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 

Oireachtas Committee responds to the final report published by the Commission on Pensions In its response to the Report of the Commission on Pensions, the Oireachtas Joint Committee on Social Protection, Community and Rural Development and the Islands has recommended that Ireland’s State Pension age remain at 66 years. This rejects the proposal put forward by the Commission on Pensions last year that the qualifying age is increased from the current 66 years by three months every year from 2028, reaching 67 in 2031.  To fund this, the Committee recommends that the Commission on Welfare and Taxation examine potential changes to Employers’ PRSI contribution rates.  Among the 13 proposals put forward, the Committee also recommends banning the mandatory retirement age for both new and existing employment contracts. Chartered Accountants Ireland issued a statement following the response this week, welcoming the recommendation to leave the state pension age unchanged at 66 years, while recognising that the shortfall in funding the State Pension long-term needs to be addressed. The Institute said that asking employers to pay increased rates of PRSI cannot be a long-term solution and the fact that employers are already paying high salaries to compensate workers for high personal tax rates must be recognised. The Committee also recommended that funding auto-enrolment should not be prioritised over retaining the current State Pension age. Chartered Accountants Ireland however believes that reforms to enhance the sustainability of the State Pension cannot take place without parallel reforms to increase private pension coverage in Ireland to enable workers to avoid living their retirement in poverty.    Calls for coherent Government policy were also made to enable workers to adequately plan for their retirement. Bank of Ireland’s recent economic pulse survey indicates pay rises this year    According to the most recent Bank of Ireland economic pulse survey, 50 percent of firms are pricing in pay rises this year. 56 percent of people surveyed indicated that it is now easier to find or move jobs, with a third of firms reporting a struggle to fill open positions. 46 percent of those surveyed expect to see a 3 percent average increase in wages in the next year. According to Bank of Ireland’s chief economist Loretta O’Sullivan, “As businesses look to retain and attract staff, and workers find it easier to get or change jobs, upward pressure on pay is likely” with a shortage of workers helping to drive the pay increases. The survey also indicated that 77 percent expect houses prices to rise in the next 12 months, with 70 percent also expecting a rise in rent. The Economic Pulse is based on a series of monthly surveys of households and firms where they are asked for their views on a wide range of topics including the economy, hiring activities, business plans, personal spending and financial situations among others. Tánaiste intends to strengthen remote working laws   We highlighted the draft Bill to give employees the right to request remote working published by Tánaiste Leo Varadkar. The proposed legislation will set out a legal framework to apply for remote working, the reasons the request could be refused and outlines the process for appeals. The Tánaiste discussed the draft Bill with the Select Committee on Enterprise, Trade and Employment this week, indicating his plans to strengthen the legislation and his intention that “employers cannot just tick a box to say no”. The Tánaiste also reiterated that the Bill is in draft form and that “there can’t be an absolute right to remote working”. Chartered Accountants Ireland has written a letter to the Tánaiste to request clear and comprehensive guidance, including practical examples, to assist our members to implement the legislation when it becomes law. Read the Draft Scheme of the Right to Request Remote Working Bill 2022. Enhanced Illness Benefit (EIB) extended The Minister for Social Protection, Heather Humphreys TD, has secured Government approval to extend the EIB payments until the end of June 2022. Almost €230 million has been paid in EIB to date, supporting over 374,000 people. The €350 weekly payment is available to people diagnosed with Covid-19 or told to self-isolate. This is available to employees or self-employed people. For more information, and to apply, go to MyWelfare.ie. Northern Ireland Business Demography Statistics 2020 released Northern Ireland Statistics and Research Agency (NISRA) recently released the latest business demography results for Northern Ireland which looks at births, deaths and survival rates of Northern Ireland businesses by Industry and District Council Area. 6,375 businesses were born in 2020, a decrease of 3.8 percent on the previous year. 4,900 businesses closed during the year, a decrease of 9 percent from 2019. The number of businesses births was greater than the number of business deaths for all district council areas across Northern Ireland.   Retail saw an introduction of 780 businesses in 2020, a 47 percent increase on 2019 and the highest number of births for the sector since the series by industry began in 2009. Importance of Traineeships as part of economic recovery in Northern Ireland This week, Northern Ireland’s Economy Minister Gordon Lyons highlighted the importance of traineeships to enable economic recovery in the region stating that “developing the local skills base is a key priority for me and a cornerstone of the recovery”. As part of the Department for the Economy’s 10X Economic Vision, the goal is “to equip people with the skills they need for the constantly evolving jobs market and build on Northern Ireland’s successes on the global stage”. The £180 million NI Traineeship program, launched in September 2021 as part of the economic recovery package, intends to fund 20,000 Traineeship places over the next seven years.

The EU Commission should not be appealing the decision of the General Court of the European Union in the Apple case, according to Chartered Accountants Ireland. The all-island body, representing 28,500 members, made the comments as the Irish government noted the decision of the European Commission on Friday to lodge such an appeal. Commenting, Brian Keegan, Director of Public Affairs with Chartered Accountants Ireland said “The appeal will serve little purpose. The Commission’s entitlement to look at tax issues when it comes to challenging state aid rules was confirmed by the July court ruling. This entitlement, along with the power of national officials to apply domestic law as best they see fit, may well be the only enduring lessons from the Apple case.  “The Commission should now be looking forward and outward. The power of the EU single market in a disrupted and unstable international trading environment is critical.  Commission resources should now be devoted to securing Europe's place as an international trading bloc and not fighting internecine tax wars with member states.  “The tax point at issue in the Apple case is no longer an issue, resolved neither by Irish legislation nor by European Commission activity but by changes in US tax law. The US Tax Cuts and Jobs Act of 2017 cancelled out the strategy of deferring tax on profits of US multinationals earned outside the US by keeping those profits outside the US. Decisions on where tax is paid are the focal point for the international corporation tax reform agenda led by the OECD, and Commission challenges in the Apple case will not further that agenda. “The European Treaties stipulate that a further appeal can only be on a point of law, which may be difficult given that the July ruling was largely determined on the facts.”  ENDS

Businesses are every bit as concerned as EU negotiators about the prospect of a no-deal Brexit, according to a survey carried out by Chartered Accountants Ireland of respondents working across all industries on the island of Ireland. Only 1 in 5 expect an EU/UK trade agreement to be reached by 31 December. These findings come as negotiations resume in London today.  Despite mounting concern, the focus of respondents across manufacturing, retail, wholesale, transport, logistics and professional services has been forced away from Brexit as they deal with COVID-19. Fewer than 1 in 10 are fully prepared for Brexit and just over 1 in 10 understand the changes that it will bring to their sector. A larger number (37 percent) have some understanding but need further clarity on the official guidance.  Regardless of whether a trade agreement is reached, customs administration will be imposed on exporters and importers north and south and beyond these shores, and survey responses again indicated a knowledge gap when it comes to customs paperwork. Almost half of those surveyed by Chartered Accountants Ireland do not fully understand the customs declarations that will be required to trade goods between Ireland and the UK come 1 January 2021.   Commenting, Cróna Clohisey, Public Policy Lead, Chartered Accountants Ireland said: “As the parties return to the negotiating table, there is an overall air of negativity from officials and from the businesses that we have surveyed. One thing that is certain is that businesses are going to have to deal with customs administration. For many years, the EU has been a safe haven for Irish and UK businesses trading with each other, meaning little need for customs paperwork and declarations. As a result, much of the customs expertise on the island of Ireland has effectively disappeared. “Customs administration is going to cost businesses. This cost emerged as a significant concern for the businesses we surveyed, ranking second, behind staff costs and ahead of customs duties, as the biggest challenge in managing business costs in the next six months.”  Recent months have seen unprecedented challenges due to COVID-19 and approximately 1 in 4 say that their focus has been unavoidably diverted from Brexit as a result.  A little over a third have progressed as far as hiring a customs agent or formally invested in building their own customs knowledge, leaving over 6 in 10 as yet unprepared for these new administrative requirements.  Ms Clohisey continued: “The businesses that will have to deal with customs administration are the same businesses struggling with the effects of COVID-19.  It is critical for the survival of these businesses that goods get to where they need to go and on time. To do this, there is an urgent need for companies and businesses to invest in the people needed to prepare and file customs returns. That work needs to begin immediately so that businesses are ready to trade when the Brexit transition period ends.”  To help bridge this knowledge gap, Chartered Accountants Ireland recently launched a Certificate in Customs and Trade to train traders and advisers to navigate the new customs regime that Brexit will bring.  

The Supreme Court of Ireland unanimously ruled that the National Mitigation Plan (2017-2022) to combat climate change lacks specificity and was reportedly “excessively vague and aspirational.”  The Court also found that the plan does not give sufficient detail about how Ireland will become a  low carbon economy by the end of 2050 and therefore does not meet Ireland’s obligations under the Climate Action and Low Carbon Development Act 2015.Following this ruling, the Government must now devise a new plan, taking into account the Supreme Court’s findings.  

According to the latest Exchequer figures published by the Department of Finance, a deficit of €7,405 million was recorded to end-July 2020, in comparison to a surplus of €896 million to end-July 2019. In a recent press statement, Minister for Finance Paschal Donohoe, T.D. has stated that “this extraordinary increase in public expenditure is a result of the Government’s commitment to supporting our health service and the wider economy through this unprecedented period, as demonstrated with the recent announcement of the July stimulus plan to support businesses and get people back to work”. The top five key takeaways from the Fiscal Monitor July 2020 report are as follows:The rise in expenditure reflects increased departmental drawdown in response to the COVID-19 pandemic, particularly in the areas of Health and Social ProtectionTax revenues for the month of July 2020 were down by €983 million or 18.6 per cent as compared to July 2019.Cumulative tax revenue to end-July is down by 2.5 per cent.Receipts to date have benefitted from a strong performance in January and February as well as solid corporate tax receipts.A sharp decline in personal consumption has led to decline on VAT and excise receipts.