A Golden Opportunity?

The cash for gold market has really taken off recently. All of sudden we are being bombarded with TV ads, flyers in the door, stalls in supermarkets from companies offering to take all that unwanted gold off our hands for bundles of cash. Gold has always been an attractive commodity in times of financial and political turmoil and this time is no different, global prices have soared in the last year. This means there is a great market for scrap gold now. So in the middle of a recession it seems a bit of a no brainer, gather all that unwanted gold jewellery, stick it in an envelope and wait for the cheque in the post by return. The buyers can resell the gold for a tidy profit, so its a good news story all round.

Well it is not that simple, as it seems many people could be selling their gold at a fraction of its worth. When you think about it, in normal circumstances would you allow the buyer to dictate the price they are willing to give you? As with all new crazes problems arise, in the US, there has been a lot of controversy about one particular company highlighted by consumerist.com and alleged wrongdoing. Here Senator John Paul Phelan of Fine Gael has also rightly raised legitimate questions concerning the regulation of this activity and the potential for it to increase burglaries and theft. Senator Phelan is proposing a private members bill to deal with this. Although if there is evidence that some companies are using sharp practice, then that could be tackled under the existing provisions of the Consumer Protection Act 2007 dealing with unfair and misleading commercial practices.


Like the Cash for Gold craze...Glee is the latest TV craze, no TV channel is safe!

However there is no law against illogical consumer behaviour and if people insist on sending their gold in the post without any idea of its value and accepting whatever price is offered, then no surprise if companies buy it as cheaply as possible. According to one company in the US 94% of customers accepted the offer given. However a very recent survey by Which in the UK found that most of the TV cash for gold operators offered poor value compared to pawnbrokers and jewellers. Now obviously no one would expect to get the retail value of the gold, but most of the cash for gold operators were only offered about 6% of the retail value of the items, compared to about 25% from the jewellers/pawnbrokers.

The lesson here is to do a bit of work. Find out the caratage (quality) and weight of your scrap gold. This expert gives great advice on what to do. Some of the companies involved provide online price calculators, so you have an idea of the price being offered. I came across this site which gives information on the value of gold based on weight and quality, they don't claim it is perfect, but it might give you some ballpark idea of values. If all that seems a bit too challenging, at the very least take your scrap gold to a pawnbroker or jeweller to get a valuation. As the seller of a now even more valuable and sought after commodity doing some leg work gives you information, choice and bargaining power and will probably ensure you get more for your gold!

Premium Discontent!

The recent bad weather with the floods in November and the snow and ice of Christmas and New Year brought misery and hardship to many individuals, households and communities. I cannot imagine what is must be like to have your home flooded either as the result of torrential rain or by bursting pipes.

As people start to get their lives together, many turn to making insurance claims for the damage caused. President McAleese has rightly called on insurance companies to process these claims speedily. That is why people pay considerable sums to them each year to ensure that when a disaster strikes they have some financial compensation. The IIF have already stated that the floods in November will cost €244m. Most of these claims relate to commercial property damage with €77m being claimed by domestic customers. However it is important to remember that this is what is estimated and these are claims, some claims may not qualify.

No doubt the recent bad weather will be used as a further excuse by insurers to hike premiums in 2010. But hold on a minute, that is what insurance is there for. Insurance companies are meant to factor in potential inclement weather into their prices. The possibility of flooding and snow and frost are hardly unexpected. Indeed it could be argued that up to this winter, we have had a spate of very mild winters. Using the recent bad weather as a cover to further hike prices shouldn't be entertained.

This is especially so when we know from the CSO that home or dwelling insurance and motor insurance went up by 16.8% and 10.1% respectively in the 12 months to December. This is against the background of 5% deflation. So what is going on here? The insurance industry will say "prices came down between 2002 and 2007 by 45%, so they had to start going up at some stage". What they don't tell us of course is that prices skyrocketed between 1997 and 2002 going up by over 61%. Most of the fall in premiums can be attributed to the introduction of the Personal Injuries Assessment Board, which led to a significant reduction in the cost of claims for insurers. The extent to which those savings were passed onto consumers is something which I would have concerns about.


Funny Ad...but the bad weather and price hikes are not as humourous!

Likewise you will hear guff about the increasing cost of claims, fraudulent claims and the extra 1% Government levy. Yes the levy has gone up by 1%, that's just 1%...what about the other 15%? The claim about increasing repair and building costs is balderdash, it must cost half what it did 3 years ago to get any repair job done. So I don't buy that one. On the fraudulent and exaggerated claims, well they have to provide proof for that, but again a useful cover for price hikes.

I have no doubt that profits in the insurance industry are down in 2009 and will be down in 2010 from the dizzy heights of the Celtic Tiger, but that is the case for every business and sector. Insurers will have to take some of the pain instead of passing it on to consumers and businesses. Historically profits here far exceeded those in the UK, in 2002 it was found that motor insurers in Ireland had 11 times the profits of their counterparts in the UK. Also the Financial Regulator Annual Reports (Page 134) show that based on competition indicators the market here is not competitive.

What needs to be done. Well we need scrutiny by the Financial Regulator, Government and Oireachtas. The Regulator could start by producing more reader and citizen friendly reports on the Industry. The annual statistics on the Insurance Industry (called the Blue Book) are turgid and difficult reading, the contain some interesting data, but it is hard going. It also doesn't address issues like how much of the saving of PIAB were passed onto consumers, or are premium increases justified based on the data available. So we need more and better data.

The Government has a vague commitment in the most recent revised Programme for Government about ensuring consumers get the benefits of competition in the insurance market. Based on a response by the Minister for Finance a review will be conducted, but when and by whom is not clear. The Oireachtas can also play a role in that the Enterprise and Small Business Committee could hold hearings and invite the insurers to outline and explain how they can justify the current increases. It would be all too easy with the focus on the banks, for the insurers to hike prices and their profits while the glare of the media and public was elsewhere.

Watch out for snake oil salesmen online!

I came down with a bit of a lung infection during the week and in the course of doing some online research on my ailment, it struck me how many companies are advertising drugs of one sort or another on the web. I never even thought about buying drugs online, seems a bit mad and unsafe to do so. I suppose it should have struck me because my junk email account is full of spam emails selling Viagra.

You can buy non-prescription drugs online, but many of these are available in shops/pharmacies and are generally occasional purchases, so I imagine the online trade in these is minimal. It is of course illegal to buy prescription drugs online for many good reasons. However it would appear that many people do it. Apart from the dangers of self diagnosis, you don't really know what you are getting. You could be paying good money for flour or starch or something a lot more dangerous. If you are not sure about the status of a particular drug, such as whether it is prescription or non-prespription, best to check the Irish Medicine Boards website where they have a database of authorised drugs on sale in Ireland.


Beware the online snake oil salesmen!

I see the Revenue Commissioners intercepted 3,000 items which contained 393,067 prescription pills in 2008 which were purchased over the web. Across the EU the number of sales is staggering, according to the EU Commission over 34 million fake tablets were intercepted in 2 months.

It would appear the market for so called "embarrassment drugs" such as Viagra is high. Many people are still too embarrassed to talk to their doctor about some conditions. This issue needs to be tackled on 2 levels. On the prevention side there is merit I think in a public awareness campaign advising people of the dangers involved. In these times of economic stringency, hard to expect Government to pay for this. It would appear to be the sort of thing that pharmacutical companies cound fund, it would be in their interests to reduce this trade. On the supply side greater efforts need to be taken by public health and enforcement agencies to track down and close down these online snake oil salesmen.

Bleak Houses?

The good news for many in the private rented sector is that prices are now back at 1999 levels. There is a lot of supply and those in the market can pick and chose. It is likely though that the tax on non-principled private residences aka second homes will be increased in the Budget tomorrow. A lot of landlords have numerous properties, so they may try and pass this cost onto the tenants. Also the Commission on Taxation recommended the abolition of the rent relief for tenants, it may not be awful lot, but for many on tight budgets was a help.


Hopefully conditions are better now!

However for many people and families on low incomes and on social welfare, the cost of renting has bizarrely gone up, despite the fact that they can least afford it. People in this category get state support in the form of rent supplement, 91,600 or 24% more than last year based on recent figures from the Department of Social and Family Affairs. Changes in the last Budget, mean that not only have tenants to pay more as part of their contribution to the rent, many also have had to top up the "official" state payment as this was also reduced in the Budget and landlords expect tenants to make up the difference. I fully understand why the Government cut their contribution, rental costs were coming down across the economy, so why not in this sector as well. However in many cases the landlord didn't accept the cut and turned to the tenant to make up the difference. You might wonder why in the current market people just don't up sticks and leave rather than pay above the market rate. I am sure in some cases people have, but not all landlords will accept tenants on rent supplement for a variety of reasons, so there is no guarantee that they will get alternative accommodation.

Also some people and families on rent supplement live in sub-standard accommodation. Earlier this year the Government to their credit did introduce higher standards for private rented sector accommodation and last week they brought in further improvements. However many of the new provisions do not apply to existing rental properties until 2013. Some landlords will meet the criteria and treat people properly, however some will try and avoid their legal obligations. That is where the local authorities come in, they are supposed to inspect rental properties in their areas. Some have a great record, over 50% of registered properties, however 17 out of the 34 local authorities inspect less than 5% (see table 37) of properties to check that they meet the current minimum standards. So the chances of dodgy landlords being caught are slim.

Organisations like Threshold do an excellent job in supporting tenants on a very limited budget, however the local authorities need to do more and carry out more inspections (at least 20%) to ensure that tenants get decent living conditions for the millions which is being spent by the state for these properties.

Traffic Lights...the right road for food labelling.

There is a big battle going on in Brussels these days that gets scant attention in the national press, but which will have major implications for consumers and their health for years to come.

In January 2008, the EU Commission introduced a proposal for a new directive to reform how food is labelled across the EU. The proposed rules will require manufacturers to put nutritional information for 6 nutrients (energy, fat, saturated fat, carbohydrates, sugar and salt) on the front of packaging.

New regulations are badly needed. Just this week the Food Safety Authority published a report on consumers experiences and preferences when it comes to food labelling. Almost 50% always or usually look at the labels, mostly to check nutritional, calorie content and ingredients. I have to be honest and say that I am among the 50% that doesn't do this very often, either because the print is very small or because the information is very technical and of little use. However I will make a New Years resolution....3 weeks early to start from now on! Although I am a sucker for the foods, such as biscuits labelled as "low fat". I know I am kidding myself into thinking chocolate biscuits are not fattening!

The research showed that 87% felt that nutritional information was very important or important and 81% of consumers want information on the health impact of alcohol on labels. Of most relevance to the debate raging in the EU institutions at the moment, they asked people about whether they preferred the Guideline Daily Amount (GDA) system or Traffic Light system for nutritional information. Here the response is a little confusing as they presented 4 options, but overall 39% preferred the traffic light system. However the suggestions that any new regulations could be a mixture of both was voted down by Irish consumers. The report does appear to show that consumers are taking more notice of the nutritional information on the packaging than before.

The traffic light system was developed by the Food Satefy Agency in the UK and would require manufacturers to put a red (high), yellow (medium) and green (low) symbol on the packaging depending on the levels of salt, fat and sugar in the product. The GDA system was developed by the Food Industry and consists of symbols with percentages of fat, sugar etc in the product based on the average daily amount for an adult.


I like traffic lights...unless they are red of course!

BEUC and other consumer and health advocates want the traffic light system for fat, saturated fat, sugar and salt because it is much clearer than the percentages GDA model. Of course the food manufacturers and processors are against this because no company wants to have red light symbols on their packaging. However the best way around this of course is for them to reduce the amount of salt, sugar and fat in their products. So not only will the traffic light system help inform consumers as to the levels of these substances, it will also force manufacturers to change the contents of their products which will be good for everyones health.

This is an important debate and issue. Several reports and studies have shown that consumers are not aware of the levels of fat, sugar and salt in many of the products they eat. The Dispatches Show on Channel 4 did an excellent programme on breakfast cereals recently. When they poured the equivalent of what the children were consuming in sugar into a bowl (300grams) a week, its easier to understand why we have an epidemic of obesity.

Therefore it is important that the EU Commission and all involved in the development of these new food labelling regulations make sure that the health needs of consumers are put before the interests and profits of the food industry. In particular our elected representatives in Brussels, our MEPs have an important role to play, lets hope they take the traffic light approach on this particular road.

Breaking for the Border!

Today the CSO published a major report on the extent of cross border shopping. They calculate that shoppers here spent about €435m in Northern Ireland between June 2008 and June 2009. They provide details of the numbers of households travelling north, the regions they are from, the amount they are spending and what they are buying.

Given all the hullabaloo about cross border shopping, it is good that we have independent and extensive data on which to make conclusions and of course to enable the Government to make the right decisions in response to what they see as a problem. I accept that cross border shopping is costing the State revenue, which of course pays for public services. However cross border shopping is a world wide phenomenon and as even the CSO and Revenue report in February noted it was not a new phenomenon here. I would argue that cross border shopping is actually a good thing for our economy as a whole in the long term, because it will force retailers to adjust their prices to retain customers fleeing to the North to escape high prices. That will be good for consumers and competitiveness.


Lithuanians crossing the border to shop in Poland.

The first thing that struck me was the large difference between what the CSO estimate is spent in the North by shoppers and what other reports have estimated. While the data from the CSO and Nielsen is at one on the numbers of households travelling North at around 16%, they differ a lot on the other aspects. CSO says that the spending was in the region of €435m, whereas others such as InterTrade Ireland claim that the overall cost to the Republic's economy as a whole will be in the region of €810m this year. Obviously spending and cost to the economy are not the same thing, but both figures cannot be correct. Much of the spending is on food which is VAT exempt, so the loss to the State is on increased profits and knock on employment taxes, but surely an expenditure of €435m, the vast majority of which is on groceries cannot stretch to €810m? ABFI are interpreting the Nielsen figures as representing a loss of €400m in taxes and excise for the State. Again I don't know the basis for these figures, but they seem very high based on the CSO data.

People and commentators can believe what they want, I have to say I have more faith in the CSO data because the Quarterly National Household Survey is based on interviews with 39,000 households. Also, the CSO does not have an agenda, unlike the drinks and retail industries who have been fleecing consumers for years and are now getting a pay-back for the price pain inflicted on consumers here.

We are led to believe that the key driver of cross border shopping is the price of alcohol. The conventional wisdom is that shoppers endure the trip and long queues to stock up on vast amounts of alcohol. I have no doubt some people do go North to buy alcohol, but is it the key reason? The drinks industry in the shape of ABFI would like you to believe it is. Of course, this also suits the retailers as it deflects attention away from the high cost of groceries. They want the Government to cut excise on alcohol by 20% in the Budget. However the actual data from CSO would appear to undermine that argument. It shows that ;

• 80% bought groceries on their most recent trip, while only 44% bought alcohol.
• Of the average household spend on cross border shopping of €286, only €32 or 11% was spent on alcohol, not the vast sums we are lead to believe.
• Consumers from the border region are the key group where business is being lost, they are more likely to travel to Northern Ireland to shop and more regularly-41% of border households compared to national average of 16%.
• They are also frequent cross border shoppers, 5.9 trips on average in the last year compared to the 1.1 trips national average.
• Border shoppers are primarily going North to buy groceries, they had the lowest spend on alcohol and the 2nd highest spend on groceries.

This suggests in my view that even if the Government reduces excise on alcohol, it will have limited impact on cross border shopping. The key driver is the high cost of groceries. So if excise on alcohol is reduced, we could end up with a scenario where the State will lose further revenue and cross border shopping will continue. If the Government want people to spend more here and travel North less, then they need to address the price of food and groceries. The idea that reducing excise on alcohol is the magic bullet to stop the flow of cross border shopping is misguided.

Not there yet...but getting there??

Today December 3rd the EU Rail Passenger Rights Regulations comes into force....well sort of. The new regulations give rail passengers new rights similar to those which apply for air travel. Train passengers will be entitled to compensation in cases where they are delayed, for example a 25% refund if the delay is between 60 and 119 minutes and a 50% refund if the delay is at least 120 minutes. There are a number of measures which are aimed at assisting people with disabilities and passengers with limited mobility. Also rail operators are required to set up formal complaints mechanisms and each member state is supposed to have a National Enforcement Body to monitor implementation of the regulation.

In theory its great that rail passengers finally have more rights, especially when they are messed around by operators. Indeed the European Commission gets all excited telling us about the brave new world for rail passengers and about how they "will from now on enjoy new rights that will protect them and their belongings when they travel by train anywhere within the European Union". Well not quite. I was aware from briefings by the European Passenger Federation that many member states were seeking derogations (nice word for a get out card!) from the regulations. In particular many member states wanted these regulations to apply solely to international traains and not domestic ones. It seems there was a bun-fight over this in 2007 and the compromise reached between the member states, Commission and Parliament was that it would apply to domestic trains, however member states could seek derogations of up to 15 years for domestic trains. The reality for Irish consumers is that these regulations are of little use if they don't apply to domestic journeys, except when travelling to Belfast or on a cross border train journey on the continent.


New Irish Rail zig-zag route....I am getting dizzy thinking about it :-)

Anyway I contacted the Department of Transport and yes the Irish Government has exempted domestic inter-city trains "pending conclusion of discussions with Irish Rail regarding issues of its implementation on Irish Rail inter-city services." That in effect means as far as I know that the regulations only apply to the Dublin-Belfast line, although I stand to be corrected, perhaps that is exempted as well. The Department did inform me that some of the regulations do apply to all rail services immediately (Articles 9, 11, 12, 19, 20(1) and26) , however apart from making provision for passengers with disabilities all the other regulations coming into force are very basic things that Irish Rail are doing anyway and won't make all that much difference.

I will try and get some more clarity on this issue in the coming weeks. It would appear unfair that the Government expects airlines to implement the EU regulations on air passenger rights, but absolves Irish Rail from their responsibilities to rail passengers. Hopefully these exemptions are short term and we won't have to wait 15 years for these rights...as the old Irish Rail advert goes...."We are not there yet....but we are getting there"...well I hope so.