Richard Curran: ‘Naughten cleared but potholes remain on road to rural broadband’

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Richard Curran: ‘Naughten cleared but potholes remain on road to rural broadband’


Former Communications Minister Denis Naughten said he was not privy to sensitive information
Former Communications Minister Denis Naughten said he was not privy to sensitive information

Broadband should be coming to a rural home near you. Just not any time soon. Peter Smyth’s report published last week found that former Communications Minister Denis Naughten had not sought to influence the procurement process around the National Broadband Plan by having private meetings with the sole remaining bidder.

This clears the former minister of interference or wrongdoing but certainly does not clear him of naivety and poor judgement. Naughten spoke about the saga on RTE Radio One last Thursday and showed absolutely no regret about the inappropriateness of these conversations with David McCourt of the Granahan McCourt consortium.

He held this position on the basis that he was entirely motivated by delivering rural broadband and he was not privy to sensitive information about the process anyway.

“I did not have access to information”, he told News At One. He went on to add that his meetings and the furore afterwards raised broader issues given that his sole objective was to deliver rural broadband.

He suggested that it was important for ministers to be in a position to implement decisions and policy. Well it is, but not by meeting private businesspeople involved in a procurement tender outside of the formalities of that process.

His explanation that he didn’t have access to information and therefore didn’t know anything of value, isn’t good enough. It raises the question of why would McCourt even want to meet him, and vice versa. Perhaps the Irish-American businessman wanted to have a good chat about Roscommon football.

Despite questions of making a political mistake, the process was not compromised. That is the first hurdle cleared. Next up is the Department’s assessment of the actual bid document itself. This comes down to two things – deliverability and price.

Can this consortium access the capital and expertise to deliver a project of this scale and secondly what will it cost? Figures of up to €3bn have been bandied about but there are two significant costs here. One is the construction and roll-out of the network and the other is the ongoing running and business costs. If the State pays for a chunk of the network to be built but the take-up is poor, who will carry the losses? Presumably it will be the private company. But will there be an ongoing operational subsidy from the State and will there be any guarantee or underwriting of those losses by the State?

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We should bear in mind that every other commercial entity engaged in this process has pulled out, from ESB and Vodafone, to Eir and the State Irish Strategic Investment Fund. It raises the question of whether this is a commercial venture at all or if so, on what kind of terms.

We will have to see. Bear in mind that Eir has swallowed up the most cost-effective 300,000 houses for fibre broadband and having passed 200,000 homes so far, the take-up is speculated to be around 14pc.

Back in the heady days when there were still three prospective bidders in this race, the minister acknowledged that it would take up to five years for the plan to be rolled out fully. Some of those rural homes tantalisingly close to Eir fibre connections could have to wait another five-and-a-half years for fibre broadband – and that assumes there are no more bumps along the road.

 

Axing of Single Malt dodge leaves bitter aftertaste for firms

Multinationals that were a little too clever by half with their global corporation tax planning could now find a bitter aftertaste to the so-called ‘single malt’ tax avoidance mechanism. Remember the infamous ‘double Irish’? This allowed firms to slash their tax bills by using a combination of Irish and usually Dutch subsidiaries to shift profits to very low or even no-tax jurisdictions.

When the Irish government closed tax loopholes which did away with this stunt back in 2015, it also allowed a grandfathering measure which enabled those using it to continue until 2021. Some companies even had time to put a double Irish in place quickly and avail of five years of it before the loophole shut down.

No sooner had the Irish Government done this, when another loophole was conjured up by tax experts. Basically companies could still do the same thing, but using Malta and Ireland. It became known as the ‘single malt’. Christian Aid did a detailed analysis of tax shifting measures in 2017 and identified four multinationals which had gone for a single malt. This week Paschal Donohoe announced that he had reached an agreement with Malta and the single malt will be no more. The sting in the tail is that there won’t be a five-year grandfathering arrangement. The new measures will take effect next September.

This means corporations who thought they were being really smart by shifting out of a double Irish and into a single malt, will miss out on a good two years of tax benefits from the measure. If they had stayed with the double Irish, they could still be availing of it until 2021. So, why the five-year grandfathering for the double Irish then, given the single malt has been shut down within 12 months?

It could simply show how the international mood towards these kinds of tax tricks has hardened even further since 2015.

Of course it won’t necessarily mean a flood of corporation tax coming to our shores, but it should mean these companies end up paying more to somebody, somewhere.

 

With Amigos like these …

British quoted money-lending operation Amigo Loans is setting up in Ireland. Good news if you need a small loan in a hurry and you are willing to pay interest rates of up to 49pc for it. And you will have to get somebody to go guarantor too.

Amigo might believe it is a customer’s friend given some payday lenders can charge 1,000pc.

It would also point out that it provides loans for people with poor credit histories or who have no credit history at all. But bear in mind that last year it took in £210m on a loan book of £666m and made a pre-tax profit of £66m.

Amigo has built a business model which involves taking a risk (although is lessened by securing guarantors) but it making a very sizeable return.

Amigo doesn’t take deposits so it borrows some money to lend out and uses cash flow from existing loan repayments to fund its growth.

In 2016 it had a loan book of £272m and this shot up to £666m within two years. Its founder, James Benamor, together with executives and staff made around £327m from the IPO.

The company prospectus said there are around five million credit-impaired adults in the UK and approximately 7.5m adults with low credit status or no credit status. Take out the two million who are “heavily indebted” which the company says it does not target and there are close to 10 million potential customers there.

Borrowers who miss a payment will have a collections agent for Amigo engaging with them within three days. The guarantor is “given the opportunity to pay” within 14 days of the borrower missing one payment. In the vast majority of cases the guarantor is a relative or friend.

Benamor appeared in the Channel 4 series The Secret Millionaire, talking to young people in Manchester as he drove around in a beat-up Nissan Micra.

When he revealed his real identity at the end of the show he disclosed that he actually drives a yellow Lotus.

He has claimed to have been an unruly teenager who “was taking a lot of drugs, became a petty criminal really”.

Fair play to him for getting out of that mess. I am not sure he could have done it on a 49pc interest rate Amigo loan though.

Sunday Indo Business

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