In this week’s public policy bulletin, we provide an update on our recent nationwide members forums on the issue childcare in Ireland and Northern Ireland. We also take a take a look at some of our recent submissions to Government on policy issues such as the private rental sector and the right to request remote work. Members forums on childcare The Institute’s public policy team were delighted to meet with members over the past month at our Member Forums on the topic of childcare. Members from across the island shared valuable insights into how the current systems of childcare (both in the Republic of Ireland and Northern Ireland) have impacted their careers as working parents to date. Members also shared their opinions on how they feel the current systems of childcare supports could be improved to better assist working parents on both sides of the border.  We would like to express our sincere thanks to every member who attended these important forums (and others who submitted written comments) as we collate the feedback we received and develop our advocacy agenda on this hugely important topic.  If anyone would like to contribute further information to us, please email stephen.lowry@charteredaccountants.ie. Response to the Irish Government’s public consultation on its review of the private rental sector Last week, the Institute’s tax and public policy team, under the auspices of the Consultative Committee of Accountancy Bodies – Ireland (“CCAB-I”), submitted a response to the Government’s public consultation on the private rental sector. Our response outlined the pension policy implications arising from longer term renting and the overall decline in homeownership rates seen in recent years. Our comments also proposed a suite of new tax measures that would accelerate investment in retrofitting works by landlords, stem their exodus from the market, while at the same time improving security of tenure for tenants. You can read the full submission here. Submission to Ireland's Workplace Relations Commission on the development of a Code of Practice to govern requests for remote work   Following the passage of the Work Life Balance and Miscellaneous Provisions Act 2023, the Workplace Relations Commission (which has been tasked with the responsibility of drafting a Code of Practice to govern requests for remote working) launched a public consultation on the issue. The Institute’s public policy team provided a response to the WRC’s consultation in which we stressed the importance of the Code being produced in a timely fashion and moreover, in clear and unambiguous language. Doing so will be vital to ensuring that both employers and employees alike have a clear understanding of the framework within which they can exercise their rights, obligations and entitlements under the parent Act. You can read the full submission here.

In this week’s public policy bulletin, we take a look at Ireland’s performance in terms of the gender gap and overall business competitiveness. We also review data on the ongoing drop in wholesale electricity prices as well as Ireland’s overall costliness in terms of household expenses compared to the rest of the EU. In addition, we report on the Bank of England’s interest rate hike in the face of stagnant inflation.   Ireland no longer in top 10 countries making most progress toward closing gender gap In its latest Global Gender Gap Report published this week, the World Economic Forum found that Ireland had slipped two places from ninth to eleventh in the ranking of nations making most progress toward closing the gender gap. Defining the ‘gender gap’ as the overall disparity between men and women across economic, social, health and political dimensions, Ireland’s gap has nonetheless narrowed by 79.2 percent in recent years. While Ireland ranked joint first in the educational attainment category, weaker ratings were given for the State’s performance in terms of political empowerment and economic participation. Iceland remains the most gender-equal country, followed by Norway, Finland, New Zealand and Sweden. Ireland ranked second in the 2023 IMD World Competitive Rankings In its 2023 World Competitiveness Report, the International Institute of Management Development (IMD) has ranked Ireland second in the world in terms of its ability to create and maintain a competitive business environment. According to the report, Ireland’s top ranking in terms of economic performance and significant improvements in government efficiency and business efficiency have contributed to the State’s rise from eleventh to second place in the overall rankings over the past twelve months. However, the economy ranked less well when it came to infrastructure, landing in nineteenth place. Wholesale electricity prices continue to fall but general household expenses remain 46 percent higher in Ireland than rest of EU Wholesale electricity prices have continued to decrease according to the CSO with prices falling by 16.2 percent in May of this year compared to the month before. Electricity prices are now 26.6 percent lower than those recorded in May 2022. However, data released this week by Eurostat on household consumption show that Irish prices were 146 percent of the EU average in 2022, higher than any other country in the bloc. The statistics show that Ireland had the highest prices in the EU for alcohol and tobacco, at more than double the union's average. Meanwhile, the State’s food and non-alcoholic beverage prices were found to be almost 15.4 percent higher than the EU average. You can read the full statistical release here. UK inflation rate remains stagnant as Bank of England raises interest rates The rate of inflation in the UK has remained stagnant at 8.7 percent despite widespread expectations of a fall. According to data released this week by the Office for National Statistics (ONS), rising prices for air travel, recreational goods and services as well as second-hand cars kept the inflation rate higher than expected. Meanwhile, in its continued pursuit to meet its stated 2 percent inflation target, the Bank of England this week raised interest rates by half a percentage point to a headline rate of 5 percent. In making the announcement, the Bank highlighted the possibility of further rate hikes in the future by stating that “if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required”.  

Institute President Sinéad Donovan and Tax and Public Policy Lead Cróna Clohisey represented Chartered Accountants Ireland at the National Economic Dialogue (NED) 2023 last week. The NED provides a forum for public consultation and debate ahead of Budget 2024 and this year’s theme was The economy in 2030: enabling a sustainable future for all. The discussion centred on the need to move the focus of economic dialogue towards more medium-term issues, with much debate around whether to spend or save the projected economic surplus. The need to accelerate housing supply, protect living standards and continue to invest in public services, all against the back-drop of managing inflation, formed part of many of the contributions. Institute representatives emphasised to Ministers the importance of addressing capacity building within the economy, particularly in housing and set out suggestions around using the tax system to boost supply. Documents and speeches from the NED can be found on gov.ie.

In this week’s public policy bulletin, we take a look at the latest economic forecasts from both the Central Bank and OECD. In addition, we review a report on the increasing use of AI by Irish workers as well as new rules on the regulation of cryptocurrency marketing in the UK. We also examine the latest statistics on business birth and death rates in Northern Ireland over the past decade. Global financial system remains vulnerable to disorderly market adjustments after a decade of elevated risk-taking – Central Bank In its latest Financial Stability Review published this week, the Central Bank has outlined how risks to the global economy remain elevated - stemming from high inflation, a tightening of financial conditions and overall geopolitical fragmentation. Following what it labels as “a decade of elevated risk taking”, the bank forecasts that the global financial system will remain vulnerable to “disorderly market adjustments” and overall market volatility such as was evidenced by the recent turbulence in the global banking system. While domestically the bank forecasts that persistent inflation and higher interest rates could lead to slower growth, it does however acknowledge that households and businesses have largely proved resilient to inflationary shocks so far, owing in part to the significant reduction in private indebtedness over the past decade. OECD forecasts lowest annual rate of GDP growth since the global financial crisis Global GDP growth in 2023 is projected to be 2.7 percent, the lowest annual rate since the global financial crisis, with the exception of the 2020 pandemic period. In its latest Economic Outlook issued this week, the OECD notes that while the global economy is showing signs of improvement, the upturn remains weak amid significant downside risks. Lower energy prices are helping to bring down headline inflation and ease strains on household budgets, and the earlier-than-expected reopening of China (defined as a move away from lockdowns) has provided a boost to global activity. However, core inflation is proving persistent and the impact of higher interest rates is increasingly being felt across world economies. In the euro area, the OECD expects the ECB to keep raising rates in the face of still high core inflation, with a peak seen in the third quarter. It forecasts that the ECB will likely then leave its main rate at 4.25 percent through to the end of 2024. One in five Irish workers currently use AI in their jobs – report According to a new study conducted by Microsoft Ireland, 1 in 5 Irish workers (21 percent) reported using Artificial Intelligence (AI) tools in their job, while of those who do not use AI (67 percent), almost 1 in 4 say they would be interested in doing so. Moreover, while 82 percent of business leaders globally anticipate that employees will need new skills in the AI era, in Ireland skills availability has been identified as the most important obstacle to the adoption of AI. This, the report points out, is despite  data showing that the share of AI talent in Ireland grew by more than 500 percent between 2016 and 2022. You can download the full report here. UK’s Financial Conduct Authority introduces new rules to regulate the marketing of cryptoassets A package of new measures was announced this week by the UK’s Financial Conduct Authority (FCA) aimed at strengthening regulations around the marketing of cryptoassets to retail consumers. Under the new rules, British consumers buying cryptoassets will get a 24-hour "cooling-off" period for the first time from 8 October this year. In addition, the suite of new measures will also include a ban on ‘refer a friend’ bonuses as well as a requirement on those marketing cryptoassets to highlight clear risk warnings and ensure that adverts are clear, fair and not misleading.  The FCA has also launched a consultation on additional guidance setting out expectations of firms advertising cryptoassets to UK consumers. Those wishing to have their say will have until 10 August to respond. Business birth rate in NI has risen over the last decade but continues to lag behind UK Ulster University’s Economic Policy Centre (UUEPC) has this week published new research assessing business births and deaths in Northern Ireland over a decade, and the implications for productivity in region. According to the findings, the number of business births in NI rose by 45 percent between 2010 and 2021 (the highest in over a decade), compared to a 55 percent rise in the rest of the UK. By contrast, while the number of business deaths in NI during the same period decreased, the rest of the UK saw a 10 percent increase in the number of business deaths. UUEPC’s analysis suggests that business churn in NI (measured as the business birth rate plus the death rate) has risen from 16.6 percent in 2010 to 18.3 percent in 2021 whereas the UK has a higher churn rate at 23.5 percent in 2021. The report suggests that the combination of a lower business birth rate and a lower business death rate indicates that NI’s economy is less dynamic than other regions of the UK. The largest number of business births and deaths annually was recorded in the construction sector while the lowest has been largely in the education sector.

In this week’s public policy bulletin, we take a look at a report published this week by the Irish Fiscal Advisory Council on Ireland’s top corporation taxpayers. We also review the latest unemployment rate estimates from the CSO, the state of consumer confidence in May and the latest Labour Force statistics for Northern Ireland. A third of Irish corporation tax estimated to have been paid by just 3 companies – report New research published this week by the Irish Fiscal Advisory Council (IFAC) estimates that just three corporate groups accounted for around a third of all corporation tax revenues collected between 2017 to 2021. The research paper, titled “Understanding Ireland’s Top Corporation Taxpayers”, seeks to better understand this concentration of Ireland’s corporation tax receipts amongst a handful of large, foreign-owned multinationals. The report’s estimates were arrived at using publicly available financial statements with a number of different approaches employed to calculate the level of corporation tax paid by the companies analysed. However, in doing so, the report concedes that there are “several limitations” to its analysis, particularly because most large groups “are not required to disclose the amount of corporation tax they pay in Ireland”. Unemployment rate falls to record low according to latest CSO estimate Ireland’s unemployment rate reached a record low of 3.8 percent in May, falling below the previous record of 3.9 percent last seen in April 2001. Unemployment had stood at 4.2 percent the same month last year. According to its estimates, the CSO recorded an unemployment rate for men of 4.1 percent in May, compared to a rate of 3.4 percent for women in the same period. Meanwhile, the youth unemployment rate eased to 6.9 percent in May, down from a revised rate of 7.7 percent in April. According to the estimate, the seasonally adjusted number of people unemployed stood at 103,300 in May, compared with 106,500 in April of this year. You can read the full statistical release here. Consumer confidence at highest level in over a year – Irish League of Credit Unions Irish consumer confidence improved further in May (reaching a 14-month high) and signalling “a continuing easing in concerns about the economic outlook” according to the latest Consumer Sentiment Index from the Irish League of Credit Unions. This, the report points out, contrasts with significantly weaker US sentiment as the general consumer mood here has evidently been impacted by a “stronger Irish economy and buoyant Budget outlook”. However, consumers are still cautious on spending plans with a majority planning to curtail spending in coming months due to a prevailing feeling that “the worst of the cost-of-living crisis is not behind them at this point”. Nonetheless, the index is now at 62.4, showing the trend of improving sentiment that has been underway since last year is now well established and stronger than elsewhere in the euro area. Latest Northern Ireland NEET statistics released (young people who are not in education employment or training)   According to the latest Labour Force Survey released by the NI Statistics and Research Agency, there were an estimated 18,000 young people aged 16 to 24 years in Northern Ireland who were not in education, employment or training (NEET) in January to March 2023. This was equivalent to 9 percent of all those aged 16 to 24 years in the region. By comparison, the proportion of young people who were NEET in the UK during the same period was 10.6 percent. In January to March 2023 there were an estimated 13,000 young people aged 16 to 24 years in Northern Ireland who were NEET and who were not looking for work and/or not available to start work (economically inactive).

In this week’s Public Policy Bulletin, read about recently announced Government initiatives to support remote working in Ireland, a BearingPoint study which analyses 123 European banks and the recently released annual report on public debt in Ireland. We also cover Minister McConalogue and Northern Ireland’s Minister Lyons’ trip to Expo 2020 Dubai and a statement from Minister Lyons on the independent review of Invest Northern Ireland  Initiatives to support remote working announced by Minister Humphrey   This week, the Minister for Rural and Community Development, Heather Humphreys, announced a series of major initiatives to support Remote Working. Through the Connected Hubs 2022 Call, the Department of Rural and Community Development will provide €5 million to add additional capacity to the existing remote working infrastructure in Ireland by upgrading existing hubs and Broadband Connection Points (BCPs). €8.9 million has already been provided for 118 remote working projects across the country in 2021.  In May 2021, the National Connected Hubs network was launched with 60 hubs onboarded onto the connectedhubs.ie platform. There are now in excess of 200 hubs live on the connectedhubs.ie platform, with an aim to hit 400 hubs by 2025. The Connected Hubs mobile app has been launched to allow users to find their nearest hub facility and easily book a desk space using their mobile device.   Read the press release here.  Pandemic impact on European and Irish Banks   A BearingPoint study has found that Irish banks were hit harder than many of its European peers during the Covid-19 pandemic. The study looked at 123 European banks from 2013 to 2020 and found that Irish banks set aside significantly more capital for the impairment of loans during the pandemic (an increase of 1300 percent), when compared to their European counterparts (an increase of less than 120 percent).  In 2020, Bank of Ireland and AIB had impairment charges of €1.1 billion and €1.4 billion respectively due to Covid-19 concerns. Irish banks had a negative return of 6.3 percent in 2020, compared to a European average return on equity of 2%. 2020 cost income ratios for Irish banks averaged at 68.7 percent, higher than the European banks average of 64 percent and the optimum cost income ratio, which should be less than 55 percent.   Noel Crowley, the Financial Services Director at BearingPoint, shares his response to the report here.   Annual Report on Public Debt in Ireland 2021   The Minister for Finance, Paschal Donohoe released the fifth annual report on public debt this week. The report found that public debt increased by €33 billion during the two years of the Covid-19 pandemic, now approaching a quarter of a trillion euros. This is an estimated 106 percent of national income or €47,250 for every person in the country. These figures stood at 95 percent and €41,450 in 2019.  Minister Donohoe highlighted the major fiscal challenges that lie ahead, including a likely fall in corporation tax receipts, an aging population and the large fiscal costs that will be required to finance the journey to “net neutral”. In a press release issued by the Department of Finance, Minister Donohoe concludes “This is why we need to rebuild our fiscal buffers, including by steering the public finances to a more balanced path. We can do this while continuing to make significant capital investment, as outlined in the National Development Plan. This will help to lay the foundations for future growth while protecting against the future fiscal challenges that lay ahead of us.”   Read the full report from the Department of Finance here.     Dubai’s Expo 2020  Minister for Agriculture, Food and Marine, Charlie McConalogue opened a Board Bia celebration of Irish food at the Irish pavilion at Dubai’s Expo 2020, with the current year theme “Island of Inspiration” highlighted when he remarked “that spirit of inspiration and creativity reflected in the Irish food producers, large and small, who are innovating and finding routes to premium markets in the Gulf region”.  Northern Ireland’s Economy Minister Gordon Lyons also attended the event during his two-day visit program to the UAE. Speaking from the UK Pavilion at the Expo, under the UK’s theme of “Innovating for a shared future”, Lyons said “Today, Northern Ireland is centre stage at the world’s largest live international event. We are here to bring a flavour of Northern Ireland to the world and showcase our innovations within business, tourism, food and education to a global audience."  Invest Northern Ireland independent review  Northern Ireland’s Economy Minister Gordon Lyons made a statement to the NI Assembly this week in relation to his decision to commission an independent review of Invest Northern Ireland (Invest NI). He pointed out the fantastic track record Invest NI has in making Northern Ireland the most attractive location in the UK, outside of London, in respect of foreign direct investment.   The statement from Lyons can be read here.   Dame Rotha Johnston DBE and Ms Maureen O’Reilly have been appointed as panel members to work with the panel chair, Sir Michael Lyons for this independent review. The report of their findings is expected in September 2022.   Invest NI’s offers of financial assistance to companies beyond March 2020 is currently on pause, as they await clarification on their potential 2022/2023 Budget sign allocation from its parent Department for the Economy