The children's’ hospital build-cost omnishambles has exposed the incompetence of “professional people” who would like to be considered as experts in their field. Real questions have to be asked about the tender process for such projects and the practice of setting estimates ahead of a tender process must really be called into question, because it seems to me that every a large-scale capital project is announced with an estimated cost, the tender price at least doubles and the actual completed cost may be three times the original estimate. We’ve seen it with the National Broadband Plan (NBP) and now again with the Children's’ hospital.
Our inglorious Government has, in recent times, unveiled a far-reaching schedule of capital investment programmes aimed at addressing some of the deficiencies in our nation’s infrastructure, but we face an age-old problem yet again – a lack of skilled labour.
All the funding in the world won’t put the people who know what they are doing in place. And if those people aren’t there to put the bricks on mortar, we are going nowhere and we are going there at a million-miles-a-minute. As a nation, zombified by the recession and the complete collapse of the construction industry only a few short years ago, we have blindly-walked into a situation where we now have a 'manpower' crisis.
Just three short years ago, in 2015, less than half of all builders identified a shortage of labour as a problem. Today that number stands at 86%. That is according to a recent survey conducted by two DIT academics for the Construction Industry Federation. The authors of the report, Eoghan Ó Murchadha and Dr Roisin Murphy, specifically pointed to the dramatic downturn in applicants applying for apprenticeships in the traditional wet trades, such as; bricklaying, plastering, tiling, and decorating. The notable decline has been continuing despite the industry undergoing a sustained recovery over the last half-decade.
Looking at some of the numbers, we can see that in 2006, 300 people registered for apprenticeships as plasterers, 161 as painters and decorators, 679 as bricklayers, and 43 as floor and wall-tilers. The decline in apprenticeships is staggering when we analyze the 2017 numbers. 2017 saw; 30 apprentices register to train as plasterers, 45 as painters and decorators, 65 as bricklayers, coupled with the grand total of zero registering as apprentice-tilers.
A little bit of self-ownership is needed in the industry also, and firms must go about putting their own houses in order. Some firms have earned a poor reputation as employers, expecting too much of skilled workers for too little in return. The industry is traditionally autocratic, and in a modern world full of international opportunity, this will likely have to change.
Profit margins in the sector, currently at 1%-1.5%, are too low to support the levels of innovation which are now required to bring the industry into the 21st century. At a time when major cities are performing well, it is a totally different story as far as building in rural regions is concerned. So long as the replacement cost of buildings in rural regions is so far above their market value, the growth will continue to lag in those areas.
I think it would be a good approach by Government, to look at rolling out the capital programme in a structured, phased way. This should help to attract people with the construction skills we need back home from overseas, as they will be satisfied that they will have a sustainable career for at least 5-10 years should they decide to return. In addition, the people whom we are trying to attract back to Ireland need to have confidence that the National Development Plan will be delivered by Government and that the medium-term economic outlook is fairly solid.
I know from experience that the career path offered by apprenticeships is a very good one. Schools and college careers guidance teachers need to be looking at apprenticeships, not as a second option or back up plan but as a real career path for pupils and students who are looking to have a professional trade. The good news, if you can call it that, is that a lack of skilled labour is not a problem which is unique to Ireland. Shortages of construction skills have reached disastrous proportions in London, where the city’s Mayor, Sadiq Khan, has launched a plan aimed at tackling the problem. In the past five years, take up of apprenticeships in the UK have halved. Many people in the known over there will point to low pay and poor career progression prospects as a cause for the halving of the numbers entering apprenticeships. Approximately 30% of the construction workforce in London come from other countries across the EU. It remains to be seen how Brexit will affect that, but already many who have traditionally been employed in the sector in London are returning home to ever-more prosperous economies in their home countries.
The reality today is that the construction, both in Ireland and across the developed world, is facing a new crisis. The stagnation and regression which set the agenda during the collapse are now over. However, the problems we are facing today are, essentially, the longer-term effects of the crash. Many young people simply do not have confidence in the sector to provide them with a sustainable, improving career, and in many ways, looking at the boom and bust cycle construction has faced over the last half a century, they may not be very far wrong. The construction skills crisis, whether we like it or not, will be with us for the foreseeable future, and perhaps beyond that, no matter the actions are taken by the industry or Government. But that does not mean we must do nothing, in fact, it means quite the opposite. We must do something and we must do something significant, very, very fast.
It is looking like 2018 was a bumper year for tax collection. There are more people in work now, with some quarters reporting 200,000 more, than at the time of the last general election. All that means the state’s coffers will be filled with more income tax, USC, and PRSI.
Where government policy starts and stops has always been a blurred line, and particularly so with regards to the ‘recovery’ the country seems to be experiencing at the moment. Albeit a rather broad measure of government productivity, the number of acts passed in the Oireachtas is in decline, and this might be helping fuel the recovery. Many will say that the government which governs least, governs best.
In 2015, which was the last full year in which a majority government ran the country, there were 74 acts added to the statute books. In 2017, the first full year of a minority government, there were 44 statutes added. 2018 is looking like it will deliver even fewer acts of the Oireachtas than 2017. When you compare this lack of legislative activity to some of the older initiatives started by the last government, the results are interesting. Many of the job initiatives which were criticized when Fine Gael & Labour took over in 2011/12, seem to be paying dividends now. But the problem arises when those initiatives run their course and their affects are less noticeable, in that, what happens when you turn off the tap? In fairness to the relevant Ministers, they have managed to keep Irish interests at the very top of the Brexit agenda, despite it being a total omnishambles from a British view-point. Further to the dodgy news, Ireland finds itself in a robust position to attract foreign direct investment because of measured responses to EU and OECD-led initiatives to change the corporation tax rules, and we seem to be staying safe in this regard and protecting our sovereignty and competitive corporate tax rates.
Now, where I am going with all this is the interesting part, which I think most people will also have noticed, because it is the part of all this that affects the working man and woman; with stronger economic growth, there has been the most minor of increases appearing in the pay packets of workers. The tax bands and allowances have failed to keep pace with these modest increases in pay, and the net result is a higher burden of taxation on the average worker. In fact, there were a number of issues created this year, which could even affect the lot of workers, if not directly, indirectly.
As in previous years, the Minister for Finance held the line strictly, and the “confidence and supply” agreement between his party and Fianna Fáil, had its fingerprints all over the budget. The Fianna Fáil priority of universal social charge (USC) reduction was accommodated, alongside the Fine Gael priority of widening the 20% band. However, last year also saw a ramping up in preparation for a new PAYE system which came into effect on January 1st. Often referred to as ‘PAYE Modernization’, it labours significant extra costs onto employers. Running payroll will now be as much about ensuring Revenue are kept kosher as it is about giving employees their proper dues.
Revenue took it upon themselves to review, and by all appearances, phase out the system of flat rate expenses for employees, this year. These standard tax deductions granted to different categories of workers reflected money they would spend on exclusively work-related items, like cleaning their uniforms and so on. The administrative decision could have resulted in unbelievable disruption on top of the revamped PAYE system, but after some jiggery-pokery, its implementation has been deferred by a year. That’s not really good enough, the proposal should be axed entirely, if for no other reason than it stops Revenue having to deal with large-scale, sometimes erroneous, claims for expenses.
So, yes, changes to USC and tax bands in the budget will leave most workers with a few euros more each week, after tax, but the feelgood factor remains missing in the zeitgeist of the nation. A suggestion at the start of last year that a reduction to the V.A.T. rate of 13.5% in the housing sector to boost the supply of housing units went nowhere. Such a move, according to a response to a parliamentary question from the Minister for Finance, might cost in the order of €240m per annum. Of course, there was no thought of the additional uptake in activity and the resultant uptake in tax revenue, but in any event, it doesn’t seem to be the amount involved that presents the problem for government, as much as the very notion that a property tax incentive could be part of a solution to the current market failure. Of course, the government is wrong in this regard but it will take them some time to realize this.
Perhaps less pressing, but affecting significantly more people than many of crises, is the inevitable “pension timebomb”. The pension funding situation is getting worse because for over a decade now the state has been settling liabilities out of the savings account because the current account has been empty. The era of permanent and pensionable work, the once great ‘a job for life’ is a thing of the past for most people in the private sector. There is plenty of evidence to suggest that private sector workers will change jobs and careers multiple times throughout their careers. That makes longer term pension planning more difficult, and in some sectors virtually impossible, particularly for low-paid workers. One of the proposals that was put on the table last year was auto enrolment. This, in effect, means that a worker is automatically put into a contributory pension scheme the day they start their job, unless they opt out. It could be of significant help in tackling pension funding shortfalls but appears to be some time off as of yet.
Over a decade ago, we started dealing with the banking collapse and the economic recession it caused. When you compare 2018 to 2008, last year shapes up pretty well. Economic growth got us close to full employment. But we will never know just how much better it might it have been without the litany of infrastructure problems we faced and the ever-looming threat of Brexit.
The IDA has reported some results for 2018. The announcement highlights the effects of Brexit on the Irish economy. The IDA and the Minister for Business, Enterprise, and Innovation, Heather Humphreys, have announced that employment levels in the Industrial Development Agency’s client companies have reached 229,057, nationwide. The IDA’s performance, according to itself, has exceeded Government targets contained in its strategy document for 2015 to 2019.
The report outlines the agency’s response to an ever-changing world of enterprise, giving consideration to everything from regional growth to the effects of Brexit on the Irish business landscape. A notable statistic from the report is that 58pc of employment in IDA companies, in 2018, was outside of Dublin. However, these were, of course, largely created in other urban centres. Many smaller county towns such as those in this region, still lag far behind the national averages.
A substantial number of companies have chosen Ireland as a base, as a result of Brexit, with some notable exceptions. 55 firms approved for IDA investment, bringing with them more than 4,500 jobs. It is likely that this strategy will be continued by the IDA and Government. The decision to showcase Ireland as a stable investment climate in an increasingly chaotic global environment has undoubtedly served the nation well, however, with these announcements come some serious challenges which must be overcome. Morgan Stanley, Bank of America Merrill Lynch, and Barclays are among those companies which declared a new or expanded presence in Ireland in 2018, as the Brexit fallout continues to accumulate. The government must now act to ensure the environment for the workers they bring with them is up to standard. Housing, healthcare, and transport all pose challenges as we grow Foreign Direct Investment (FDI), particularly in Dublin.
Humphreys said: “The IDA’s record results for 2018 underline how strongly Ireland continues to perform when it comes to attracting FDI.”
Humphreys emphasized the progress made in areas outside of Ireland’s main cities, with every region seeing employment gains in the last year. She added: “Our ongoing efforts to grow and sustain FDI here are complemented by other actions we are taking to improve the capacity and resilience of enterprise in Ireland.”
CEO of IDA Ireland, Martin Shanahan, said: “FDI continues to drive the economy with strong employment growth at 7pc, compared to [the] national average of 3pc in 2018. FDI exports, experienced growth of 10pc and an increase of 8pc in the amount spent in the Irish economy on payroll, materials and services – this now stands at over €19.2bn.” He added that IDA client companies account for an estimated two-thirds of corporation tax in Ireland. This too is something that government must watch closely and not become over-dependent on.
At the end of 2018, total jobs at IDA client firms stood at 229,057, compared to 210,443 at the end of 2017. Job gains in 2018 stood at 22,785, up from 19,851 in 2017. Credit must be given where credit is due in this regard, however, the nation and its people would be well served will more balanced regional development and job creation.
Shanahan also said that while the report is to be celebrated, there are still significant risks facing Ireland in the future, stating: “Ireland is a small, open-trading economy, and increased nationalism and protectionism [are] likely to have an impact on future FDI figures.
“10 years on from the financial crisis, the global economy continues to grow at a steady pace but the Organisation for Economic Co-operation and Development (OECD) says global GDP growth has peaked and is slowing on the back of weaker trade growth and less-supportive monetary and fiscal policies.”
He also explained that housing, skills, infrastructural investment, educational investment, and income tax levels at the higher marginal rate were all issues encountered by IDA client firms.
Shanahan concluded that new and emerging technologies must be embraced by Irish based companies in order to maintain a competitive edge in the global market place, stating: “Ireland must also prepare for a scenario where technology, artificial intelligence, machine learning, and robotics play an increased part in our working lives.”
I think the Government may have missed a trick in not having focused on attracting more Micro businesses from the North and UK mainland to smaller towns and villages, on the head of Brexit. Smaller firms too would like to keep a foot in the EU, and towns such as Roscommon, Athlone, Boyle, Strokestown, Ballaghaderreen, and the likes would be more than capable of facilitating many of these smaller operators. However, credit where credit is due to the IDA on national job creation facilitation.