Public Policy

In this week’s Public Policy news, read about the launch of the Ireland for Finance 2020 Action plan; the stark warnings from the Environmental Protection Agency on Ireland’s progress towards its climate targets; and the forecast for the biggest decline in the UK economy in 300 years.  Launch of ‘Ireland for Finance 2020’ Action Plan The Ireland for Finance 2020 Action Plan was launched this week, the first to be published since the formation of the new Government in June of this year. The new Programme for Government, committed to complete the ‘Ireland for Finance Strategy’ for the development of Ireland’s international financial services sector to 2025. The plan has been updated since its initial development in December 2019 to take account of the passage of time and the unprecedented challenge of COVID-19 and the continued requirement for Brexit-readiness. The vision of the plan is to ensure that Ireland continues to be a top-tier location of choice for financial services companies, to enhance our competitiveness, and for Ireland to  be at the forefront of positive industry developments in products, services and operational models. Launching the plan, Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Sean Fleming TD said that the progress made on important measures for International Financial Services during the year is reflected in “the resilience the sector has shown in the face of the pandemic,” and that attention must now be focused on the future and how the potential of the industry can be maximised as the economic recovers. Stark warnings from the Environmental Protection Agency The publication this week of the Environmental Protection Agency (EPA) Ireland's Environment 2020 - An Assessment provides an update on the environmental challenges that Ireland faces both nationally and globally. The report, which publishes every four years, found that Ireland is still heavily reliant on fossil fuels and is falling seriously behind in protection of natural habitats. It also found that raw sewage is being dumped into water from 35 towns and villages, leaving only 20 of Ireland’s more than 3,000 rivers, streams and tributaries unpolluted. The report noted that Ireland cut only  4.5 percent of its greenhouse gas emissions in 2019. This signals a significant challenge to the Government as it seeks to make Ireland carbon neutral by 2050, which it plans to do by, among other measures, cutting overall greenhouse gas emissions by 7 per cent annually for the next decade. The report called for the implementation of solutions across all sectors of society through an overarching environmental policy position, and predicted that a decade of action is needed to put things right. UK economy forecasted for biggest decline in 300 years Describing the impact of COVID-19 as an “economic emergency” UK chancellor Rishi Sunak reportedly warned that the pandemic will damage both growth and jobs, with official forecasts  predicting the biggest economic decline in 300 years. The outlook is for a contraction of the UK economy by 11.3 percent this year, with no return to pre-crisis levels until the end of 2022. It also expects a rise in Government borrowing to reach levels that are record for peacetime, to deal with the economic impact. According to the Office for Budget Responsibility (OBR), the UK government’s independent forecaster, the number of unemployed people will rise to 2.6 million by mid-2021, with the unemployment rate reaching 7.5 percent, its highest level since the 2009 financial crisis. Read all our updates on our Public Policy web centre.  

Nov 27, 2020
Public Policy

  In this week’s Public Policy news, read about recommendations contained within a report on Ireland’s pension landscape; the European Commission’s economic forecast for Ireland and its proposal to grant Ireland €2.5 billion in financial support; a proposed expansion in Northern Ireland's aerospace sector; and the emergence of the world’s largest trading bloc in Asia. New report recommends simplifying Ireland’s pension landscape The Interdepartmental Pensions Reform & Taxation Group last week released a new report, running to 140 pages, which looks at ways to simplify the supplementary pension landscape, a review of the Approved Retirement Fund (ARF) as well as assessing the cost of the State providing tax relief for pension savings.  The Group which is chaired by the Department of Finance and includes members from Revenue, the Department of Social Protection, the Pensions Authority and the Department of Public Expenditure and Reform have written the report based on responses to the 2018 public consultation exercise. The report recommended several areas of reform to consider including the following: The normal retirement age should increase from70 to 75 years (i.e. the age by which pension funds have to be drawn down). The age at which people can access their pension funds will be standardised at 55. The report says that this is in line with longer working as a result of increasing age. Accurately calculating the total cost of tax relief on pensions is a challenge due to limited availability of data. However, tax relief on pension contributions benefits middle income levels the most with those on higher incomes also benefiting. Automatic enrolment has the potential to address both the coverage and adequacy gaps in Ireland; however care needs to be taken to ensure that any State Benefit is aligned in some way with the current tax relief. Buy out Bonds (BOBs) and Retirement Annuity Contracts (RACs) should cease. Existing BOBs and RACs should be allowed to run-off over time. The PRSA should operate as the sole personal pension product. The Approved Minimum Retirement Fund (AMRF) should be abolished given that the State Pension means the requirement to have an annual guaranteed income of €12,700 is largely redundant. The differential treatment of the PRSA for funding purposes should be abolished, employer contributions to PRSAs should not be subject to BIK. In addition to this, a new Pensions Commission has been set up to examine the possibility of increasing the State Pension Age. Auto-enrolment proposals are still under review. We will keep readers posted of developments. European Commission publishes Autumn Economic Forecast for Ireland  The European Commission this week published its Autumn 2020 Economic Forecast. It projects that Ireland’s economy will contract by 2.25 percent in 2020. The 3 percent growth it anticipates in 2021 will be followed by further growth of 2.5 percent in 2022. A better reflection of the underlying domestic economy, though, is modified domestic demand. This the Commission expects to fall by 6.5 percent in 2020 and grow by 7.25 percent in 2021 and 4.5 percent in 2022.  A summary of the forecast has been reproduced below:   2019  2020   2021 2022  GDP growth (%, yoy)   5.6   -2.3  2.9   2.6   Inflation (%, yoy)                                                                                0.9  -0.5   0.3  1.6 Unemployment (%)  5.0   5.3   8.9   8.7   Public budget balance (% of GDP)   0.5   -6.8   -5.8   -2.5   Gross public debt (% of GDP)   57.4   63.1   66.0   66.0   Current account balance (% of GDP)   -11.3   5.7   0.2   -1.1 Source: Economic and Financial Affairs       European Commission Despite a strong rebound in the third quarter after the severe shock in the first half of the year, the later resurgence of the pandemic means that growth projections over the forecast horizon for the euro area and the EU are subject to an extremely high degree of uncertainty and risks. Output in both is not expected to recover its pre-pandemic level in 2022, In the case of Ireland, the Commission found that Ireland’s domestic economy was hit severely by Covid-19 control measures in the first half of the year. The fall in real GDP was cushioned by strong exports by multinationals and employment has been shielded by state income support schemes. However, the contraction in the economy, combined with the high fiscal stimulus packages are expected to significantly widen the budget deficit, so, similar to the euro area and EU, risks to Ireland’s outlook remain exceptionally high. The full Irish forecast can be found here. €2.5 billion proposed for Ireland under SURE The European Commission has proposed a decision to grant €2.5 billion in financial support to Ireland under SURE. SURE is the European instrument for temporary financial support to mitigate unemployment risks in an emergency.  It is part of EU's strategy to mitigate the negative consequences of the COVID-19 pandemic by protecting jobs and workers. It covers 18 Member States, including Italy, Spain and Poland. If the proposal is approved by the European Council, Ireland will receive loans on favourable terms to help cover the costs associated with the Temporary Wage Subsidy Scheme. Northern Ireland’s aerospace sector set for expansion   Invest NI has announced it is seeking a contractor to deliver a new ‘Northern Ireland Aerospace Customer Diversification Programme’. Anticipating an ‘inevitable upturn and new world of aerospace’, the scheme reportedly plans to diversify Northern Ireland’s aerospace sector and help it expand to reach new and emerging markets. A further goal is to research and identify areas where the existing manufacturing supply chain can collaborate with “Northern Ireland’s cybersecurity and technology sectors to target emerging opportunities in new sectors and aerospace with a view to the decarbonisation of aviation”, placing emphasis on markets where the Northern Ireland Aerospace supply chain and associated technology supply chain can compete. UK publishes 10-point plan for ‘green industrial revolution’ This week UK Prime Minister Boris Johnson published a 10-point plan for a ‘green industrial revolution’. The plan aims to create and support up to 250,000 jobs. The points of the plan are: Producing enough offshore wind to power every home. Increasing the production of low carbon hydrogen, with the aim of developing the first town heated entirely by hydrogen by 2030. Advancing nuclear as a clean energy source. Accelerating the transition to electric vehicles and transforming the national infrastructure to better support electric vehicles. Making cycling and walking more attractive ways to travel and investing in zero-emission public transport of the future. Supporting industries that are difficult to decarbonise to become greener through research projects for zero-emission planes and ships. Improving energy efficiency of homes, schools and hospitals, and installing 600,000 heat pumps every year by 2028. Becoming a world-leader in carbon-capture technology, with a target to remove 10MT of carbon dioxide by 2030. Protecting and restoring our natural environment, and planting 30,000 hectares of trees every year. Developing relevant cutting-edge technologies and making the City of London the global centre of green finance. Read more about this plan at gov.uk. Agreement reached to create world’s largest trading bloc 15 countries have agreed to set up the world’s largest trading bloc. Called the Regional Comprehensive Economic Partnership, or RCEP, its aim is to reduce barriers in an area covering one-third of the world’s population and economic output. The countries in the bloc include China, Japan, South Korea, Australia and New Zealand, as well as the countries in the 10-nation Association of Southeast Asian Nations (ASEAN). These include Cambodia, Indonesia, Laos, Burma, the Philippines, Thailand, Brunei, Singapore, Malaysia and Vietnam. The deal followed eight years of negotiations, which culminated at the annual summit of the 10-nation Association of Southeast Asian Nations (ASEAN), hosted by Vietnam. Although the deal is not expected to integrate member economies as the EU does, it does build on existing free trade arrangements, and will further reduce already low tariffs on trade between member countries. Read all our updates on our Public Policy web centre.  

Nov 20, 2020
Public Policy

  In this week’s Public Policy news, read about the launch of Chartered Accountants Ireland’s new resources on sustainability for accountants; Skillnet Ireland’s new strategy to prepare businesses for the future world of work; the continuing economic impact of COVID-19 on Northern Ireland;  the UK’s moves to become a world leader in green finance; and the EU budget to build a greener, more digital and resilient Europe. Launch of Sustainability for Accountants The Institute launched Sustainability for Accountants, a practical, easy-to-read short guide to help accountants understand sustainability and discover how to implement sustainability practices in their own organisations. The guide, along with an online sustainability hub, were launched as part of Climate Finance Week 2020 at a webinar at which former Institute president Terence O’Rourke joined a panel of Dr Rodney Irwin, Managing Director of Redefining Value at the World Business Council for Sustainable Development and Cróna Clohisey, Institute Public Policy Lead, to discuss the role accountants have in embracing sustainability. Moderated by Dr Brian Keegan, Director of Advocacy and Voice, the webinar also included a keynote address by the current Institute President Paul Henry. Speaking about sustainability, Terence O’Rourke stated that “Chartered accountants have a key role in helping organisations focus on, and effectively use, the measurement and reporting of key metrics. Increasingly, sustainability measures are becoming more important.  It is vital that we accountants are capable of supporting and leading our organisations transform our regular management and board reporting to encompass the recording and clear presentation of  sustainability KPIs”. You can watch a recording of the event using this link (video starts at 2:14:41). Skillnet Ireland launches new strategy to prepare businesses for the future world of work Skillnet Ireland this week launched a 5-year strategy Transforming Business Through Talent 2021-2025. Centring around the three themes of workforce design, people development and strategic innovation, the strategy sets out ambitious targets to increase the organisation’s engagement with business and industry, training and upskilling the workforce to combat challenges including Covid-19, Brexit, climate change, and automation. Minister for Further and Higher Education, Research, Innovation and Science, Simon Harris, TD, described the strategy as “a key milestone in Ireland’s economic recovery and growth… designed to help our businesses and workers prepare for the future world of work. Having a skilled and agile workforce is essential to how we respond to current and future business challenges.” Skillnet Ireland, whose mandate is to advance the competitiveness, productivity, and innovation of Irish businesses through enterprise-led workforce development, is currently funded from the National Training Fund through the Department of Further and Higher Education, Research, Innovation and Science, with employers paying a contribution towards some training programmes. Economic impact of COVID-19 on Northern Ireland continues Figures published this week by the Northern Ireland Statistics and Research Agency have revealed that redundancies in Northern Ireland more than doubled in 2020, with record high numbers recorded in June and July. An Ulster Bank Survey, which analyses private sector companies, has reportedly indicated that business output in Northern Ireland ‘stagnated’ in October as new orders decreased and staff cuts continued. It also indicated that any prospect of a return to growth is unlikely in the near future. Research carried out by the Department for the Economy to analyse the economic impact of the four-week ‘circuit breaker’ during the coronavirus pandemic also revealed that it may lead to a loss of £400m to the economy, on top of losses of £4bn to 5bn already this year. The UK similarly recorded a record high number of layoffs during the third quarter, with the Office for National Statistics reporting that redundancies had reached an all-time high of 314,000. UK seeks to become a world leader in green finance The UK government this week announced that it would sell its first sovereign ‘green’ bond next year, and announced the intention to mandate climate disclosure by large companies and financial institutions across the economy by 2025. The move, announced in a speech about the future of the financial sector on Monday by Chancellor of the Exchequer Rishi Sunak MP, was described as “truly transformative” by Mardi McBrien, Managing Director, Climate Disclosure Standards Board (CDSB). McBrien further commented:  “Mandatory implementation of climate risk disclosures using the TCFD recommendations across major sections of the UK economy by 2025 will improve business resilience, level the playing field for companies and investors reporting on climate and drive investment to finance the UK’s transition to a net zero future.” The announcement came on the same day that Mark Carney, the British Prime Minister’s finance advisor for green finance and former Bank of England governor called on the world’s governments to adopt internationally standardized regulations of climate-related disclosures for the financial sector. Carney described climate change as a “crisis which involves the entire world, and from which no one will be able to self-isolate”. Also this week, the Financial Reporting Council published a review in which it stated that corporate reporting needs to improve, and that investors expect to see disclosures regarding the financial implications of climate change. The Council in the review encourages PIEs to report against the TCFD and SASB metrics for their sector. Agreement on EU budget to build a greener, more digital and resilient Europe The European Commission this week welcomed agreement on Europe’s next long-term budget and NextGenerationEU, its temporary recovery instrument, following interinstitutional negotiations between the European Parliament and the Council, and with the participation of the European Commission. Once adopted, the package of a total of €1.8 trillion will be the largest package ever financed through the EU budget. The package will help rebuild a post-COVID-19 Europe, which will be greener, more digital, more resilient and better fit for the current and forthcoming challenges. Described as a budget fit not only for today's realities but also for tomorrow's uncertainties, 30 percent of  EU funds will be spent to fight climate change, the highest share ever of the largest European budget ever. The package also pays specific attention to biodiversity protection and gender equality, and will have strengthened flexibility mechanisms to guarantee it has the capacity to address unforeseen needs. The Commission has committed to put forward proposals on a carbon border adjustment mechanism and on a digital levy by June 2021, with a view to their introduction at the latest by 1 January 2023. The Commission will also review the EU Emissions Trading System in spring 2021, including its possible extension to aviation and maritime. It will propose an own resource based on the Emissions Trading System by June 2021. Read all our updates on our Public Policy web centre.  

Nov 13, 2020
Public Policy

Sustainability for accountants Susan Rossney Today, Chartered Accountants Ireland launches its new guide, “Sustainability for Accountants” detailing the risks and opportunities presented by sustainability, and the steps that need to be taken to address the challenges. An accompanying Sustainability Hub on the Institute’s website provides practical information, guidance and supports to help members. Sustainability means many things to many people, but in a business context the simplest definition is “future-proofing your business, responsibly”. It means being resilient, meeting your needs as a business but in a way that does not endanger future generations. There are many terms for sustainability, but a common one is environment, social and governance, or ESG. Most people understand sustainability to be about climate, but it is considerably broader; indeed, the scale of sustainability can be daunting at first glance. The United Nations has identified 17 goals (SDGs for short) as part of its Sustainable Development Agenda, and Ireland as a UN member has committed to work towards these goals. The goals range from eradicating poverty and hunger, to improving education, reducing inequality and building sustainable cities and communities. Sustainability is also the guiding principle of Strategy 24, the vision for Chartered Accountants Ireland as a growing, evolving, modern organisation. Our vision is to create a sustainable business model, supporting our members and profession in creating a sustainable society, now more than ever, in this time of global uncertainty. Our core value is: for tomorrow, for good. Why does sustainability matter? The importance of sustainability to accountants can be summed up in three words ‘risk, risk and risk’. Environmental, social and economic issues present huge risks for businesses.  Accountants need to identify and quantify these risks and develop policies for themselves and their clients to address them. Risks include: Fines or penalties for non-compliance with increasing levels of policy and regulation Losing out to competitors for clients or business partners. The sustainability requirements of large organisations can require a smaller business in its supply chain to comply with regulatory requirements to which the smaller business might not itself be subject. Sustainability is also an increasingly important factor in tendering for contracts with larger organisations with stricter sustainability goals. A sustainable business – or one working to become so – is a competitive proposition to other businesses looking for compliant business partners. Losing customers. Becoming sustainable for many companies is an intrinsic part of their social license to operate. Staff expect it, customers demand it. Developing stranded assets, weaknesses in supply chains, and over-reliance on scarce resources. Reduced access to capital. Investors are actively looking to invest in sustainable funds and are screening out certain sectors or companies (like those heavily reliant on fossil fuels, for example). Businesses seeking this investment will benefit from being able to collect and report on their sustainability-related activities against a recognised standard, like the UN Sustainable Development Goals or the Global Reporting Initiative. Many banks are also adopting sustainability criteria and may require proof of sustainable practices from companies looking to avail of finance. Not availing of reduced costs: According to the Sustainable Energy Authority of Ireland (SEAI), the average SME can save up to 30 percent on its energy bill by becoming more energy efficient. Becoming unable to attract talented employees, or experiencing high employee turnover, with associated costs and succession risks. Companies unable to demonstrate in an authentic manner that they value sustainability will struggle to attract and retain talented staff. The accountant’s role in sustainability Professional accountants, working in all sectors of industry, have an increasingly significant role in addressing sustainability risks. For many accountants, ‘sustainability’ is synonymous with the ‘reporting of non-financial information’. This presents challenges as there is a wide range of standards against which a business may report. However, there is a growing demand from many stakeholders for consistent, reliable, transparent and comparable reporting on these and other sustainability risks. Global Frameworks and standard-setting bodies are beginning to work together to address this demand.  Just as sustainability is more about climate, the role of the accountant is more than reporting. Accountants can now do more to assist companies in building resilience, becoming more sustainable and measuring and reporting on sustainability. Chartered Accountants are bound by a code of ethics based on an international code adopted and implemented by more than 3 million professional accountants across the globe. They are committed to protecting long-term value for organisations and society, and they act in the public interest. This, in turn, contributes to the sustainable advancement of today’s global society. In our guide, “Sustainability for Accountants”, we describe the myths, realities, risk and opportunities for accountants around sustainability, and provide tips to get started, as well as a case study to show how a small business in Ireland transitioned to a sustainable operation successfully and cost-effectively. Our new sustainability hub in our Knowledge Centre provides resources including news, interviews, information about events and a collection of articles, webinars and podcasts, as well as links to organisations providing a wealth of information. We want to support our members in their sustainability journey, as well continually developing our knowledge in this area. Read the guide here 

Nov 06, 2020
Public Policy

In this week’s Public Policy news, take a look at the economic forecast for Ireland in the latest Autumn Economic Forecast by the European Commission. You can also view the latest Spending Review papers published by the Department of Public Expenditure and Reform, and read Minister Donohoe’s comments welcoming the work of the Task Force on Climate-related Financial Disclosures.“Ireland one of the least affected member states”, says latest EU Economic ForecastReleased earlier this week, the European Commission’s  Autumn 2020 Economic Forecast has forewarned that an interrupted and incomplete recovery of the EU economy has led to further uncertainty in economic projections. With the economy showing a strong rebound in the third quarter following a lifting of COVID-19 restrictions, the resurgence of the pandemic has resulted in further disruption. In comparison to the Summer forecast, growth projections for both the euro area and the EU are slightly higher for 2020 and lower for 2021. It is forecasted that the euro area economy will contract by -7.8 percent in 2020 before growing by +4.2 per cent in 2021.What was the major impact on Ireland?The forecast for Ireland has found that Ireland's real GDP fell by 2.1 per cent in the first quarter of 2020 and by 6.1 per cent in the second. This was low in comparison to other EU member states, as exports by multinational corporations, particularly the pharmaceutical and business services sectors, performed well. However, a decline in private consumption and investment triggered a fall in imports. The impact on investment in Ireland is the worst in the EU, as it is set to shrink by 41.3 per cent in 2020 before strengthening next year.What is the impact on Ireland’s labour market?The wide take-up of Ireland’s income support schemes is set to cushion the labour market shock, while strong exports by MNCs cushioned the fall in real GDP. Higher unemployment may accompany the economic recovery in 2021 as the Pandemic Unemployment Payment scheme ends in April. In 2022, a second year of recovery is set to support the labour market’s improvement.Is Brexit contributing to the predicted economic downturn?As a departure from previous practice, the Autumn forecast is also based on a "technical assumption" that there will be a no-deal Brexit at the end of the transition period on 31 December 2020, and that from 1 January 2020 both sides will be trading on default WTO terms. In Ireland, this default trading relationship is expected to reduce trade and GDP growth in 2021. Minister McGrath publishes second quota of Spending Review papers for 2020The Department of Public Expenditure and Reform in Ireland has published the second tranche of Spending Review papers as part of the 2020 Spending Review process. The Spending Review process aims to facilitate the development of policy analysis and evaluation in support of the service-wide agenda of evidence-informed policy making. The 17 papers published today are available on the Spending Review website. In comparison to the first tranche of papers, this set is much more detailed and takes into account the dual impact of COVID-19 and Brexit across many sectors in Ireland. The papers cover a number of areas, while focussing on measuring such as the review of State-Supported loan schemes to mitigate the impact of COVID-19 and Brexit, assessment of the impact of Brexit and COVID-19 on the Gaeltacht’s local economy, the effectiveness of energy efficiency measures for the private household sector in Ireland, assessment of Ireland’s performance under the EU Work-life Balance Directive, and building delivery mechanisms for social housing.Some other areas covered are:EducationEnterpriseCivil and Public Sector Staffing, Pay and PensionsForeign Affairs and TradeChildrenClimate ChangeAgricultureDefenceTransportJustice & Courts ServiceState PropertyHealthHousingGovernment Expenditure Minister Donohoe supports work of Task Force on Climate-related Financial Disclosures Minister for Finance, Paschal Donohoe T.D., has voiced Government support for the Task Force on Climate-related Financial Disclosures (TCFD), and its work on providing clarity to companies reporting on climate risks and increasing the transparency required to meet the Paris Agreement goals. Speaking at an event organised as part of Climate Finance Week Ireland, Minster Donohoe stated that he is actively encouraging more Irish firms look to engage with and adopt recommendations made by the task force to expedite their own climate transition plans.The implementation of the recommendations represents best practice for companies and opens up access to more sustainable pools of growth capital while addressing the needs of investors for greater transparency.Chair of the TCFD, Michael Bloomberg, has also welcomed Ireland’s adoptions of the recommendations especially as countries build greener, more resilient economies in the wake of the pandemic. He also stressed on the importance of increasing transparency on climate-related risks and opportunities, to promote more informed financial decision-making by investors, lenders and others. Read all our updates on our Public Policy web centre. 

Nov 06, 2020
In the media

In his regular column in the Business Post, Dr Brian Keegan takes a close look at how Joe Biden’s presidency versus Donald Trump’s presidency may impact FDI to Ireland.Dr Keegan is quoted on CNBC; he highlights the uncertainty Irish businesses are facing, with Brexit less than 70 days away.   Professional Tax Leader, Norah Collender is quoted in the Irish Times, on the tax liabilities facing employees who received payments under the Temporary Wage Subsidy Scheme. “There is a liability arising, and it won’t be easy for people to comprehend”, she says. 

Nov 05, 2020