Cantillon

Inside the world of business

Kelly declines to swoop in, save day

THOSE WHO are most successful in public life over the long term tend to have aligned themselves closely with the realisation that power carries with it a degree of responsibility. The maxim, originally attributed to Voltaire but possibly more closely associated with Spiderman, is particularly useful when applied to those whose words or actions are known to influence those of others.

Which brings us to UCD economist Prof Morgan Kelly, the man credited more than most with predicting the demise of the property sector and the subsequent aching hangover of unsustainable mortgage debt.

Prof Kelly has been eminent not only in making forecasts on the economy, but also in urging particular action in a public manner. Among his most notable pronouncements has been his call for debt forgiveness for homeowners in mortgage difficulties.

He is entitled to hold this view (the result of considerable and valuable analysis) and to be admired for putting himself in the public eye in doing so. Less impressive however has been his inability, as stated this week at the Oireachtas Joint Finance Committee, to find the time to expand on his stance for the Interdepartmental Working Group on Mortgage Arrears.

This is the group appointed by the Government to come up with proposals to alleviate mortgage pain for homeowners. In other words, it is the group most likely to be leaned upon when it comes to formulating the Government’s policy on the matter.

When asked at the finance committee this week if Prof Kelly’s input had been sought in the group’s work, its chairman Declan Keane said it had. He went on, however, to say that while the group had sought to meet the academic “on a number of occasions”, it “couldn’t be accommodated”.

There are always valid reasons for which meetings do not occur: other commitments will arise, whether those involved like it or not. But surely this would have been one encounter Prof Kelly should have made it his business to facilitate, particularly in light of his proven knowledge in the area and displayed interest in arriving at solutions for hard-pressed borrowers.

He may argue that he is not a public figure and thus does not have any responsibility in this regard and, in the strictest sense, he is correct. His profile and fondness for proffering advice serve to tip the balance away from this position however.

If nothing else, a quick meeting with the Keane group may have helped to reinforce his super-hero status at a time where such personalities are in short supply.

Coalition to count cost in wake of Aviva move

WHATEVER WAY you look at it, this has been a bad week for insurer Aviva. But for all their fury, it’s not been a great one for the Government either.

Mired in an era of austerity bequeathed by their predecessors and monitored by the bailout troika of the European Commission, the ECB and the IMF, the Government has made great play of the one significant “positive” policy initiative – its job creation proposals.

The decision by Aviva to axe 950 jobs from the roughly 2,000 people it employs in Ireland is a major blow on that front as well as for a company with a long track record in the Irish insurance sector. The generally confused manner in which staff were updated did little credit to the company. It seems reflective of muddled thinking by management.

The October 2009 decision to establish a pan-European entity in Dublin was certainly driven by tax incentives. However, it could not have escaped the insurer’s attention that the move would be seen as an endorsement of its Irish business and the local business environment.

Similarly, its decision to acquire the naming rights to Lansdowne Road stadium ensured a profile that must now be deemed ill-considered.

Back in March, reporting results that featured growth on the health insurance side but a 17 per cent fall in the life and pension business, Aviva said changes made by the government to retirement savings and income drawdown products in 2010 meant the “seasonal increase in pension sales was significantly lower” than in 2009.

By then, an Aviva U-turn had seen the European unit relocating to London, and talks of job cuts were circulating. For its part, the Government decided to raid pension funds with a levy to pay for its vaunted jobs policy. It’s too early yet to measure the success of their efforts on jobs in general but Aviva’s decision may be the first indication of the price the Coalition has to pay in lost opportunities in the financial services sector.

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