The interview: Ibec’s Danny McCoy

Ibec CEO Danny McCoy tends to take a long view on things and he is thinking beyond Brexit to an Ireland that will need to seriously invest in its future in terms of infrastructure, education and potentially one day a reunited Ireland.

McCoy has been CEO of Ibec since 2009. Ibec is Ireland’s most powerful lobbying force for business, representing SMEs and multinationals that employ 70pc of the private sector workforce across 36 trade associations. As well as being CEO of Ibec, he is president of the Statistical and Social Inquiry Society of Ireland, Honorary Fellow of the Academy of Engineers, member of the Export Trade Council and the OECD-BIAC working group on Corporate Taxation. He has enjoyed an extensive academic career, including positions at DCU, University College London, University of Oxford and Trinity College Dublin.

My conversation with McCoy wasn’t quite what I was expecting. As Brexit quickly becomes a reality with the UK’s impending departure from the EU, it is clear he is thinking beyond this chapter and has the courage of his convictions to outline some uncomfortable truths.

“It’s very easy to start a business in Ireland, it’s very difficult to grow one”

His view is that Ireland needs to prepare to make bigger investments in its own future, especially in terms of education as university rankings plummet, and infrastructure. Bottom line: we need to pay for stuff.

“Brexit is getting 80pc of the attention, but it is a big distraction.

“Our economy is growing at 8pc. Disposable income has grown 25pc in the last five years for Irish households. We’re dealing with a surge in economic activity, a surge in money, and yet a huge imbalance in the economy in terms of housing, childcare and infrastructure. That’s actually the big story. Brexit is really a big distraction.”

Crucially, he warns, what we are witnessing is the UK in meltdown. “Brexit is no longer about the UK leaving the EU anymore. It’s actually an existential crisis in a G7 country.”

Once the dust settles on Brexit, another dimension McCoy believes will need to be broached is the potential or eventual reunification of Ireland. Won’t that be better in the long-term? “I’m an optimist. So eventually, yes. But there’s going to be huge disruption. So that genie doesn’t go back into the bottle. So, you know, I think there are people who have a kind of a Utopian view of the world, somehow Britain will do a second referendum and all losses will be restored and sorrows end. That’s not going to happen. And so we’re now living beside a neighbour that’s had a melt-down. And a society split.”

McCoy is optimistic for the future of Ireland. That is if we take responsibility for our future.

“As a generation we’ve a lot of options, I mean, as an Irish generation it is the most spectacular time to be alive. Even 10 years ago, imagine facing the Brexit crisis in the depths of the austerity, failed economy. Now, we are actually riding high. There may well be dips to come our way, no doubt. But even on that big issue about the all-island potential reunification of the island. We mightn’t want to pay for it, that’s a different issue. I’m not of the view that this is an affordable proposition at all, by a long shot. I think money is the least of the issues that could be involved in that. It’s about the integration of our cultures our society, I don’t think the Republic is actually psychologically ready for what has to be a risk factor, the risk of this next decade having to cope with a border poll. And all of the issues involved is a very significant factor that the business community should be talking about. Not in any kind of triumphalist way or in any way encouraging it, but just to be ready for it. The Germans weren’t ready for their reunification in the late 1980s. And it’s taken them the best part of two decades to absorb it. So those issues, I think, are much more significant than watching the pantomime that is Boris Johnson, spinning out of control as we speak.”

Investing in tomorrow

Man in dark suit standing on stage at a conference.

Danny McCoy, CEO, Ibec.

McCoy describes the Ireland of today as a “resource economy” that is very much embedded in the corporate balance sheets of corporate giants like Google or Microsoft. At the same time, however, he is aware that owner-managers of SMEs, who are the majority of employers in Ireland, are also battling against a tide that is beyond their control in terms of bureaucracy and the realities of a limited local market.

He views the rise of rural innovation hubs, co-working and home working through the lens of a skilled negotiator on thorny subjects such as work contracts and working hours.

“I think most businesses realise that the problem of presenteeism is as equally a difficulty as absenteeism. Productivity comes from giving people dignity, respect and latitude. And of course, there will be a proportion that will abuse that.

“When you empower people, you get more from them. So it really comes down to flexibility and technology.

“But here’s the irony: our political system and particularly our legislative system is going in exactly the opposite direction. It is not liberative. What I am referring to is this precariousness that affects people who are not in the workplace and who are outsourced to their own homes or in some sense are being detached from the organisation. And we see that in legislation around banded hours. What if they are in a band that contracts them for 25 to 30 hours and for some reason they end up working more than that or for extended periods of time?”

He believes the four-day week will need to be properly debated. “Will you get five days’ work done in four days? Will there be a decline in productivity? I do think it is the way of the future, but we also need to think flexibly about care. Our conversations about care tend to be open-ended. Childcare can be defined but we don’t take into account workers who need to take care of elderly parents, for example.

“So while I think businesses need to be responsive to these changes in work, there is a counterculture that is emerging because part of this is the individualisation of work and then people feel precarious in certain employments around pensions and sick pay. So, I think there is a movement back towards collectivism. Society needs to think about how to deal with that collectivism as we have seen from the recent beef disputes.”

Time for a new social contract?

Man in dark suit standing on stage at a conference.

Danny McCoy, CEO, Ibec.

This rise in collectivism and the need to invest in the future, he believes, indicates a need for a new social contract between the State and its taxpayers.

We are still in the mindset that we are in the clutches of austerity. And we rail against paying for things

“We don’t have the necessary social infrastructure in place for the scale of population, nor for the affluence of population. And Irish people react really badly about what I would call the ‘affluent slur’. People react really badly when you say this is an affluent society. They immediately will identify people who aren’t affluent.”

McCoy points out that Ireland is now among the top five countries in the world in terms of income per household. And yet Irish people would reject any suggestion they are wealthy.

“I’ve always been amazed, even during the austerity phase, how we get natural experiments brought into our own living rooms every night. Operation Transformation, Goggle Box or Dermot Bannon’s Room to Improve. And you just look at their standard of living. The things they have. Now, they will of course, with describe themselves as being your average person. If that’s true, then they live in quite nice houses with quite nice cars, over-dressed in Operation Transformation like Olympic athletes from about eight years ago. Quality of life can be different to standard of living. You can have all of the material standard of living, which may not be the quality of life, you may be time poor, but all we’re observing is the fact you got lots of stuff. You may be unhealthy because you’re stressed out. You may say that you are not materially wealthy, but what you’re not is materially poor.”

Crucially, what Ireland needs to realise is that it has come a long way and we need to look at where the country is at in relative terms. Top of the list is what he describes as the urban-rural divide and the need to better allocate resources and infrastructure for a better society. But that all, of course, has to be paid for by someone.

“We have this private affluence developing. Incomes are up, wages are higher, and people have cash. But what they don’t have is the social infrastructure they need and we don’t have a mechanism to re-channel that because employees keep looking for higher wages because of factors like childcare and housing.”

What is emerging, he warns, is a nation that is as wealthy as Norway or Switzerland in terms of household wealth, but with none of the infrastructure or services.

“John Kenneth Galbraith refers to this very evocatively as private affluence and public squalor. Many societies end up in that space where the people are rich, but they have gated communities, effectively, because they don’t have sufficient interest in their social systems and infrastructure. We have an opportunity not to go that direction. But we need to face up to the fact that we are affluent. That’s the first proposition before you can actually do something to stop the affluence causing us lots of problems.”

McCoy insists that if we want the future that a fair and equitable society wants, it has to be paid for.

But he also points to imbalances that are intra-business when you compare the struggles of SME compared with multinationals and the fact that so much development and growth in Ireland has largely shifted eastwards to Dublin.

“It’s very easy to start a business in Ireland, it’s very difficult to grow one. I think when it comes to starting up in Ireland and growing a business in Ireland it is the realisation of where the population is, where the market is. Which is why so many indigenous businesses are export-focused because the market is going to be elsewhere.

McCoy said Ireland needs to see its affluence for what it is and sort out the resource allocation problems in terms of infrastructure and education.

“We are still in the mindset that we are in the clutches of austerity. And we rail against paying for things.”

Midas touch

He warns of Ireland choking on its affluence without paying for the things that its society and people need.

Our universities are perceived to be better than Southampton, and Sheffield and Exeter. But they are not

“Ireland’s like the Midas economy right now. Everything we’re touching, is turning to gold. We’re not short on money. What we’re short on though is how to allocate it and we are getting to that private affluence, public squalor situation. This looks like some kind of elitest argument from D2 or D4. But it’s as obvious as the day as long. If you told Irish people that towns like Sheffield, Southampton or Exeter would have anything better than say, Dublin, they won’t believe you because Dublin is wealthy, cosmopolitan, a European capital city, the incomes are higher. Our universities are perceived to be better than Southampton, and Sheffield and Exeter. But they are not.

“There were 21 universities higher than Trinity in the last ranking and our biggest competitor for this type of model, the Dutch, have 10 universities ahead of Trinity. So this is a society that professes to value education highly, that our international reputation is as ‘the Land of Saints and Scholars’ and yet we’re affluent and we allow this to happen by not providing the resources.”

McCoy knows full well that politicians don’t want to apply higher charges or taxes with an election year looming.

“But here’s the uncomfortable truth for politicians: the average households have the money. They’re just not willing to hand it over, though. And so how do you actually get them over the line? Well, you will not get re-elected on a taxation splurge. But reframe the issue. You have done this before, how about borrow the money to give them back at a future date; they were called SSIAs back in the day. Take for instance, the universities – create a service level agreement and you raise the money off the households in terms of a bond for the colleges. The commitment from the colleges is that they will improve their rankings because that might be thing we’re worried about at that particular time. And in return for that they will charge the fees to the international students who want to buy into the brand and the pecking order and that income flow from foreign students repays the Irish households for their bond. I’m making this sound very easy but it’s not beyond the realms of possibility.

“We don’t like taxation because we think we’ll never see the money again, but bonds are another matter. However, we are all quite financially ignorant because we are nouveau riche.”

McCoy said that Ireland needs to take a longer view of where it is going and the kind of country it is going to be.

“Back in 1841, the population on the island of Ireland we all know pre-Famine was 8m, what’s probably little known is the population on the island of Britain on the exact same night of the census was 17m, now it is 65m compared with 7m on this island. So, we’re the only place in Earth with a lower population today than in the 1840s. And so, Ireland is a story of de-population, everybody knows about the Diaspora, but it does have consequences. The consequences are a big piece of land, and too few people knocking around on it. Now it is beginning to increase.

“But we need to get ahead of that in terms of social infrastructure provision, because the lesson from across the water is they’ve had the biggest population surge in their history in the last generation, bigger than anything that went before. It’s always been an open society in Britain, but it couldn’t cope with the scale because it couldn’t build its infrastructure fast enough. So, people were being crowded out from going to their GP, from the NHS, and you got a social reaction, and that was Brexit. Unfortunately, it may burst the whole country, and we get the breakup of the United Kingdom. And that’s a messy piece of neighborhood to be around when it happens. But we can’t do anything about it because we are in the neighborhood.”

McCoy said that he got a lot of jibes for defending infrastructure like the National Children’s Hospital. “The absence of a world class children’s hospital is one of our biggest failures at the moment. We are on our way to providing it but what it costs is actually immaterial in the overall scheme of things. It was the same with the Port Tunnel and the motorway system, but they paid for themselves over time.

“Another jibe I got on the radio was about the Bertie Bowl, would I have built it? I have no idea whether it would have been a good or bad thing. But we didn’t get the World Cup coming here and infrastructure was the reason why we didn’t. I love Croke Park and I love the Aviva Stadium, but isn’t a pity that they are U-shaped? We don’t have a Bowl,” he concluded with an ironic smile.

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Written by John Kennedy (john.kennedy3@boi.com)

Published: 11 October, 2019