Time to say bye bye to ill-conceived Help-to-Buy housing scheme
IT really does look like bye bye to Simon Coveney’s Help-to-Buy scheme for first-time house buyers. Coveney’s successor, Eoghan Murphy, didn’t waste any time signalling that this particular waste of public money would be coming to an end in the autumn budget.
The scheme was pretty well flagged in its infancy as something aimed at delivering higher prices to developers to encourage them to build, as opposed to simply helping people to buy. Pencilled in for a first-year cost of €50m, the bill was heading towards €70m just four months into the scheme.
A significant number of house buyers using the scheme, which provides up to €20,000 cash back, were buying houses worth over €375,000. If it was aimed at simply helping to provide affordable homes for people, then it should have been an affordable-homes scheme, aimed at providing some kind of subsidised housing for those on lower incomes. This scheme has no income limits. When it bites the dust, most likely in the October budget, it will no doubt have helped finance nice furnishings for people who were buying their first home and didn’t need the cash. It will also have provided a top-up to a relatively small number of developers who signed up. In the first two months of its operation, some €30m in refunds were in train covering houses built by 55 developers.
Estimates that the scheme could cost €100m, without any real tangible or verifiable results, may not be wide of the mark. The Government’s review of the scheme will take cost/benefit into account but this analysis is only happening after the scheme was introduced. It isn’t so much about closing the stable door after the horse has bolted, as never needing to have a horse in the first place.
Our reliance on just a handful of multinationals is troubling
THERE is something very reassuring about the role that Foreign Direct Investment has played in the country’s economic recovery. After languishing as the financial basket cases of Europe (well, after Greece) for a few years, confidence in investing in Ireland, returned very quickly.
But there is nothing reassuring at all in the fact that 40pc of our entire corporation tax take last year came from just 10 multi-nationals. The top 20 delivered half of the exchequer’s corporation tax take, as pointed out to Fianna Fail’s Micheal McGrath in a Dail question during the week.
There are problems with this on several levels. The fact that the tax take went up so strongly in 2015 and 2016 has prompted some complacency about how sustainable it is. But also, how sustainable is the presence of these multinational operations in Ireland at all.
There is no breakdown as to how many of the top 20 were Irish multi-nationals like Ryanair, Smurfit Kappa or Kerry Group, and how many were foreign.
It looks like the top 10 contributed around €3bn or an average of €300m each. There are very few Irish companies generating such a level of corporation tax.
Yes, many of the foreign multinationals are heavily invested in plant, machinery, intellectual property and human capital here. However, they have all of those things elsewhere too. Few of them, especially in the tech sector, are involved in manufacturing here. They are less embedded in this economy.
Between US President Donald Trump throwing shapes about Corporation Tax, and UK Prime Minister Theresa May committing to cut British corporation tax to below 15pc, there has to be a question mark over a sizeable chunk of these revenues into the future.
Corporation tax receipts are expected to hit around €7.7bn but by the end of April, they were down €172m in year-on-year terms and €223m below target for this year.
Irish beef farmers to get squeezed in the Brexit crush
OMINOUS Brexit clouds are gathering for Irish beef farmers. The big processors who buy and export their product are “beefing” up their presence in the UK. This can only mean one thing – they are preparing for a tariff regime which could see more beef for the UK market, sourced in the UK itself.
It started with the tie-up between Dawn Meats and Dungannon-based Dunbia just a few weeks ago. That deal gave Dawn access to several more British processing plants.
During the week it was announced that a joint venture between Larry Goodman’s ABP Foods and Fane Valley Co-op, would extend to Fane’s British processing facilities.
The deal will see ABP take a 50pc stake in Fane’s Linden Foods Group. This will give it a half share in a range of processing plants in Northern Ireland and Britain.
In pure business terms ABP and Dawn are moving swiftly and effectively to be better prepared for Brexit.
It makes perfect sense for their businesses to do so, but it doesn’t augur well for the future of Irish beef exports to the UK.
Beef farmers and small processors will know this best of all. Government agencies are doing their best to open up new markets to Irish beef, such as the US. But it is a slow and uncertain process, often with only niche results at the end of it.
A really hard Brexit could result in a “plague on all your houses” for beef producers on both sides of the Irish Sea. If the Conservative Party pins its future post-Brexit economic hopes on major bi-lateral trade deals with countries like Brazil and Argentina, Britain could be flooded with cheap Latin American beef in return. And that would spell bad news for everyone.
Clooney tequila deal could be costly mistake for Diageo
HOW much is the face of actor George Clooney worth on advertising of any product? Perhaps a lot more than even he is charging. The actor is reputedly paid around $40m to promote Nespresso coffee.
However, he has just sold his Tequila brand for $700m with a possible further $300m if performance targets are reached over the next ten years. Clooney set it up with two other friends.
Called Casamigos, it is manufactured in Jalisco, by a Mexican company that also makes other tequilas. It is simply a recipe and a brand that Diageo has valued at a minimum of $700m.
Given that it sold just 120,000 cases last year, what does that make Baileys worth? It sold 6.2 million cases last year.
Tequila is in at the moment and the category is enjoying significant growth. But this is an enormous price for Diageo to pay. Casamigos is a premium product that retails for around $45 a bottle. Jose Cuervo is the big player and it did an IPO in February. Valued at $6bn it is a 250-year-old company.
Even Diageo says Casamigos won’t be earnings enhancing for four years. Spirits are clearly running high in the drinks business with valuations running even higher.
Clooney has made at least a third share of $700m and all he has to do is keep promoting the product in the years ahead. Casamigos claims to be smooth and with no burning when it is swallowed.
One tequila guru website called tequilataste.com reviewed it back in 2013 when it was first launched. The reviewer remarked: “After spending a couple hours with Casamigos Tequila, we decided that although it was pleasant and sippable, it really didn’t live up to its price tag. The question now is can its celebrity endorsements keep the brand afloat?”
Well, we now know the answer to that one.