Why is the cost of most things so high in Ireland?

[Brendan Burgess]

Interesting article by Cliff Taylor in today's Irish Times

Cliff Taylor: High-cost Ireland set to continue punishing the young


The hard figures back up the perception of high-cost Ireland. Ireland is one of the dearest places in Europe to live. According to new figures from [broken link removed], the European Union statistical office, Ireland was the fifth most expensive country in the EU last year for a basket of goods and services, “beaten” only by Switzerland, Iceland, Norway and Denmark.
...

Sky-high rents make it either difficult or impossible to build up a deposit for many, unless parents can step in. Housing costs are then high and banks charge an average of 3.55 per cent for a mortgage, compared with the 1.87 per cent average across the EU.
...

Ironically, our high costs also make it more difficult for Government to address some of the key issues. Take house-building. It appears that the cost of building a house here is high by international standards. Wages for skilled labour are high, as is the cost of cement and other materials. Insurance costs and development levies add further to the bill. Add on VAT at 13.5 per cent and costs here are, on some estimates, 25 per cent plus higher for a normal apartment compared with other major cities.
...
Why is Ireland high cost? Some of it represents the historical success of the “insiders” in various lobbies and professions in maintaining practices and prices that gouge the public or other businesses – take parts of the legal profession, for example. Some of it is because, as a small island economy, competition can be limited. Some of it is a legacy of the trauma faced during the bust. Insurance costs have soared because insurers priced everything way too low for a period - and are now overcompensating. Banks were bust and have got away with charging over-the-top interest rates for so long because others fled the collapsing market.

 

[Gordon Gekko]

Interesting that of the four other "EU countries" that are more expensive than Ireland, only one is actually in the EU...

Switzerland, Iceland, and Norway aren't in the EU!

 

[mathepac]

Statistically speaking then, if you eliminate the four that "beat" us, we end up top of the pile for all the wrong reasons, again.

 

[odyssey06]

On top of the factors already noted... I wonder if there is an element of celtic tiger / euro switchover legacy.
What I mean is a country which goes through a boom quickly more likely to see a surge in costs, than one that undergoes a gradual increase in living standards. Did we take our eye off the ball when the money was flowing in?

Against that, a lot of the costs should have been wrung out of the system during the crash... except of course in anything state or semistate related who seem incapable of being held to account in terms of conduct and value for money.

 

[MrEarl]

Hello,

I think that all would agree that we as a small country, with less resources (natural, human, financial etc.) will not be as competitive as many of our larger European neighbors.

However, that said, phrases such as "Rip off Ireland" and the "Paddy Tax" have not come from no where. There is inappropriate levels of profiteering coming from certain quarters both here in Ireland and abroad, too many barriers to entry in certain quarters preventing real competition, even a bit of pure stupidity playing it's part - by the Irish consumers who tolerate some of this nonsense. Things will only get better when we make them better and that means taking action, something the Irish population has traditionally proven extremely slow to do (water charges being the only exemption of any real note, in the last 100 years).

 

[newtothis]

I would say the original article has it bang on, with: "Why is Ireland high cost? Some of it represents the historical success of the “insiders” in various lobbies and professions in maintaining practices and prices that gouge the public or other businesses – take parts of the legal profession, for example. Some of it is because, as a small island economy, competition can be limited."

Take banks for example: what motivation have local banks here to start competing seriously? Much easier to behave in a cosy- quasy- cartel- like way. What possible monivation has any outside bank to come in and disrupt?

Also, I wouldn't hold my breath waiting for things like the arcane way property is transacted here changing any time soon.

One potential bright spot is the way the onward march of technology could disrupt many more sectors. However, equally it could decimate employment: not much point in having cheaper mortgages or whatever if nobody has a job to sustain one.

 

[qwerty5]

In my (uneducated) opinion we have several factors that seem to cause higher prices.

In no particular order (and off the top of my head).

Insurance payouts - I frequently see payouts in the newspapers that are like small lottery wins. Somebody has to pay for that. Our courts don't seem to follow any rules and just pluck numbers from the air.

Governments that tinker, rather than govern - Our governments seem to be paralysed by stuff if it's not popular. Our rent crisis has been building for years and our government have been tinkering, trying to keep everybody happy while not doing anything of much significance. They've marked the landlords as the bad guys (which is popular) so the solutions they've put in are all stick and no carrot for landlords. Who could have guessed that this would mean that people don't want to be landlords anymore?

Minimum wage - This is a chicken and egg item. Stuff is expensive so the minumum wage has to go up, which can make stuff more expensive. Google the minimum wages across Europe. According to this (https://en.wikipedia.org/wiki/List_of_European_countries_by_minimum_wage) ours is the third highest. This affects everything. An example is childcare. I've a baby in childcare. By regulation there has to be one carer for 3 babies under the age of 1. So if the crech makes no money and has no other costs (which they obviously do), and the carer gets minimum wage then this means that I have to pay €500 pm minimum just to cover the persons wages. Then people complain that childcare is expensive. Before having our baby we were planning on getting an Au-Pair. But we can't afford it.
As a side note, when the government announced the small subsidy for people sending kids to creches last year I heard people on the radio saying this discriminated against people who didn't send kids to creches. It was a real WTF moment. They'd prefer there was no subsidy rather than give working parents a tiny dig out.

We (as a country) talk about doing stuff for years rather than getting it done. This is not good for business. Examples are the Metro North, the Athenry Apple Data Centre debacle, the childrens hospital etc. etc. We should be capitalising on Brexit. But no, Dublin is suffering gridlock and people can't find places to live. What would you do if you were a company considering Dublin to relocate to?

Our transport costs - These seem to be higher than many other similar sized countries but many of our transport companies are teetering on the brink of going under. I have a relation working for one of the companies that is not making much money and the practices he describes to me (e.g. getting 4 hours sleep during a night shift) don't seem like practices that many companies should be supporting. But if you try and fix it, it's Striiiiiiike.

Mentality of some of our citizens - Some, not all, of our citizens seem to think the government owes them a living. An example is the recent storm about a bank giving an example of some adults living with their parents to save for a mortgage. It's what my parents did, what I did and what I'd expect my kids might have to do. But it is heresy to some people. Another is highlighted by an article I read a little while ago. A young mother who's been homeless for 3 years with 3 kids. Two were above 3 but one was 1 year old. For some reason it's acceptable to have no control over getting pregnant (with no apparent father to support them) when you're homeless. We have to pay for that so that comes from our taxes. Myself and my wife had to wait until we could afford to give a baby a decent life. For others, it's pop them out then go to the state with the hand out.

Our left wing politicians - Apparently if I work 50 hours a week, spend hours commuting and then study when I get home so that I advance my career, then I'm a great target to aim at to tax more.

For our mortgages - if a bank sniffs at taking a house back that somebody hasn't been paying the mortgage for years on certain parts of society start to howl. There were 14,000 BTL mortgages in arrears over 90 days in Q4 2016. We have low repossession rates. So if the banks can't repossess what else are they going to do? They'll increase the price of their other products e.g. the variable rate that I'm stuck on for the next 20 years. In Ireland it seems if you take out a mortgage and don't pay it or rent out a house and don't pay the rent then the problem is all the banks / landlords and not the person signing the contract.

And we're a small country. Some cost is obviously to do with economies of scale and the fact that we're an island.

Other than that, it's all good
Actually it is, Ireland is a great place to live and work. There is great opportunity if you are able to see it and get it and navigate around the issues above. I have some friends though that suck the life out of you with negativity and for some reason their lives never seem to get better.

 

[TheBigShort]

In my (uneducated) opinion we have several factors that seem to cause higher prices.

In no particular order (and off the top of my head).

Insurance payouts - I frequently see payouts in the newspapers that are like small lottery wins. Somebody has to pay for that. Our courts don't seem to follow any rules and just pluck numbers from the air.

Governments that tinker, rather than govern - Our governments seem to be paralysed by stuff if it's not popular. Our rent crisis has been building for years and our government have been tinkering, trying to keep everybody happy while not doing anything of much significance. They've marked the landlords as the bad guys (which is popular) so the solutions they've put in are all stick and no carrot for landlords. Who could have guessed that this would mean that people don't want to be landlords anymore?

Minimum wage - This is a chicken and egg item. Stuff is expensive so the minumum wage has to go up, which can make stuff more expensive. Google the minimum wages across Europe. According to this (https://en.wikipedia.org/wiki/List_of_European_countries_by_minimum_wage) ours is the third highest. This affects everything. An example is childcare. I've a baby in childcare. By regulation there has to be one carer for 3 babies under the age of 1. So if the crech makes no money and has no other costs (which they obviously do), and the carer gets minimum wage then this means that I have to pay €500 pm minimum just to cover the persons wages. Then people complain that childcare is expensive. Before having our baby we were planning on getting an Au-Pair. But we can't afford it.
As a side note, when the government announced the small subsidy for people sending kids to creches last year I heard people on the radio saying this discriminated against people who didn't send kids to creches. It was a real WTF moment. They'd prefer there was no subsidy rather than give working parents a tiny dig out.

We (as a country) talk about doing stuff for years rather than getting it done. This is not good for business. Examples are the Metro North, the Athenry Apple Data Centre debacle, the childrens hospital etc. etc. We should be capitalising on Brexit. But no, Dublin is suffering gridlock and people can't find places to live. What would you do if you were a company considering Dublin to relocate to?

Our transport costs - These seem to be higher than many other similar sized countries but many of our transport companies are teetering on the brink of going under. I have a relation working for one of the companies that is not making much money and the practices he describes to me (e.g. getting 4 hours sleep during a night shift) don't seem like practices that many companies should be supporting. But if you try and fix it, it's Striiiiiiike.

Mentality of some of our citizens - Some, not all, of our citizens seem to think the government owes them a living. An example is the recent storm about a bank giving an example of some adults living with their parents to save for a mortgage. It's what my parents did, what I did and what I'd expect my kids might have to do. But it is heresy to some people. Another is highlighted by an article I read a little while ago. A young mother who's been homeless for 3 years with 3 kids. Two were above 3 but one was 1 year old. For some reason it's acceptable to have no control over getting pregnant (with no apparent father to support them) when you're homeless. We have to pay for that so that comes from our taxes. Myself and my wife had to wait until we could afford to give a baby a decent life. For others, it's pop them out then go to the state with the hand out.

Our left wing politicians - Apparently if I work 50 hours a week, spend hours commuting and then study when I get home so that I advance my career, then I'm a great target to aim at to tax more.

For our mortgages - if a bank sniffs at taking a house back that somebody hasn't been paying the mortgage for years on certain parts of society start to howl. There were 14,000 BTL mortgages in arrears over 90 days in Q4 2016. We have low repossession rates. So if the banks can't repossess what else are they going to do? They'll increase the price of their other products e.g. the variable rate that I'm stuck on for the next 20 years. In Ireland it seems if you take out a mortgage and don't pay it or rent out a house and don't pay the rent then the problem is all the banks / landlords and not the person signing the contract.

And we're a small country. Some cost is obviously to do with economies of scale and the fact that we're an island.

Other than that, it's all good
Actually it is, Ireland is a great place to live and work. There is great opportunity if you are able to see it and get it and navigate around the issues above. I have some friends though that suck the life out of you with negativity and for some reason their lives never seem to get better.

Where do I start?

 

[TheBigShort]

Insurance payouts - I frequently see payouts in the newspapers that are like small lottery wins. Somebody has to pay for that. Our courts don't seem to follow any rules and just pluck numbers from the air.

By and large insurance payouts are in line with strict guidelines within the industry. The problems arise, as I see it, is when the insurance company resist the claim and it goes to court. If the insurance company lose they appear to be effectively at the mercy of the court. The reality, in most instances, is the court

Governments that tinker, rather than govern - Our governments seem to be paralysed by stuff if it's not popular.

They've marked the landlords as the bad guys (which is popular) so the solutions they've put in are all stick and no carrot for landlords. Who could have guessed that this would mean that people don't want to be landlords anymore?

An example is childcare. I've a baby in childcare. By regulation there has to be one carer for 3 babies under the age of 1. So if the crech makes no money and has no other costs (which they obviously do), and the carer gets minimum wage then this means that I have to pay €500 pm minimum just to cover the persons wages. Then people complain that childcare is expensive. Before having our baby we were planning on getting an Au-Pair. But we can't afford it.

As a side note, when the government announced the small subsidy for people sending kids to creches last year I heard people on the radio saying this discriminated against people who didn't send kids to creches. It was a real WTF moment. They'd prefer there was no subsidy rather than give working parents a tiny dig out.

We (as a country) talk about doing stuff for years rather than getting it done.

Dublin is suffering gridlock and people can't find places to live.

What would you do if you were a company considering Dublin to relocate to?

Our transport costs - These seem to be higher than many other similar sized countries

I have a relation working for one of the companies that is not making much money and the practices he describes to me (e.g. getting 4 hours sleep during a night shift) don't seem like practices that many companies should be supporting. But if you try and fix it, it's Striiiiiiike.

Mentality of some of our citizens - Some, not all, of our citizens seem to think the government owes them a living.

An example is the recent storm about a bank giving an example of some adults living with their parents to save for a mortgage.

It's what my parents did, what I did and what I'd expect my kids might have to do.

A young mother who's been homeless for 3 years with 3 kids. Two were above 3 but one was 1 year old. For some reason it's acceptable to have no control over getting pregnant (with no apparent father to support them) when you're homeless.

Myself and my wife had to wait until we could afford to give a baby a decent life. For others, it's pop them out then go to the state with the hand out.

Our left wing politicians - Apparently if I work 50 hours a week, spend hours commuting and then study when I get home so that I advance my career, then I'm a great target to aim at to tax more.

For our mortgages - if a bank sniffs at taking a house back that somebody hasn't been paying the mortgage for years on certain parts of society start to howl.

There were 14,000 BTL mortgages in arrears over 90 days in Q4 2016. We have low repossession rates. So if the banks can't repossess what else are they going to do?

 

[TheBigShort]

 

[MrEarl]

LMAO

 

[Purple]

You're great crack after a few drinks!

 

[Gordon Gekko]

The fact that professionals are so protected and so overpaid feeds into everything and increases costs across the board.

 

[Purple]

The fact that professionals are so protected and so overpaid feeds into everything and increases costs across the board.

Some of them, not all of them.

 

[Sophrosyne]

Just looking at energy costs …

My electric usage is low but when standing charges, levies and taxes are added it makes a considerable difference.

For instance, on one bill the charge for usage was €49.66, when the above are added it became €99.71 or an additional 50%.

In another bill the charge for usage was €15.11, which became €63.11 or an additional 76% after add-ons.

 

[Delboy]

Just looking at energy costs …

My electric usage is low but when standing charges, levies and taxes are added it makes a considerable difference.

For instance, on one bill the charge for usage was €49.66, when the above are added it became €99.71 or an additional 50%.

In another bill the charge for usage was €15.11, which became €63.11 or an additional 76% after add-ons.

A lot of the add-ons are to keep the Green industry going

 

[Sophrosyne]

Well it seems contradictory to environmental principles that the less energy one uses, the greater the percentage of additional charges.

 

[galway_blow_in]

The fact that professionals are so protected and so overpaid feeds into everything and increases costs across the board.

yes and they are so smug in their long established sheltered positions , they see it as the natural order of things that they be allowed gouge

 

[Purple]

Well it seems contradictory to environmental principles that the less energy one uses, the greater the percentage of additional charges.

Has anyone got data showing those levies and charges being transferred to the State? If not they are just extra charges which go towards paying the very high wages in the ESB.

 

[Sophrosyne]

I don't have statistics, but the PSO Levy and VAT go to the State.

VAT is charged on the PSO Levy.

In the case of the bill where the electric usage was €15.11, the VAT & PSO Levy amounted to €19.31.