Those of us who take part in debates on the financial crisis should declare our incomes, writes FINTAN O'TOOLE
IN A PERFECT world, the journalists, broadcasters and commentators who set the political agenda would be paragons of absolute objectivity. We would be able to completely separate our views from our interests, to put forward ideas that are not, even in their subtlest shadings of nuance or emphasis, influenced by our own private circumstances.
Most of us, I think, genuinely strive for that ideal. Equally, though, we are the first to point out the naivety of similar claims made by, for example, politicians. We never tire of telling Ministers or TDs that they live in a bubble because they earn so much more than most of those they represent.
In the last few weeks, I’ve been fairly prominent in debates on radio and TV about the current crisis in the public finances. I’ve been struck by the stark fact that every single person involved in those debates (including me) earns much more than the vast majority of those who will be affected by our prognostications. Every contributor is earning at least twice or three times the average wage.
None of us is in immediate danger of unemployment, and each is in a position to cope with cutbacks. We’re mostly talking, in other words, about other people’s pain.
Let’s take, for example, an issue I’ve been trying to put on the agenda – the €3 billion in public subsidies for private pensions. It matters, surely, that no one who belongs to the majority of workers who don’t benefit from these subsidies gets to take part in the debate. And it matters, too, that those who shape the debate tend to have a very particular perspective on the issue – that of the very high earners who get most of these subsidies.
(It is not true, by the way, that most of the tax relief forgone goes to people on middle incomes saving for their pensions. The combined subsidy for employee contributions to superannuation schemes, PRSAs and retirement annuity premiums is just over €1 billion of the €3 billion total.)
When I went on Pat Kenny’s radio show to discuss this issue, Pat’s reaction was, as Gene Kerrigan put it in the Sunday Independent, as if “O’Toole suggested killing our first-born”.
This is fair enough in itself and I’m happy to mix it. I’ve also worked with Pat Kenny in the past and appeared on his shows down the years, and I have genuine respect for his integrity as a journalist. I’ve no doubt that his outrage was not, in his own mind, influenced in any way by his personal circumstances.
But he would have to be superhumanly dispassionate to avoid the inescapable reality that his perspective is that of someone on €850,000 a year (before his voluntary 10 per cent pay cut) rather than, say, €50,000 a year.
What’s the difference? On this issue, it’s huge. Take a freelance journalist – let’s call her Paula – who works for RTÉ and gets €50,000 a year. She’s 60 and needs to make hefty pension contributions. The most she can get tax relief on is €20,000 – a subsidy of about €8,000.
Now take someone like Pat who’s earning €850,000. I have no idea what Pat’s actual pension arrangements are (except that, as he has announced, his pension fund lost a “significant amount” on bank shares). But I do know what a typical tax adviser, operating completely within the law, would urge Pat to do. The adviser would tell Pat that the maximum amount he can claim tax-free for his pension is 40 per cent of the €150,000 limit that was set in the last budget. Nice, but no cigar.
Happily, the adviser would have a solution. “Okay, Pat,” he says. “Get your company Pat Kenny Media Services Limited, to bill RTÉ for the €850,000. It pays you a taxable salary of, say, €200,000. The directors of PKMS can now put the other €650,000 into your pension fund – entirely tax free. Any money your fund makes from investing this sum is also tax free. You can keep putting in these sums annually up to a maximum of €5 million.”
This is the way the system works. Paula’s annual pension subsidy is capped at €8,000 a year. Pat’s is effectively unlimited. Whether or not he takes advantage of this opportunity – and he is, I stress, fully entitled in law to do so – Pat’s experience of this issue is fundamentally different to that of middle-income workers, never mind those on lower pay. He’d have to be a combination of a saint and a robot not to be influenced in some tiny way by that basic fact.
All human beings have a limited perspective. We should stop pretending otherwise. In the first place, those of us who take part in debates on the financial crisis should declare our own incomes, and, where relevant, our pension arrangements.
It is not for us to judge whether these facts create perceived conflicts of interest, but for the listeners and viewers. Secondly, the range of voices in this debate needs to be broadened.
Would it be unbearably shocking to hear what someone on an average wage might be thinking?