Why not cut passive income?

An tSaoi08/10/2009

An Saoi: This morning, listening to Morning Ireland, I was struck by Cathal MacCoille’s interview with Bobby Kerr, the founder of the Insomnia group of coffee shops, which you can hear here. Mr Kerr was asked on to discuss the demise of the O’Brien Sandwich franchise. He described how property interests had strangled that business and could put other businesses such as his in danger also. He had cut his prices by 25% to stay competitive, but his rent of course had remained the same. He also clearly expressed support for the minimum wage and the need to pay and protect employees.

Effectively, Mr Kerr and his employees are now working for Insomnia’s landlords, who have complete protection under the law. They sit by without contributing anything to the business, able to increase the rent if Mr. Kerr is successful and if he is not, still get their money. Rent reviews can only go one way without any obligation to share the hard times.

Right wing forces have won the argument to date, suggesting that it is salaries and wages that need to be cut to bring Irish competitiveness into line. Little or nothing has been said in relation to passive income, such as rents and the various tax subsidies such income attracts.

Pay and conditions have been agreed between employers and employees after negotiations, but it is proposed that those agreements should be torn up, or at least suspended. However, there is no quid pro quo suggested in relation to rents.

In the retail & services sectors, the level of rents has a material bearing on the final cost of goods and services. Realistic rents are part of any adjustment to the cost base in the Irish economy. A move to rents based on turnover, as is already the case with some more recent developments, and really independent arbitration, which can force rents down as well for all commercial tenants as up are needed now.

The level of protection granted to landlords is a problem for all of those involved in commercial activity in Ireland and also to the Public Sector. I have commented elsewhere on this site about the insidious way that the property game still hangs over us. It is time to force commercial rents down now to give people like Mr Kerr a chance to survive. Why should he and others be sacrificed on the High Altar to the false god, NAMA?

Posted in: Economics

Tagged with: commercial rents



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