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Inside the world of business

This report cannot be brushed aside

IF THE draft version is anything to go by, the report of the Innovation Taskforce due to be published today will echo many of the recommendations made by similar bodies down through the years, from increased spending on research and development through to the need for venture capital and on down to remedying the inadequacies of the broadband infrastructure.

There are a number of differences, of course, not least the ambition for Ireland of the individuals involved in the report and the confidence that implies in the availability in Ireland of the basic raw material of innovation – people.

But is there any reason to believe this report will not suffer the same fate as its predecessors? One reason is expediency. Unlike its predecessors, this report cannot be quietly brushed under the carpet against the backdrop of full employment and the gravity-defying growth of the economy.

Unemployment is set to hit, and hopefully peak, at somewhere about 13 per cent this year. The country needs jobs, and the Government needs a plan to deliver them; the Innovation Taskforce holds out the prospect of 120,000.

This should at least ensure that the Government pays lip service to the report and its recommendations. But it is an open question as to whether it is prepared to undertake the heavy lifting required to make it a reality.

All the recommendations will cut across vested interests and have unforeseen consequences. Politicians, by and large, try to avoid both. It will require an equal level of ambition on their part to make the taskforce’s vision a reality.

Beware of 'asset booms'

TRYING TO understand how the mighty economic sages – even those at the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) – didn't spot the Irish property bubble is all the rage now that it has burst.

IMF economist Daniel Kanda has entered the fray via a a paper published earlier this month.

He assessed how "asset booms" could distort traditional estimates of a state's revenue, and this could "lead to serious fiscal policy errors".

Kanda found – as we now all know – that the housing bubble boosted indirect taxes such as VAT, capital gains and stamp duty, and that generally "not accounting for" asset price cycles, bubbles and sectoral changes can generate "a large bias" in the calculation of the structural balance of an economy.

In other words, he believed the Government (and others) failed to spot that the brimming public coffers had been distorted by the housing market during the country's boom years.

"In Ireland's case, this bias, which made the revenue prospects seem much rosier than they actually were, helped stimulate an expenditure relaxation that created a large hole in the public finances that will take several painful years to close."

He argued that there was a strong case to change how the public finances of a country were assessed to take account of any such bubbles.

Glanbia marriage over

THE NEWS that Glanbia is to dispose of its Irish dairy unit has been hailed by the farmers' representative groups and analysts as a good thing for farmers and investors. Glanbia can concentrate on what its shareholders want – increasing profits and continuing investment in profitable businesses – while farmers can take sole ownership of the businesses which use their supplies.

The transaction, if it is approved, will see the Glanbia Co-operative Society take 100 per cent ownership of the company's Irish diary operations including its dairy ingredients, agribusiness and consumer products businesses.

The announcement may have been hailed by both sides as a "win-win situation", but in reality can be seen as an admission of the failure of a marriage of convenience that was always going to be difficult.

Reconciling the collective ethos of the co-operative with the profit motives of an investor-driven private company was never going to be easy and Glanbia management seem to have have decided that its a circle that simply cannot be squared.

Kerry Group came to this realisation a long time ago – albeit in different times – and was able to convince Kerry Co-op to sell down its shareholding, preserving the business and the value built up in it since flotation.

Glanbia has instead opted for divorce and unfortunately it is a truism that they are normally bitter and messy affairs with no real winners.

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