial and health information of up to 10,000 customers. Bad and all as that was, the abject failure of BOI to inform the Data Protection Commissioner, the Financial Regulator and most importantly those affected immediately reflects very badly on the bank. CAI has called for BOI to pay compensation to all those affected, see our press release.

Then we had another damning report from the Financial Ombudsman in relation to the misselling of financial products to elderly people and the attempts by financial institutions to wriggle out of their commitments to people who had serious illness insurance cover. This is awful stuff, here we have vulnerable people, some in their 80's and 90's and then others whose lives have been turned upside down by serious illness and they are out through the wringer when they are least able to deal with it. Kathleen Barrington has an excellent piece on this in Sunday Business Post today.

There was also turbulence in the mortgage market, with some mortgage providers reducing their commissions to brokers, which could potentially lead some to direct business to where the best commission is rather than where the best deal is for the borrower, see more on that here.

Across the water in the UK the big story was the judgement in the High Court in favour of the Office of Fair Trading, and against all the high street banks.


ITN News report on the case.

The judgement gives the power to the OFT to examine the fairness of charges imposed on customers in relation to unarranged overdrafts, such as people going into overdraft. Thursday's decision was a great one for consumers, however its likely that the banks will appeal all the way to the House of Lords, so it is not over yet. In some cases consumers are charged £35 each time this happens, when independent analysis suggests that it costs the bank about £2. From 2005, thousands of customers have begun to reclaim charges. The charges here are not as high as in the UK, which is primarily in my view because of section 149 of the Consumer Credit Act which I wrote about here previously. And the current charges chaos in the UK is a timely reminder why we need to retain section 149.

However the judgment also points to the need here to review the existing charges imposed to determine their fairness on Irish consumers. In particular there are many people in the sub-prime market who are being charged exorbitant fees and charges which only serve to make it even more difficult for them to sort out their finances. CAI will be writing to the Department of Finance seeking such an independent review of charges.

Tonight is my last night playing Roger in "I do not like thee, Dr. Fell" with Dunshaughlin Players. Its been hard work over the last few months learning the lines and moves, but performing has been great fun so far, especially with such a great cast, director and backstage team. Looking forward to the finale tonight and a few beers afterwards perhaps!!

Getting the messages and message!

When I was a young fella growing up in rural North Tipperary, we used "to go to Borris (Borrisokane) to get the messages", usually from a small number of local shops. Groceries were things that Americans used to buy in large supermarkets and bring home in brown paper bags in TV shows like the Brady Bunch. Shopping patterns have changed a lot since then and many Irish consumers are now buying their "groceries" from large multiples like Tesco, Dunnes and SuperValu.

The week before last the Competition Authority brought out two reports. The first report focused on the effects of the abolition of the Groceries Order in 2006. The analysis suggests that while prices fell as a result of the Groceries Order being abolished, most of the gains have been wiped out by the significant increase in the cost of food globally. There has been quite a bit of comment in relation to this report, so I am not going to go on about it again.

The second report published on April 9th didn't get any coverage that I am aware of, but I found it fascinating. Its entitled "A Description of the Structure and Operation of Grocery Retailing and Wholesaling in Ireland: 2001-2006". Its very useful because in reality the Groceries Order was always in my view a minor factor in determining the cost of groceries. Yes I supported its removal, but it was not the magic bullet to cheaper prices. What we require to improve competition and ensure consumers get a better deal is a well informed policy.

The report tells us that the groceries market was worth €11.6 billion in 2006. It describes really well the nature and structure of the market, between what it calls the "vertically integrated retailers" such as Tesco, Dunnes, Aldi etc, the affiliated retailers operating under the brand of the likes of SuperValu, Londis, Mace and Centra and then the independent retailers. Many people complain about the decline of the local village shop or the corner shop and that is borne out by the report as the number of outlets has halved from 13,775 in 1977 to 6,293 in 2006, with about 55% of these being independent retailers.

Of course size is what counts and while there are less outlets, they have been replaced by large and medium sized supermarkets with a wide variety of products. I was surprised to read the significant position of the other retailers in terms of presence and market share. I had incorrectly assumed that the Tesco and Dunnes were the big beasts, under pressure now from Lidl and Aldi, but that the others were in the ha'penny place. However the report shows that while Tesco has the largest market share at over 18%, SuperValu and the Independent retailers are number 2 and 3 respectively, with Dunnes coming in 4th and Spar 5th.

The good news is that the report indicates that between 2005 and 2006 consumers were shopping around more, by visiting more retail outlets. Depressingly, if of no surprise, 82% of shoppers use their car to do their main weekly shop compared to 16% who walk and only 2% use public transport, and travel on average 22 minutes to do their main shop.

The report indicates that Irish shoppers are more brand conscious. A statistic that stood out for me was that own brand products comprised just 7% of total sales here compared to 45% in Switzerland, 30% in Germany, 28% in the UK and 22% in the Netherlands. While my assumption is that own brand products usually cost less consumers may worry about the quality or value of such products. Perhaps this is fed by memories of the now long gone, Quinnsworth's (now Tesco) own brand "yellow pack" range which is still used as a term to describe a product, service and even a job which is considered sub-standard. As well as price surveys, perhaps we need to work on encouraging Irish consumers to free themselves of brand loyalty or as some would call it brand tyranny.

The report shines a light on a very significant market and the details and information will hopefully be used to inform consumer policy. The Competition Authority is following up this report with a study on the retail planning system as applied to the grocery sector. That will also be very useful in light of the importance of location and convenience in terms of retailer selection.

I cannot let the day go without mentioning the great win by the Tipperary hurlers in Limerick today, couldn't make it due to other commitments, but had the pleasure of attending the game last weekend in Nowlan Park against Kilkenny. Here are some highlights of today's win courtesy of www.premierview.ie
Tiobraid Arann Abu...bring on the rebels in June!!

Legal Ombudsman Bill falls short.

My blog is a little late this week, the consequence of attending a seminar in the beautiful city of Budapest organised by my good friend Joao over the weekend. Unlike many an event the PowerPoint presentations were kept to a minimum and for fun at the event one of the organisers Ozegan entertained us with this you tube video.


Chicken, Chicken, Chicken!!!

Anyhow to more serious stuff. The Legal Services Ombudsman Bill was published today. While it is welcome that the bill has finally been published and the Government are moving towards greater regulation and oversight of the legal profession, I have concerns. We are all familiar with the most recent high profile cases, however over the years many consumers have faced serious obstacles getting redress from their solicitors or barristers in relation to complaints. Consumers have even faced difficulties getting another solicitor to take on their case against a solictor. That has been compounded by the failure of the existing self regulatory bodies, the Law Society and Bar Council to be less than adequate in dealing with complaints brought to them by members of the public. This is of course no surprise, these bodies were set up to advance and represent the interests of solicitors and barristers respectively, to expect them to independently adjudicate on claims, allegations and complaints against their own members is ridiculous. Indeed the old legal maxim that no one should be a judge in their own case, somehow got lost when these regulatory systems were evolving.

I have always been of the belief that not only is this in the interests of consumers, it is also not in the interests of these representative bodies currently engaged in oversight or regulation of their members or profession. Self regulation is an oxymoron as I have said before, that does not serve consumers.

This proposed legislation fails consumers because it will force a person who has a complaint with a solicitor/barrister to go through three processes. Firstly they will have to take up their complaint with the individual solicitor/barrister and try and resolve it there. This of course makes sense for all concerned and the hope would be that most issues can be resolved here. But if they get no joy at this stage they will have to pursue the matter with the representative bodies complaints procedures, and if this fails to meet the needs of the consumer, they can bring the matter to the Legal Services Ombudsman. That might seem all very neat, but for the ordinary consumer who is already stressed out with a particular case/legal issue this could all be very stressful, time consuming and costly. The law and legal system can be intimidating for many individuals, so to force peopel to go through

I believe we should follow the model adopted for financial services where the consumer is required to pursue their case with the individual bank/financial services company and where this fails to meet they can pursue the matter with the Financial Services Ombudsman without having to bring the matter to an intermediatory body.

Why can't we have the same for the legal profession? This is something that CAI will be calling for as the legislation proceeds through the Oireachtas.