Britain still cut off as Brexit fog remains in the English Channel
EVERY time the Brexit fog between the UK and EU looks like clearing, it descends once again. We are always just one more British cabinet meeting away from finally understanding what the British government wants. Yet when the meetings are over, the fog of confusion usually thickens instead of lifts.
This week it was confusion on two fronts. British Prime Minister Theresa May has come up with the latest unworkable compromise on Brexit which would propose a new “facilitated customs arrangement” between the UK and the EU. Under the plan, goods arriving in Britain would attract a UK tariff, set independently of EU rates. However, British customs officials would collect a potentially higher EU tariff for goods passing through the UK en route to the bloc’s single market.
This proposal is a hybrid of a hybrid, which looks like working when drawn on the back of a napkin, but has little chance of operating at Dover or Dublin. If EastEnders actor Danny Dyer was confused about Brexit last week, he will be even more confused now.
Even the Financial Times flagged up EU concerns about how this new proposal could become a smugglers’ charter.
The FT wouldn’t normally be too focused on trivial matters of small trucks moving through the back roads of south Armagh.
The scam could see goods imported to the UK with tariffs paid on them. They could then be shifted out to the EU, possibly through an open Irish border, without EU tariffs being collected.
The ports of Larne and Derry could become the new Rotterdam, as people use an open Irish border to get around this. (Yes, that is an exaggeration — but you get the idea).
The second area of confusion this week came from Austrian chancellor Sebastian Kurz, who currently holds the EU presidency. He isn’t a major player in Brexit negotiations but he decided to raise the possibility of giving the British more time to come up with workable solutions.
He expressed the view that if the UK cannot agree a workable border backstop for Ireland by October, then negotiations should be extended further. This won’t be welcomed in Brussels, which has piled on the pressure for the UK to meet some kind of deadlines around the talks. After all, the UK set its deadline for leaving, not the EU. It has already fallen back to a two-year transition.
However, it is the first sign of cracks appearing in the EU’s united position on the issue. It may even be a sensible and pragmatic idea to avoid the UK tumbling out without a deal. The problem is the talks could progress without the border backstop being tied down.
If the talks became mired further in delays and confusion, all of the deadlines could slip. This might not be too bad for Ireland because it would result in an extension of the status quo vis-a-vis trade and the open Border.
But the uncertainty hanging over Irish business would drag on for longer.
The Government has set up a standoff in which its border backstop must be “bulletproof ”. The truth is that it cannot be bulletproof unless the UK stays in the customs union and single market.
May’s biggest mistake was at the beginning of her premiership. She invited too many hard Brexiteers into her cabinet and she has struggled to control them. They represent a minority in her parliamentary party.
Now she is trying to row back from a hard Brexit having gone too far with a hard one. She has left herself open to shouts of Brexit betrayal or even a leadership heave. The only way she can keep the show on the road is by fudging everything for as long as possible.
The Austrians seem to want to give her more time. But will Leo?
Interest-only pain for landlords will hit their tenants too
PEOPLE renting their home are facing a few more years of financial pain. Rents are set by landlords, many of whom are set to take a big hit when they have to start repaying the principal on their interest only buy-tolet mortgages. This means the landlords’ repayments will sky-rocket.
For those who borrowed heavily during the boom to become landlords, it means they may well feel unable to meet the full repayments, unless they find a way of increasing the rent.
For others, it may see them exit the property rental business altogether. When their properties change ownership, a new landlord will find it easier to set a new rent. Some landlords have been getting around the rent caps by putting the property up for sale. The Central Bank study examined 21,351 buy-to-let loans across three banks. Of these, it found that 35pc will switch to a traditional mortgage model between now and 2022. Most of the rest will not face a similar reality until the 2030s.
Given that thousands of landlord residential properties have faced modest repayments up to now, as only the interest had to be paid, how come rents have rocketed so much? We keep hearing tales of woe from the sector about how taxation rules, regulation and other costs are diminishing the profit and incentive for landlords to remain in the business.
This may be true for those who bought relatively recently at higher prices or during the boom but without interest-only mortgages.
There is always the possibility that interest-only buy-to-let mortgages could stage a comeback as a way of enticing more people back into the sector — especially those without the cash to buy properties directly.
But this could be a dangerous road to go down. Buy-to-lets relieve pressure and give a temporary and artificial boost to the sector but chickens can often come home to roost.
If anything, these figures point up that landlords of thousands of rented homes have been making a fortune when it comes to rent hikes, given their artificially low repayments per month, combined with their high rents.
The IMF has pointed out that our rent control zones don’t seem to be working. Given that so many landlords are about to be hit with much higher repayments in the coming years, it doesn’t augur well for tenants on the receiving end.
Sean Quinn and Anglo meter is still running as case looms
DON’T expect the conviction of former Anglo Irish Bank boss David Drumm to be the last we’ll hear of shenanigans and CFDs at the bust operation. The Quinn family legal action against IBRC is set to kick-off in January.
The Quinn family are arguing that the loans given to Sean Quinn for the purchase of CFDs, but secured on the family’s assets, were illegal and the security on those loans was improperly put in place.
On the other side, IBRC is taking cases against the Quinns for putting assets beyond the reach of the bank in a move that cost it tens of millions of euro. The cases are likely to run and it could be years before they are complete. Any kind of settlement between the parties doesn’t look likely.
Any chink in the State’s case could end up costing the taxpayer a lot more money. Imagine handing out compensation to the Quinn family on top of the losses heaped on the taxpayer through the collapse of the bank.
If the Quinns have any kind of case, that is always a risk. Yet reaching an agreed settlement would be political dynamite.
Irrespective of the outcome, lengthy legal actions will delay the winding up of the liquidation and the payment of any final dividend to the state. Sean Quinn’s CFD gamble has cost the State around €2.4bn. The collapse of his insurance business is costing another €1bn, which we are all paying through a levy.
The Anglo Irish Bank/Sean Quinn meter is still running.