In this week’s Public Policy Bulletin, read about the recently released economy overview presentation produced by the Parliamentary Budget Office in the Oireachtas, comments from IBEC and ICTU on the Right to Request Remote Working Bill, and €11 million funding announced for Skillnet Ireland to support small and medium businesses. We also cover the announcement of the eighth Assured Skills Academy in Northern Ireland.   Irish and European Economy trends presented by the Parliamentary Budget Office (PBO) in the Oireachtas    A new data visualisation, produced by the PBO, was released this week. This provides an analysis of recent trends in the Irish and European economy, including issues such as inflation, the labour market, savings, bond yields and financial markets.   The Irish economy’s GDP of 9.51 percent was the highest average growth rate of all EU countries during the pandemic. Employment in Ireland has already returned to pre-pandemic levels, approximately five times faster than it took following the financial crisis. Gross Value Added by foreign-owned multinational enterprises (MNEs) overtook domestic enterprises during the pandemic, increasing Ireland’s dependence on foreign MNEs.   Inflation increases continue to cause concern, with above average inflation being reported in most commodity groups. Exceptions to this are education and health, which both have experienced deflation. Ireland is the second most expensive country in the EU, with its price level indices 40 percent above the EU average.  In 2020, Russia provided nearly 40 percent of the EU’s natural gas requirements, over 20 percent of their oil and petroleum needs and nearly half of the solid fossil fuels. As the war on Ukraine continues, higher energy prices are expected across the EU. Ireland will be particularly impacted by this, with 71 percent of its energy requirements imported in 2020.  Public debt, a global phenomenon, is now eight times what it was in 1995, now surpassing €246 billion. This will increase Ireland’s exposure to higher interest rates and reduces the scope for Ireland to handle future shocks.   The full economic update can be accessed here.   IBEC and ICTU express their views on Right to Request Remote Working Bill   Both IBEC and ICTU brought their views to the Joint Oireachtas Committee on Enterprise, Trade and Employment in relation to the Right to Request Remote Working Bill.   IBEC referred to the tight labour market and remarked that the “tables have turned a little bit, and it’s not all about what the employer’s want” but is concerned that the Bill adds additional administrative burdens for employers. IBEC noted that significant moves to remote working are being seen, where its practical and sensible, and questions the need for any legislation.  ICTU expressed disappointment in the level of consultation in the development of the Bill, indicating that the Bill in the current form is not fit for purpose, with it too easy for a request to be refused and not enough of a penalty for those who do not follow the legislation. IBEC also asked for Government to “make it meaningful” and calls for more engagement to develop the Bill.  The full session can be found on Oireachtas.ie.  €11 million supports announced by Minister Harris   The Minister for Further and Higher Education, Research, Innovation and Science, Simon Harris, announced €11 million in funding for Skillnet Ireland to support small and medium businesses post-Brexit.  The funding is intended to support business recovery and will address several priority areas including digitalisation, innovation, sustainability and leadership development. Paul Healy, Chief Executive of Skillnet Ireland, states that the funding will “help SMEs plan for success in key areas”.   This funding has been provided under the EU Brexit Adjustment Reserve and will be available to all SMEs nationwide. Businesses are encouraged to join a network relevant to their sector and region to avail of these supports.   Eighth Assured Skills Academy announced  This week, Northern Ireland’s Economy Minister Gordon Lyons announced the eighth Assured Skills Academy with Alchemy Technology Services. This will be funded by the Department for the Economy and will be delivered by North West Regional College.   The 20 chosen participants will be enrolled in a five-week pre-employment training programme, with an opportunity to become a Technical Analyst on conclusion.   Minister Lyons also urged interested individuals to apply to the PwC Professional Services Assured Skills Academy and last month, 40 additional places with FinTrU were announced.   All three programs are still open to application. More information can be found on the NI Direct website. 

Originally posted on Business Post 06 February 2022. There is no evidence to support the status quo, so why are politicians still waiting to make a decision? The clearest signal yet that Irish politics has moved on from the emergency phase of the pandemic came from the Oireachtas Committee on social protection last Wednesday. In its comments on recommended increases to the state retirement age by the recent Commission on Pensions, the committee essentially contradicted the findings of that very commission. The committee said that the qualifying age for the state pension should remain at 66, with additional flexibility for long serving employees. This jars because Ireland has become accustomed to following the recommendations of experts. Guidance from public health experts has largely shaped our response to the pandemic for the best part of two years. By and large, the technocracy of public health has dictated the political decisions made since the pandemic began, perhaps to an excessive degree according to some. Nevertheless, when compared to other countries, and this is in no way to diminish the terrible loss and sadness of the pandemic, Ireland has fared reasonably well. Success came from sticking to the advice from the scientists, and this may also help explain why the harsh restrictions and measures were more acceptable to the majority of the public. We have a tradition in this country that respects knowledge, and few enough Irish people suffer from a Michael Gove-style fatigue from having to listen to experts. Whatever else can be said about the pensions commission, it did not lack for expertise, having experienced business people, public servants and academics on board. It is almost unimaginable that a recommendation from the National Public Health Emergency Team (Nphet) to the Minister for Health could have been, at any stage over the past two years, referred back to an Oireachtas committee to be contradicted. So, what has happened here? Are medical doctors in some way more expert than economists and welfare analysts? Is the political system simply trying to reassert its sovereignty? Or is the pensions issue simply less critical or urgent than the pandemic crisis, leaving expert opinion on the issue fair game for challenge? Considerations of political primacy and the perceived severity of voter pushback may have informed the committee’s report. Nevertheless, shouldn’t our politicians be more amenable to guidance from expert groups established to provide advice to the state? Politicians must of course represent the views of their constituents, if only to preserve their seats. They may not always read these views accurately or be swayed either by a vocal minority of their own support or an opportunistic opposition challenge. The Oireachtas committee came up with 13 recommendations on the pensions issue. Not one offers any concrete solution to the fundamental problem of retirement age – namely that we cannot afford the status quo. Their recommendation instead is to wait for the advice of the current Commission on Taxation and Social Welfare to give the funding answer. The Commission on Taxation and Social Welfare is another expert group. Will its report fall foul of yet another Oireachtas committee, which will recommend waiting for . . . what? In a post-pandemic era, voters may well be less tolerant of poorly informed policies. It will be interesting to see what they think of Norma Foley the Education Minister’s determination to run this year’s Leaving Certificate in the traditional format. Political noise from the opposition was inevitable. This time, however, many voters may conclude that the decision based on expert advice to go with written exams was the correct one. In the outcome of the Portuguese general elections this week, it seems that voters recognised, and then rejected, the ill-advised manoeuvres of the smaller parties supporting the previous Portuguese coalition. Those parties had not supported the fiscally prudent budget being promoted by the larger Socialist Party within the coalition, and this triggered the election. Now prime minister Antonio Costa, leader of the Socialist Party, will have an overall majority. One interpretation of this outcome is that when push came to shove, the Portuguese electorate recognised what needed to be done to govern their country well. Over the course of the pandemic, both the 2020 caretaker government and the current coalition had the good sense not to treat the population as fools. People realised that restrictions were necessary, and then got on with it. Wobbles in adherence to the pandemic restrictions only happened when government advice was conflicting or unclear, as was the case with the approach to schools reopening towards the back end of last year. Our government needs to continue the good habits of implementing policy based on expert evidence. The report of the Oireachtas Committee on social welfare flies in the face of this. If the results of the Portuguese election are anything to go by, politicians will bear the cost of getting it wrong.   Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

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 

In this week’s public policy bulletin, read about record high exports and imports for Ireland in 2021, the proposed digital euro currency, as well as positive news from the Department of Finance’s latest SME credit demand survey. We also cover Northern Ireland’s latest Labour Market report, which shows employment levels are bouncing back. Central Statistics Office releases goods exports and imports data for 2021 Exports of goods from Ireland hit an all-time high of €165 billion in 2021, an increase of just over €3 billion from the previous year. Medical and pharmaceutical products account for 38 percent of total exports, up 1 percent from 2020. The value of goods imported were also strong; up 18 percent from previous year, growing to nearly €103 billion in 2021. Imports of mineral fuels have seen the biggest year on year percentage movement, up 81 percent in 2021. Exports and imports between the Republic of Ireland and Northern Ireland have both increased significantly in 2021, each totalling nearly €4 billion, up 54 and 65 percent respectively. €1.3 billion of these exports were shipments of food products and live animals. The report outlines that “under the Revised Protocol on Ireland and Northern Ireland, Northern Ireland is legally part of the customs territory of the UK, but effectively remains within the EU Single Market for the movement of goods”. The Fine Gael TD, Neal Richmond calls on this opportunity to be seized and to maximise trading patterns through every means possible. Richmond says “we must remember that this movement of goods from Northern Ireland to the EU Single Market is possible only thanks to the Northern Ireland Protocol. Businesses and traders have shifted their trading patterns to the path of least resistance and are focusing their goods in the internal EU market. The Protocol is not only protecting Northern Ireland from the worst of Brexit, economically, but it also offers far greater potential than many would have expected.” Exports to Great Britain in 2021 exceeded €14.4 billion, €958 million less than imports recorded of €15.4 billion. However, while a trade deficit resulted from 2021, annual exports to Great Britain did increase by 17 percent, whereas imports from Great Britain saw a drop of 13 percent, compared to 2020. Read the full report here. Euro Central Bank Digital Currency bill due early 2023 European Commissioner Mairead McGuinness spoke at the Afore Consulting Annual FinTech and Regulation Conference last week and confirmed that the Commission intends to present a legislative initiative on instant payments in the second half of 2022. This will be the legal foundation for the euro central bank digital currency (CBDC), with a working prototype expected in late 2023.  McGuinness added that a targeted legislative consultation will be held “in the coming weeks”. As reported by Politico, Germany and France called to speed up the project last year as they fear being left behind, with China and India making moves to create their own. The earliest completion date for CBDC is 2025. Latest SME credit demand survey shows recovery in overall SME performance The most recent SME credit demand survey released by the Department of Finance covers the period April to September 2021. Of the 1,502 SMEs included in the survey, 57 percent reported a profit, compared to 31 percent in 2020. Average reported turnover for the twelve-month period ending September 2021 was €515k for micro companies, €3.63m for small sized enterprises and €9.96m for medium sized companies. Trading conditions were also reported to have improved significantly, coming close to the levels recorded pre-pandemic, in September '19 Read the full report from the Department of Finance here.   Northern Ireland Labour Market Report The Northern Ireland Statistics and Research Agency published their latest Labour Market Report this week. This report indicates that the number of people on payroll in Northern Ireland has increased 5 percent over the twelve-month period to January 2022, with the figure now standing at 774,900. The January 2022 claimant count stood at 41,200 people, which is 35 percent lower than the peak seen in May 2020. However, the current count is still 35 percent higher than the pre-pandemic count in March 2020. A median monthly pay of £1,941 was recorded for January 2022, up 8.7 percent over the previous year. From 1 January to 14 February 2022, 260 redundancies have been proposed, following low proposed redundancies for the period September to December 2021. 2,450 redundancies were confirmed over the latest twelve-month period, which is 54 percent less than the previous year, where 5,380 redundancies were confirmed.  

While 2021 was a big year for ESG pledges, climate ambitions and keeping the 1.5°C target within reach, 2022 will be the year of action. Russell Smyth outlines the seven ESG themes we will likely see this year. The global emphasis on environmental, social and governance (ESG) issues increased significantly in 2021 among governments, NGOs, the business sector, and other stakeholders. Given the remarkable momentum achieved last year, mainly stemming from the run-up to, and discussions at COP26, we expect the ESG growth trend to continue apace in 2022. Here are seven ESG themes we expect to see throughout the year. 1. Moving beyond the pledges At the close of the year, more than 2,000 companies worldwide had set or committed to setting emission reduction targets in line with the Paris Agreement climate goals through the Science Based Target initiative (SBTi). At COP26, global leaders agreed to the Glasgow Climate Pact, securing a near-global net-zero with over 90% of world GDP now covered by net-zero commitments. These actions have kept the 1.5°C target alive, but 'its pulse is weak', as stated by COP26 president Alok Sharma. In the year ahead, there will be increased pressure and scrutiny on corporates and countries to deliver on these (often vague) commitments, with regulators and stakeholders seeking transparent and robust evidence of tangible action, quantifiable progress, and interim targets well in advance of 2050. Companies failing to act on their climate and broader ESG goals risk suffocating the already weakening 1.5-degree target as well as experiencing the expanding impact inaction will have on business continuity. 2. You've got to bring your supply chain with you For companies, a key opportunity to deliver effective change in 2022 sits within their supply chain. Supply chain emissions, or so-called ‘Scope 3’ emissions, are typically the most difficult emissions for companies to track and influence depending on the complexity of their supply chain. However, tackling them can be transformational for corporate climate action. This stems from the fact that supply chain emissions often significantly outweigh a company's direct emissions – on average, supply chain emissions are 11.4 times that of operational emissions. Decarbonising Scope 3 emissions will require a rethink and possible redesign of current value chains but also provides a significant untapped opportunity in the drive towards a net-zero carbon economy. 3. Quantifying climate risk The corporate ESG agenda has to date focused on quantifying and reducing the impact companies have on the environment (e.g. carbon emissions, waste production). Now, however, the focus is shifting to the impact of ESG, particularly climate change, on companies. This will include quantifying, in monetary terms, both physical risk (e.g. flooding risk to factories) and transitional risk (e.g. new regulations, changing consumer sentiment) to a business, driven by the requirement to report against frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD) and investor demands. This will involve moving beyond qualitative assessments of climate and environmental risk to the provision of quantified and financially-based risk assessments to inform investors on the business's risk profile and assist management in business planning and strategy. 4. ESG reporting is coming of age The ESG disclosure and reporting rhetoric has been dominated by the challenges posed by the proliferation of competing metrics and, subsequently, the lack of consistency in measurement and disclosure. In 2022, however, a tipping point has been reached, and the next phase of ESG reporting is unfolding rapidly. This includes: EU Taxonomy: A new type of classification system which establishes a list of environmentally sustainable economic activities. The Taxonomy will require financial market participants and companies to disclose their climate change mitigation and adaptation performance in a comparable way by the start of 2022 and other environmental objectives by January 2023. The Task Force on Climate-Related Financial Disclosures: Provides a framework for companies to issue climate-related financial information. Corporate Sustainability Reporting Directive (CSRD): CSRD will come into effect in December 2022 and will entirely replace the NFRD. The proposed changes made by the CSRD include the extension of reporting requirements to include additional categories of companies and the inclusion of the 'double materiality concept'. International Sustainability Standards Board (ISSB): The ISSB is tasked with developing mandatory corporate ESG disclosures. 5. Biodiversity Biodiversity is fundamental to long-term business survival. Businesses depend on highly-functioning ecosystems for important inputs into their production processes and essential services like air, soil and water quality. This year will see the global biodiversity conference, COP15, take place in China after two years of delay due to the pandemic. The conference aims to set a Paris Agreement-style global goal for nature, with many organisations calling for a worldwide goal for businesses to be "nature-positive." A nature-positive world requires no net loss of nature from 2020, a net positive state of nature by 2030, and full recovery by 2050. To mitigate impacts on biodiversity, businesses are asked to avoid and reduce pressures on nature loss, restore and regenerate, so that the extent and integrity of nature can recover, and transform underlying systems to address the drivers of nature loss. It will be easier for companies to solve these issues by setting science-based targets for both nature and climate.   6. The emergence of the green consumer According to the Harvard Business Review, consumers want more sustainable products, but when faced with them, they don't consistently buy them and "keep reverting to old, habitual behaviour". The tide seems to be changing in 2022 as consumers become more aware of how individual actions can be part of climate change mitigation. In addition, governments are increasingly pressuring businesses to nudge consumers towards making that sustainable purchase. 7. The role of the circular economy In 2022, all businesses should investigate measures for enhancing waste management, increasing product durability and quality, and seek to involve recycling/take-back schemes for product end-of-life. These methods, among others, are examples of how companies can begin to implement circular economy principles into their day-to-day processes to become a more sustainable business. In Europe, the Commission has estimated that adopting circular economy principles could increase EU GDP by 0.5 percent by 2030 and create an additional 700,000 jobs. In the context of Ireland, EPA estimates suggest a 5 percent material reduction in the 100 million tonnes used annually could correspond to an annual €2.3 billion opportunity. In December 2020, Ireland launched its first Whole of Government Circular Economy Strategy, in which it estimates that annual savings of €2.3 billion could be achieved by boosting Ireland’s circularity. Russell Smyth Sustainable Futures Partner in KPMG.

Inflation is a hot topic this week as a 20-year high annual rate of 5.5 percent was announced by the Central Statistics Office in Ireland, higher than the Euro Area rate of 5.3 percent, according to Eurostat. A rate of 4.8 percent was measured by the Office for National Statistics in the 12 months to December 2021 in the UK. Dr Brian Keegan, Director of Advocacy and Voice at Chartered Accountants Ireland weighed in on the topic in the Irish Examiner last weekend, urging Government to use VAT relief to best tackle inflation. Dr Keegan says, “While everybody feels the effects of price inflation on consumer goods and fuels, those costs make up a greater proportion of the disposable income of lower earners and VAT reductions thus have a more equitable impact” and emphasises that “the impact can be quite immediate”. On RTE Radio 1 this week, Dr Keegan called for a reduction in the VAT rate on fuel costs as a “quick fix to the real cost to people”. VAT of 13.5 percent is currently applied to electricity, coal and gas. A reduction in this cost would benefit everybody but should disproportionately help lower income earners as a higher proportion of their disposable income goes towards fuel. Our recommendations were communicated to the Government in a letter to Minister Michael McGrath this week.  A press release was held on Thursday evening by Minister for Finance Paschal Donohoe and Minister for Public Expenditure and Reform Michael McGrath to announce the new measures that will be introduced to help people suffering from the impact of inflation. The most significant of the measures is an energy rebate of €200 including VAT, which is “almost a doubling of what was originally envisaged, in recognition of increased pressures on consumers and householders”, according to a statement from Minister Ryan. The package, totalling €505m, include a 20% cut to public transport fares, which will take effect from April and will last until the end of 2022. School transport fees will be capped at €150 for primary level pupils and €500 at secondary level. Fuel Allowance claimants will receive an extra €125 in a lump sum payment and the Drugs Payment Scheme threshold will fall to €80 from €100. The Working Family Payment budget increase of €10 will be brought forward from 1 June to 1 April 2022. People are reminded to reach out to community welfare offices if they are struggling as there is an exceptional needs payment that can be made available. Chartered Accountants Ireland released a press release this morning on the issue.