Cantillon

Inside The World Of Business

Why Cowen has little reason to fear the heat of Somers

MICHAEL SOMERS’S feuding with the Department of Finance continues unabated. The former head of the National Treasury Management Agency took to the airwaves again last weekend to query why the role of the Department of Finance in the mismanagement of the Irish economy did not receive as much attention as some of the other actors in this drama last week.

It is clear Somers thinks the department has a case to answer and on the face of it they do. The department, after all, is the primary source of advice and guidance to the Minister of the day and the Government on matters economic and fiscal.

And it’s pretty clear that one of two things happened as the economy started to go off the rails. Either the department gave good advice and it was ignored in the interests of political expediency or else the department gave bad advice that was heeded with disastrous consequences.

The truth is probably a bit of both, but at the same time it’s instructive that when a variation of this question was put to the authors of one of the reports published last week, Klaus Regling and Max Watson, they replied that on the basis of what they found, there was not very much good advice coming from the department.

This statement remains unchallenged, but the department’s silence should not be taken as acquiescence. Protocol dictates that civil servants don’t get drawn into such matters.

And the Mandarins of Merrion Street are unlikely to get a chance to vindicate themselves in the coming statutory investigation because of the Government decision to exclude its handling of the economy from the terms of reference.

Instead they will have to settle for the opportunity to appear before the Oireachtas Committee for Finance and the Public Service.

Thus we will be left in the dark as to the truth or otherwise of the allegation that an incompetent and dysfunctional Department of Finance was a major contributor to the mismanagement of our economy and its near collapse.

It’s not a satisfactory state of affairs for the department, the taxpayer or anyone else interested in the truth. It does, however, suit the Government and in particular Taoiseach Brian Cowen who held the post of minister for finance at the crucial juncture. Indeed Somers’s comments, if left unchallenged, may serve to take some of the heat off him.

Index may fuel debate

At first glance, an energy index of the type launched by State company Bord Gáis yesterday is unlikely to excite too many people, but it could turn out to be useful.

The model is simple. It takes all the principal fuels we use – electricity, oil, gas and coal – weights them according to consumption, changes prices into euro and converts it all into an index, benchmarked at 100, a figure that is based on prices at the end of last year.

The first release of the index fell 1 per cent. An 8 per cent fall in the price of oil, which has the biggest weighting, offset increases in the cost of the other three. As things stand, the initial short to medium-term trend is pointing upwards, largely because of the belief that the world is beginning to recover from recession.

No great surprises there, but the index could help shed some light on our increasingly complex energy markets.

The Commission for Energy Regulation sets prices paid by consumers and small business for electricity and gas, as that agency determines what the ESB charges these customers for electricity and what Bord Gáis can charge for gas. Their competitors for those consumers and businesses then discount against these charges, which means the CER has a strong influence over what happens.

Several times over the last decade, the prices determined by the CER, which are based partly on submissions from both companies, have run counter to what was actually happening in the market, to the point where the agency had to change its determination within months.

There is a strong possibility that this could happen again, and, if it does, Bord Gáis will have provided us with fairly clear information on what’s happening in those open markets.

If this were to happen, the company may well ask if it has cut a stick for us to beat it with.

Rival for Elan’s Tysabri

Just as Elan’s Tysabri gets comfortable with its blockbuster status, along comes a new rival that may yet challenge its position in the multiple sclerosis (MS) market. Novartis’s Gilenia came through an advisory panel hearing at the US Food and Drug Administration last week with an ease that surprised some observers.

Gilenia’s major selling point is that it is administered in tablet form rather than as an injection or infusion. From a patient point of view this is considered a major advance even if no-one is yet any closer to finding an effective cure for the condition.

The drug, which still requires final FDA approval, has been recommended as a first-line treatment, unlike Tysabri. That means it will provide a more imminent threat to more traditional therapies, among them Biogen’s Avonex.

FDA staff had raised concerns about side effects with the new drug. However, as tysabri has shown, MS patients are prepared to risk quite serious side-effects for effective therapy.

Today

The Central Statistics Office publishes the Quarterly National Household Survey while, this afternoon, the Revenue Commissioners release their quarterly list of tax defaulters.

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