All hands to the pumps!

Motorists are finding the current increases in petrol/diesel prices a big drain on their income. I know to fill up my tank it is now costing well over €53 compared to €40 a year ago. The official statistics confirm this with diesel prices increasing a massive 65% in the last 4 years and petrol prices increasing by almost 40%.

Despite repeated calls from CAI and others to Government to do their bit by reducing either excise or VAT on petrol/diesel they have steadfastly refused to do so. The irony of course in all this is that high petrol/diesel prices are in the interests of Government because the higher the price the greater the amount of VAT revenue generated for the Exchequer.

However given the huge hole fuel costs are burning in all our incomes, it is not enough for Government to sit back and tell us to shop around, they have a duty to assist us in that regard. Therefore there are three things the should be doing (which I am calling Fuelwatch Ireland) to assist motorists with high fuel costs and to drive greater competition at the pumps! As a preface I want to say that I am in favour of measures to car journeys and oil dependency, but that cannot be achieved overnight and we all don't live within walking distance of public transport, so in the meantime something must be done.

It could consist of the following aspects.

A statutory fuel price database where all service stations in the state would be legally required to register their current prices so that consumers could check online where they could get the cheapest prices in their area. Fuelwatch Ireland would be based on the very successful fuelwatch database in Western Australia which is now being expanded across Australia. Legislation would be required to ensure all service stations comply with the scheme.

There are a number of websites already which provide information on petrol and diesel prices and those running these websites must be commended for the assistance and information they provide. However since there is no obligation on the stations to cooperate with these websites and they depend on information being sent in by motorists and in some cases the prices can be out of date. A statutory website would include all stations and would ensure that the information provided was up to date. Like the grocery price surveys, this would assist consumers to shop around and get the best price. It works very well in Australia, I cannot see any reason why it couldn't work here. It would be quick, easy and cheap to do.

I also think we need to investigate the price of fuel at the pump. I would really like to see the Government commission a study to investigate whether fuel prices in Ireland have increased in line with global prices or if price increases have surpassed global oil prices. Also would be useful to examine the extent to which price decreases have been passed onto the consumer at the pump as quickly as price increases appear to be. I have no evidence to indicate that price reductions are not being passed on, but given the significant fluctuations in price in the last year, it is important to make sure that the current volatile market situation is not being exploited further.

And finally I think we could assist motorists to maximize fuel efficiency when using their car which would be good not only for the pocket, but also kinder on the environment. I am not an expert on this, but the Government could develop and distribute practical information to all motorists on the national vehicle register on how they can reduce their fuel costs. All register vehicle owners could be sent a leaflet and this information could also be put online. While this leaflet would outline the options for reducing car use, it would also provide information on how motorists could reduce fuel use even while using their car. It would cover areas such as servicing, speed and driving patterns, tyre type etc where consumers could reduce their fuel use which we don't always think about in relation to reducing costs, well I don't anyhow. This could be easily done with the assistance of motoring experts.

Basically in my humble opinion it's time for the Government to do something to assist motorists given the high cost of fuel. They can't reduce the price of a barrel of oil, but they make a contribution and these proposals would go some way to allievate all our pain at the pumps!


Petrol protests Indonesian style!

Stop the Lights another ESB price increase!

Friday was a bad day for consumers following the announcement that the Commission for Energy Regulation (CER) had sanctioned a 17.5% increase in electricity costs for domestic consumers. This is going to hit us all in the pockets as electricity is a cost most of us cannot do without, particularly as we face into the autumn and winter months. I know the increased cost may encourage some householders to cut back on unnecessary use of electricity, but in general we all need "the electric" to heat our homes and to use a range of modern conveniences. This increase will in particular hit those on low and fixed incomes, some will get support through the households benefits package but others will probably have to cut back and perhaps end up ill as the result of a lack of heating or will go into debt to meet these bills.

OK I acknowledge that utility prices were always likely to increase given the increase in oil and gas in recent months, but the manner and nature of the announcement were troubling from my perspective. It smacked of very co-ordinated news management between the regulator and regulated in my view and we were all softened up for the bad news well in advance. For months we have been "informed" that prices were going to increase massively, some figures of up to 30% were mentioned. A day before the announcement by CER, ESB held a news conference on their 2007 annual report were they pre-announced their decision to make a €300m rebate to relieve costs to consumers. Then a day later, CER comes out and says they are planning to sanction a 17.5% increase (although technically it the final decision will be made on July 18th) There was no consultation with CAI or other consumer bodies as far as I know and of course the timing of the decision on the day after the Oireachtas rose for the summer recess meant it would get less political scrutiny. Also the rationale and background available at present from CER for the price increase is paltry running to a page and a half.


One response to the price increase!

There is little we can do about this price increase now, however it does highlight a need to change the process so that the interests and voice of consumers is fully taken into account. More information is required as to how this price increase was sanctioned, a full public consultation process and a real examination of ESB costs to determine if they can achieve greater internal savings rather than just passing on costs to the consumer! The €300m once off rebate will do nothing to address the long term inefficiencies of ESB. We know that the wage bill in ESB is much higher than comparative providers in other European countries. And we need competition so that domestic consumers have the choice of switching providers for better value if want to, which domestic consumers cannot do now almost 10 years after supposed deregulation.

Of course like CIE the fact that the Government is both the owner and regulator (if indirectly) of ESB creates a conflict of interest. The Government got a significant rebate from ESB last year and given the current state of the public finances, it is unlikely that the Government would want to forego this. However the cost to individual households and to our competitveness should in my view take precedence over temporary funding streams....but don't hold your breath!

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!!