In this week’s public policy bulletin we take a look at the latest inflation forecast from the CSO as well as a report from the Irish Fiscal Advisory Council proposing the establishment of a State pension fund. In addition, we examine a report from the ECB linking increased inflation primarily to rising profit margins across the Euro zone as well as the latest on the passage of the Work Life Balance Bill through the Houses of the Oireachtas. Inflation rate dropped to 7 per cent in March – CSO This week the CSO released its latest Flash Estimate for the Harmonised Index of Consumer Prices in which it reported that prices in Ireland were estimated to have risen by 7 percent in the 12 months to March 2023. This however marks a reduction from the 8.1 percent rate recorded in February and marks the slowest annual rate of inflation since March 2022. Food prices are estimated to have increased by 1.1 percent in the last month and increased by 13.5 percent overall in the last 12 months. Meanwhile, energy prices are estimated to have decreased by 0.9 percent in the month and increased by 11.7 percent overall in the 12 months to March 2023. Irish Fiscal Advisory Council (IFAC) recommends set up of State pension fund In a report published this week, IFAC has recommended the establishment of a State pension fund to support the provision of the State pension. Warning that “the funding of the State Pension will come under increasing pressure in the coming decade as the population ages”, the report suggests raising PRSI rates by 3.5 percent over their current level as well as setting aside windfall corporation tax receipts to support the new fund. According to the report, if PRSI rates were raised by 3.5 percent now, so-called baby boomers would pay more towards their pensions while they’re still working rather than loading younger workers with even higher rates of PRSI in the future. You can read the full report here. Rising profit margins driving up inflation more than rising wages – ECB In a report issued this week, the European Central Bank (ECB) has contended that profits contributed more than half of the domestic price pressures in the euro area in the fourth quarter of 2022, while wages contributed less than half. According to the report, profits made up around a third of the GDP deflator from 1999-2022 but rose to two thirds of the GDP deflator by the close of 2022. The report goes on to contend that “high input prices (for example for energy) also made it easier for firms to increase their profit margins, because they make it harder to tell whether higher prices are caused by higher costs or higher margins”. A copy of the full report can be accessed here. Work Life Balance Bill passes all stages of the Oireachtas This week the Work Life Balance Bill formally passed all stages of the Oireachtas and will now be sent to the President to be signed into law. The Bill provides for the introduction of new rights for employees to support a better balance of family life, work life and caring responsibilities. The Bill also seeks to support those who are victims of domestic violence through the introduction of a statutory paid leave entitlement of five days. Amongst the new provisions being introduced under the Bill include: 5 days unpaid leave for medical care purposes for parents of children under 12, and carers 5 days paid leave for victims of domestic violence The right to request flexible working for parents and carers The right to request remote working for all employees 2 years entitlement to take time off work for breastfeeding breaks

In this week’s public policy bulletin we take a look at the interest rate hikes announced this week by both the US Federal Reserve and Bank of England. We also examine the findings of the latest Wholesale Price Index from the CSO as well as a new initiative from the Government to increase SME access to public procurement opportunities. In addition, we review the Northern Ireland economic output statistics for Quarter 4 2022.   US Federal Reserve and Bank of England both announce further interest rate hikes This week the US Federal Reserve announced that its benchmark interest rate would rise another quarter of a percentage point to a range of 4.75 per cent to 5 per cent – its ninth consecutive rate rise and the highest rate since 2007. In a statement accompanying the announcement, the Federal Reserve noted how recent developments in the banking sector “are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation”. Meanwhile, the Bank of England raised interest rates by a further quarter of a percentage point on Thursday bringing its headline rate to 4.25 per cent. Wholesale electricity prices fall while food prices rise in year to February 2023 In its latest Wholesale Price Index for February 2023, the CSO has reported that wholesale electricity prices decreased by 1.8 per cent since January 2023 and were 9.2 per cent lower in February 2023 when compared with February 2022. However, in the same period, producer prices for food products rose by 6.2 per cent meaning that producer prices for products sold on the domestic market are now 10.6 per cent higher than they were in February 2022.  Some of the most notable changes in producer prices for food products over the 12 months to February 2023 include dairy (+23.8 per cent), fish (+18.2 per cent), fruit & vegetables (+18.2 per cent) and grain (+12.2 per cent). Government launch new initiative to support greater SME participation in public procurement opportunities Cabinet have this week approved a new government initiative aimed at supporting SME participation in public procurement. The initiative will act as an update to previous guidance, which introduced a number of measures aimed at assisting SMEs to access public procurement opportunities. The new provisions include: an increase to the threshold at which all contracts for goods and services must be advertised on eTenders from €25,000 to €50,000 (ex VAT) an increase to the threshold at which all contracts for works must be advertised on eTenders from €50,000 to €200,000 (ex VAT) enhanced measures that public bodies should take to promote transparency, including a requirement to publish contract award information for all procurements over €25,000 specific measures that public bodies should take to promote SME participation, including the use of proportionate financial capacity and insurance requirements Latest Northern Ireland economic output statistics This week saw the publication of the latest economic output statistics by the Northern Ireland Statistics and Research Agency (NISRA). According to the publication, output in the services sector increased by 1 per cent in real terms over the fourth quarter of 2022 and by 1.8 per cent over the year putting NI service output at a record high. Meanwhile, production sector output decreased by 0.6 per cent over the fourth quarter of 2022 and by 1 per cent over the year. Retail output saw an increase of 2.2 per cent in Quarter 4 2022 but a decrease of 2.3 per cent over the year. When comparing current output with the pre-Coronavirus pandemic levels seen in Quarter 4 2019, NI production output is 4.5 per cent above its pre-pandemic level and NI service output is 6.2 per cent above its pre-pandemic level. In contrast, NI retail output remains 4.5 per cent below its pre-pandemic level seen in Quarter 4 2019.

In this week’s public policy bulletin we take a look at the latest statistics on the growth in house prices from the CSO. We also report on this week’s meeting of the Irish Financial Stability Group following the collapse of Silicon Valley Bank. In addition, we review unemployment rates across the OECD as well as the latest batch of Northern Ireland Labour Market Statistics. 6.1 per cent growth in house prices in 12 months to January 2023 The CSO this week released its latest Residential Property Price Index (RPPI) in which it found that residential property prices across Ireland rose by an average of 6.1 per cent in the 12 months to January 2023. This figure is however down from the 7.7 per cent rate recorded in the year to December 2022, and from the high values of 15.1 per cent seen in the 12 months to February and March 2022. Nonetheless, according to the RPPI, residential property prices in Dublin saw an increase of 4.3 per cent in the period to January 2023, while property prices outside of Dublin were up an average of 7.4 per cent in the same period. The median price of a dwelling purchased in the 12 months to January 2023 was €305,000. Irish Financial Stability Group (FSG) meets to assess impact of Silicon Valley Bank collapse Following the announcement of the failure of Silicon Valley Bank (SVB), a US technology focused lender, the Irish Financial Stability Group (FSG) met on Monday, 13 March, to assess the situation and any impacts on the Irish financial system. The FSG consists of senior officials from the Department of Finance, NTMA and the Central Bank of Ireland, and is chaired by the Secretary General of the Department of Finance. Given that SVB had a significant number of Irish businesses among its clients, the Irish FSG has established a sub-group to co-ordinate enhanced monitoring and reporting on the domestic impacts arising from the failure of the bank. In a statement commenting on the meeting, Minister for Finance Michael McGrath stressed that while “it is important to highlight the limited direct impact on the Irish financial system of the failure of Silicon Valley Bank, the retail banks operating in Ireland have no exposure” to SVB. Unemployment rate across OECD hits record low The OECD unemployment rate remained at 4.9 percent in January 2023, the seventh consecutive month at this record low since the organisation’s report on unemployment rates began. The unemployment rate was stable in 12 of 38 OECD countries, but close to its record low in only 7 countries, including Canada, France, Germany, and the United States. The number of unemployed persons declined to 33.2 million, remaining close to the record low reached in July 2022. Relative to men, the unemployment rate for women was higher in 18 OECD countries, with the largest gender gaps recorded in Colombia, Costa Rica, Greece, Spain and Turkey. By contrast, 16 OECD countries recorded a lower unemployment rate for women than for men. You can read the full report here. Northern Ireland Labour Market statistics The Northern Ireland Statistics and Research Agency this week released its latest batch of labour market statistics for the region. According to the release, the number of employees receiving pay through HMRC PAYE in NI in February 2023 was 787,200, a 0.4 per cent increase over the month and a 2.2 per cent increase over the year. Moreover, HMRC PAYE data indicated that NI employees had a median monthly pay of £2,047 in February 2023, an increase of £10 (0.5 per cent) over the month and an increase of £134 (7.0 per cent) over the year. Meanwhile, the claimant count rate remained constant for the tenth consecutive month with the seasonally adjusted number of people on the count standing at 35,600, a decrease of 0.1 per cent from the previous month’s revised figure and representing 3.8 per cent of the total workforce.

In this week’s public policy bulletin, we take a look at the first economic forecast of 2023 from the Central Bank. We also report on the Government’s announcement this week of a referendum on gender equality. In addition, we examine the latest Government bond sales from the NTMA and the signing into law of a new accountability framework for the financial services sector. Central bank forecasts lower inflation but reduced rate of growth for domestic economy   In its latest Quarterly Bulletin published this week, the Central Bank has forecasted that inflation is likely to ease to a rate of 5 percent this year. However, growth of the domestic economy is expected to slow to a rate of 3.1 percent in 2023, reducing again in 2024 to a rate of 2.9 percent according to the bulletin. Noting how “headwinds from higher inflation have tempered the pace of growth”, the Bank also points to “tighter monetary policy” in the Euro area as also affecting overall growth. Separately, the findings suggest the unemployment rate is expected to remain low, averaging at a rate of approximately 4.4 percent out to 2025, with tight labour market conditions continuing.  Government announces referendum on gender equality The Government has this week announced its intention to hold a referendum on gender equality as recommended by the Citizens’ Assembly on Gender Equality and the Special Joint Oireachtas Committee on Gender Equality. The referendum will propose amending the Constitution to enshrine the right to gender equality and to remove the current reference to ‘women in the home’. Announcing the plans as part of International Women’s Day earlier this week, the Government’s proposals on specific constitutional amendments are to be published by the end of June, with the referendum due to take place in November. NTMA raises €1.25 billion in latest bond auction The National Treasury Management Agency (NTMA) this week completed an auction of €1.25 billion worth of Irish Government bonds. The funds raised as part of the sale included €450m worth of ten-year bonds maturing in 2032, carrying a yield of 3.133 percent. In addition, €800m was also raised as part of the sale of treasury bonds maturing in 2037, carrying a yield of 3.37 percent. With the completion of this week’s auction, the NTMA has so far issued a total of €4.75 billion in benchmark bonds during 2023. New accountability framework for financial services sector signed into law On Thursday of this week, the Central Bank (Individual Accountability Framework) Act 2022 was formally signed into law by the President. The new legislation will place statutory obligations on certain customer-facing firms and senior individuals within them to set out clearly where responsibility and decision-making lies in what is termed as a new ‘Senior Accountability Executive Regime’ (SEAR). In addition, the Act also includes enhancements to the existing fitness and probity regime as well as providing for stronger Central Bank enforcement capabilities. Elements of the new regime will be enforced immediately and the Central Bank is expected to publish regulations and guidance around them shortly.

By Susan Rossney, Chartered Accountants Ireland Accountants play a key role in making sure their clients and business partners can spot, avoid and act on greenwashing. ‘Greenwashing’ is where a company presents a false or misleading image to persuade the public that its products, aims or policies are more environmentally friendly than they actually are. Greenwashing is on the rise for a number of reasons. More and more companies want to take advantage of the growing public concern for environmental issues, a concern which has created a fast-growing market for green products. Companies that wish to attract talent know they can benefit from a competitive advantage over their peers by advertising their commitment to the environment. Other incentives include a desire to convince critics or stakeholders that a company is well-intentioned. There is also a rising appetite among investors for green projects. The IMF noted in its October 2021 Global Financial Stability Report that sustainable investment funds doubled in the four years up to 2021. It also noted that up to $20 trillion of new sustainable investments would be required to achieve global climate goals by 2050.   Greenwashing is dangerous and unethical because it misleads investors and consumers who are genuinely looking to buy environmentally friendly products or to join or trade with environmentally minded companies. Greenwashing aims to capitalise on consumers’ willingness to sacrifice a saving by paying what is often a premium for ‘green’ products. It weakens the efforts of those businesses actually working to create a better world. Greenwashing also represents a serious risk to businesses when misleading activities are exposed. In How Greenwashing Affects the Bottom Line, HBR authors cited that 42 percent of green claims from Europe were exaggerated, false, or deceptive, and could potentially qualify as unfair commercial practices under EU rules. The much publicised Volkswagen emissions-test scandal caused an almost 20 percent drop in the price of its shares and wiped more than €13bn off its market capitalisation.  Other high profile examples include HSBC, when the UK Advertising Standards Authority (ASA) upheld greenwashing accusations about environmental claims; Tesco, which was rebuked over greenwashing in adverts for plant-based food; and Asos, Boohoo and George at Asda, which were all investigated over their eco-friendly claims. In its 2021 report mentioned above, the IMF noted that proper regulatory oversight and verification mechanisms were essential to prevent financial companies making misleading claims concerning their environmental credentials. To combat greenwashing, regulators have begun to introduce proposals to protect consumers and investors. This activity gained pace in 2022. In August, the US Security Exchange Commission (SEC) launched the Climate and ESG Task Force in order to fight misleading ESG disclosures. In October, the UK’s Financial Conduct Authority (FCA) proposed a package of new measures to protect consumers and improve trust in relevant investment products.  Potential measures include restrictions on how terms like ‘ESG’, ‘green’ or ‘sustainable’ can be used. In December China announced plans to further regulate funds claiming to be environmentally friendly. In Ireland, the Irish Auditing & Accounting Supervisory Authority (IAASA) started to tackle climate related statements made in Companies annual reports. In its recent Compendium of Financial Reporting Decisions it challenged statements made by some companies such as “Net zero by 2050” and promised reduction of carbon emissions. As these publications have traditionally dealt with accounting standards, their starting to address ESG statements is an interesting development. So how can greenwashing be avoided, and what can accountants do? With their skills of professional scepticism, rigorous attention to detail and an ability to interrogate data, accountants are ideally placed to be part of the global fight for better, decision-useful information to help business make critical investments. The key to this is transparency. Work is ongoing in creating global sustainability standards, but accountants can still make a valuable contribution to existing reports by making sure that company financial information and sustainability-related material ‘balances’. Accountants can ensure that the company is clear about what it is currently doing, what it has achieved to date and what it is likely to be able to do in the future. This can involve reviewing corporate pledges such as ‘Net Zero by 2050’ against planned investments in emissions-reduction in the company’s facilities projects and screening for emissions-heavy products in a company’s investment portfolio. When making procurement decisions, accountants also have the skills of professional scepticism, rigorous attention to detail and an ability to interrogate data to separate fact from aspiration. The following are questions accountants can ask of  their suppliers’ products and services: Does the company making the product or providing the service back up its environmentally friendly claims? Are the claims independently certified by a verified third-party, such as B-Corp or Fair Trade? Does the product use language that is vague and unspecific (for example, ‘eco-friendly’) without any description of how this is achieved? Are the claims made by a company too good to be true (for example, ‘carbon-neutral coal’)? Accountants can also increase their knowledge about the meaning of terminology such as ‘carbon neutral’, ‘climate-friendly’ and ‘nature positive’. By increasing their knowledge they can use it to critically assess claims made by companies that are not backed up by quality, third-party independent verification. Accountants can look to their professional associations, such as Chartered Accountants Ireland Sustainability Hub (which contains a useful glossary of terms and other resources) and international organisations such as Chartered Accountants Worldwide for further guidance.  

In this week’s public policy bulletin, we take a look at the Government’s Annual Employment Survey for 2022 as well as the latest inflation statistics for both Ireland and the wider Euro zone. In addition, we examine current gender pay gap trends, the latest Oireachtas Committee hearing on the effect of housing shortages on SME’s and work quality statistics from Northern Ireland. Record employment levels in companies supported by Enterprise Ireland, IDA Ireland and Údarás na Gaeltachta This week the Government released both its Annual Employment Survey for 2022 which found that jobs in client companies of Enterprise Ireland, the IDA and Údarás na Gaeltachta were now at their highest ever level, at over 529,144 jobs (up 7.3 percent on 2021 figures). According to the report, overall employment in FDI firms increased by 8.2 percent since 2021, with an additional 23,854 new jobs created. Meanwhile, employment in Irish-owned firms rose by 6 percent, recording an increase of 12,137 in new jobs since 2021. ICT services was the fastest growing sector with over a third (36.1 percent) of FDI companies operating in this space while Irish owned firms also saw the strongest growth in ICT with a 7.9 percent increase since 2021, or 2,082 full time jobs. Irish rate of inflation increases in February while Euro zone inflation falls less than expected The annual rate of inflation in Ireland is estimated to have risen to 8 percent in the year to February 2023 – an increase of approximately 1.4 percent since January. According to the CSO’s latest Flash Estimate for the Harmonised Index of Consumer Prices, while energy prices are estimated to have decreased by 0.2 percent in February, food and transport costs both rose in the same period by 1.2 percent and 3.6 percent respectively. Meanwhile, the annual rate of inflation across the euro area slowed marginally to 8.5 percent in February from 8.6 percent in January, according to an initial estimate from Eurostat. According to the findings, sectors across the Euro-zone with the highest prices currently include food, energy and services. Report finds gender pay gap of 12.6 percent across 500 companies An analysis of up to 500 firms based in Ireland that published gender pay gap reports in December has found that a mean gender pay gap of 12.6 percent exists. As set out in a report published this week by PwC Ireland, while the reasons for the gap vary, a key factor appears to be the higher number of men working in certain sectors. Specifically, the proportion of women to men tends to be lowest in the engineering, construction, manufacturing and technology sectors. By contrast, the lowest gaps were recorded in retail, health and charity organisations. The full report is available here. Housing shortages labelled the “greatest challenge” currently facing SME’s at Oireachtas hearing In its opening statement at a hearing of the Joint Oireachtas Committee on Enterprise, Trade and Employment this week, Chambers Ireland asserted that the “greatest challenge” facing small and medium enterprises this year is the lack of available talent which is driven by affordable and appropriate housing being unavailable across most of the country. Noting how the domestic market has been fundamentally constrained by this lack of housing, the organisation outlined how “although we are growing as an economy, we are not growing at the pace we could grow” if the housing supply issue was to be adequately addressed. Chartered Accountants Ireland last week launched a joint paper with housing charity Focus Ireland on how to improve supply in the private rental sector. Latest work quality in Northern Ireland statistics released  The latest statistics on work quality in Northern Ireland was published this week by the Northern Ireland Statistics and Research Agency. The publication provides statistics for eight work quality indicators: earnings, secure employment, neither under/over employed, job satisfaction, meaningful work, career progression, employee involvement in decision-making and flexible working. Finding that five of the eight work quality indicators have had significant increases since 2020, notable differences however emerged when analysing by age and sex. For example, while career progression has been consistently higher for employees aged 18 to 39 than those aged 40 and over, meaningful work has also been consistently higher for female employees than for male employees with the difference increasing from two percentage points in 2020 to eight percentage points in 2022.