In this week’s Public Policy Bulletin, read about the latest live register figures, measures to impact inflation and Ireland’s first Artificial Intelligence Ambassador. We also cover the recent hints of a European Central Bank rate hike. Lastly, in a quiet week in Northern Ireland on the policy front following the NI Assembly elections, we bring you a roundup of the latest news from the rest of the UK.  Latest Live Register Figures released  Social Protection Minister Heather Humphreys welcomed the April 2022 live register figures this week, reporting a drop in the seasonally adjusted unemployment rate to 4.8 percent. The number for April 2022 was reported at 177,004, reflecting a drop of 1,992 on the March 2022 figure. This is also 965 less than the April 2021 figure, when there were a further 385,211 people in receipt of the Pandemic Unemployment Payment.  More measures to address inflation impact announced   This week, Minister for Public Expenditure and Reform, Michael McGrath announced measures to address the impact of Construction Material Price Inflation on Public Works Projects. An “Inflation Co-operation Framework” is being introduced for parties engaged under a public works contract. The Framework will help mitigate the risks of significant losses for contractors and is in the interest of safeguarding public projects already under construction.   The Framework outlines the approach and parameters within which public works contract parties can calculate the additional costs attributable to material and fuel price fluctuations, using the Central Statistics Office’s price indices. These additional inflationary costs will be apportioned between the parties, with the State bearing up to 70 percent of the additional inflationary related costs on payments made from 1 January 2022.  See the full press release here.   Appointment of Ireland’s first Artificial Intelligence Ambassador  This week the Minister for Trade Promotion, Company Regulation and Digital, Robert Troy TD appointed Dr Patricia Scanlon as Ireland’s first Artificial Intelligence (AI) Ambassador.   Dr Scanlon will work with the Department of Enterprise, Trade and Employment on a schedule of engagements in her new role as she leads a national conversation on the role of AI in our lives. Dr Scanlon’s AI developer background, using AI to help children to learn, will help with a key part of her new role, to engage with young people in relation to AI.  The Government is committed to an ethical approach to the use of the technology and in particular its adoption by businesses. At the appointment, Minister Troy said “We cannot stem progress, but we can embrace it. AI can bring great benefits to our society in areas such as healthcare, climate action and education. It is important that we look at all aspects of the technology so we have a full and informed understanding of how it will impact of lives from now and into the future.”     European Central Bank rate rises expected  This week, European Central Bank President Christine Lagarde made remarks during a speech in Ljubljana, Slovenia, signalling the first interest-rate increase in over a decade may be coming this summer.  Lagarde stated “The first rate hike, informed by the ECB’s forward guidance on the interest rates, will take place some time after the end of net asset purchases. We have not yet precisely defined the notion of “some time”, but I have been very clear that this could mean a period of only a few weeks. After the first rate hike, the normalisation process will be gradual.”   Read the full press release here.  UK news in brief:  High energy use businesses in the UK are set to get additional government support. Read more.   HSBC is the latest lender to be added to the UK’s SME Finance Charter. This brings to five, the number pledges from UK banks and finance providers to support their SME customers.   Businesses in the UK can now sign up to offer work to people who have come to the UK from Ukraine.     Attendees at the Cyber UK conference which took place in Wales this week heard about the threats and opportunities that cyber presents. Read opening comments.     

In this week’s Public Policy Bulletin, read about the CSO business survival results and Kantar’s recent report on Ireland’s grocery figures. We also cover the establishment of the Enterprise Digital Advisory Forum. Lastly, we tell you about the Department of Finance’s Back in Business scheme in Northern Ireland. CSO releases Business Survival results This week, the Central Statistics Office (CSO) released results found from their ‘Business Signs of Life Series Two: Business Survival, 2020 to 2021’ study, finding a business survival rate of 84 percent at the end of 2021 for businesses that traded normally in 2019. Businesses continuing to trade at the end of 2021 accounted for 94 percent of the jobs recorded in 2019. The ‘other services activities’ sector, which includes gyms and hairdressers, had the highest proportion of enterprises which showed signs of being at risk of closing, with nearly 1 in 5 experiencing difficulties, followed by the ‘construction’ and ‘accommodation & food service activities’ sectors. 10 percent of enterprises trading pre-COVID-19 were at risk of closing at the end of 2021, rising to 12 percent for micro enterprises. 98 percent of the 653 large enterprises in existence in 2019, were still in business at the end of 2021. Kantar releases report on grocery inflation Kantar reported a fall of 7.2 percent in Ireland’s take home grocery spend in the twelve weeks to 17 April 2022, in a period where grocery price inflation hit 4.7 percent inflation, the highest level since September 2013. 23 percent of households say they are now struggling to make ends meet when it comes to their weekly food shop according to Kantar’s most recent Link Q Service. Despite this, sales of instant hot snacks and frozen pizzas saw growth of 9 and 4 percent respectively over the last four weeks. Alongside this, hot cross buns saw a jump in spending this year, an additional €620,000 compared to the previous year, and €10.8 million more was spent on Easter eggs. See the full report here. Establishment of Enterprise Digital Advisory Forum This week the Minister for Trade Promotion, Company Regulation and Digital, Robert Troy TD established and chaired the new Enterprise Digital Advisory Forum, a commitment in both the ‘AI –Here for Good: A National AI Strategy for Ireland’ and Ireland’s National Digital Strategy, ‘Harnessing Digital: The Digital Ireland Framework’. The Forum, which brings together representatives of indigenous enterprise, multi-national enterprises and experts in digital technology, will support Government in driving the digitalisation of enterprise across Ireland. Minister Troy indicated plans for 90 percent of SMEs to have achieved basic digital intensity by 2030 and sees the Forum as “crucial to supporting Government to encourage this change.”  Department of Finance’s Back in Business scheme This week, the Department of Finance in Northern Ireland started accepting applications for their Back in Business scheme. This scheme is aimed at attracting businesses back onto the high streets and into town centres. Businesses will be offered a 50 percent rates discount for up to two years if they move into premises that have been unoccupied for more than 12 months and previously used for retail purposes. Applications will be accepted up until 31st March 2023. See here for more information.    

In this week’s Public Policy Bulletin, read about the Tánaiste’s US trip to promote Ireland as a place to do business, Ireland’s first Women in Finance Charter, the Department of Finance’s Spring 2022 economic insights and updates on the Work Life Balance and miscellaneous provisions bill. We also cover the launch of the new regional enterprise plan for Cork and Kerry and Government’s finance shared services. Lastly, we tell you about the Department for the Economy in Northern Ireland’s recently announced training places. Tánaiste embarks on IDA Ireland and Enterprise Ireland US West Coast Trade and Investment Mission Tánaiste Leo Varadkar, IDA Ireland CEO Martin Shanahan and Enterprise Ireland CEO Leo Clancy are in the US this week on a joint mission to promote Ireland as a place to do business. The US continues to be the largest single investor in Ireland. Meetings will be held with some of the IDA’s largest existing client and also with potential clients. Plans are also in place for a number of Enterprise Ireland meetings over the course of the week, with key focus on areas such as cyber security, life sciences and ICT. Read more here. Launch of Ireland’s first Women in Finance Charter This week, Minister of State at the Department of Finance, Sean Fleming TD launched Ireland’s first Women in Finance Charter, a collaboration between industry and Government under the Ireland for Finance strategy. The Charter, developed in partnership with Financial Services Ireland, Insurance Ireland, Banking & Payments Federation Ireland and Irish Funds, is open to all financial services firms operating in Ireland. Signatories of the Charter commit to improving the number of women in management and board level positions to achieve better gender balance and a more inclusive working environment in their organisations. The senior management teams of signatory firms will be accountable for progressing the yearly targets. Data will be collected and reported on by the Economic and Social Research Institute (ESRI) on an annual basis to ensure independent, credible analysis. Read more about the Charter here. Department of Finance publishes Spring 2022 Economic Insights The Department of Finance published their Economic Insights for Spring 2022 last week. This report recognises the heightened economic uncertainty but makes the point that the Irish economic growth model over the medium term will continue to depend on productivity, trade and investment. One of the main findings suggest that productivity growth remains the predominant driver of economic growth in Ireland. Demand side factors are seen as the main driver for property price variations, with high asking rents coming from low levels of supply.   Work Life Balance and Miscellaneous Provisions Bill Minister for Children, Equality, Disability, Integration and Youth Roderic O’Gorman recently welcomed approval by the Government of the drafting of a Work Life Balance and Miscellaneous Provisions Bill, indicating that the intention is for this legislation to be passed and enacted prior to summer recess. This legislation will provide new rights to parents and carers in order to help support a better work life balance, reflecting elements of the EU Work Life Balance Directives. Under the proposed legislation, parents and carers will have a right to request flexible working, including the right to request compressed or reduced hours. It will also introduce five days leave per year for serious medical care and extend current entitlements to breastfeeding/lactation breaks under the Maternity Protection Acts from six months to two years. The full Bill is available here. Minister McGrath welcomes the launch of Finance Shared Services The National Shared Services Office (NSSO) launched its Finance Shared Services this week, representing the large-scale transformation of finance and accounting processes used by central Government and Offices. Minister Michael McGrath welcomed the launch, stating: “The modernisation of accounting standards and comprehensive reporting of finance has been a key objective for this Government. Coming from the accountancy profession, I know the extensive value that having rich centralised data available from a single central financial system can deliver, and the value that the NSSO is bringing.” South-West Regional Enterprise Plan launched This week, Minister of State for Business, Employment and Retail, Damien English was in Killorglin to launch the South-West Regional Enterprise Plan (REP) to 2024. This plan is one of nine new enterprise plans funded by up to €180 million throughout the country and is intended to drive the implementation of the plans to develop and implement collaborative and innovation enterprise projects and support sustainable jobs. Another Assured Skills Academy announced This week, Northern Ireland’s Department of the Economy announced a further 20 positions on the Microsoft 365 Cloud Academy. This will be funded by the Department for the Economy and will be delivered by Belfast Metropolitan College. Successful applicants will receive twelve weeks of pre-employment training and receive a training allowance for this period.    

Originally posted on Business Post 03 April 2022. A wage increase would generate hundreds of millions of euro in tax yield without much political or social pushback. Are wages in Ireland really too low? It would appear the emerging consensus is that they are. There have been recent debates in the Dáil over the level of the national minimum wage. Trade unions are signalling the need to achieve increases in pay in the order of 5 per cent or more. Even President Michael D Higgins has engaged in the discussions, with his observation last week at the Siptu Biennial Conference that we should be entering a new era of worker engagement and negotiations over pay and conditions. Last week, there was progress on issues such as pensions auto-enrolment and minimum statutory sick pay. Both of these are entirely laudable and necessary social reforms, but both also create further inflationary wage pressures and extra costly demands on employers. Every household in the country is feeling the pinch of higher fuel prices and other essentials, a wave of price increases prompted initially by the rapid economic recovery post-pandemic, and now perpetuated by the miserable and evil war in Ukraine. No one can be in any doubt that Ireland is an expensive country to govern. The pandemic has added to our national debt servicing costs. There are legitimate calls for additional funding for health, education and social services, along with the need to provide aid and support for the war refugees. But these calls are not being matched by a willingness among the Irish population to pay for the enhanced government services. In February, a Red C poll in this newspaper found that while the majority of the population were keen to ensure that the retirement age would not be raised, a similar majority would not be willing to pay the tax price of what undeniably is a social good. This tax reticence is nothing new. It took two attempts for a modest local property tax, to fund essential local council services, to stick. When LPT revaluations fell due last year, the system was tweaked in such a fashion that the tax burden would only increase on very few people. In 2012 the nation jibbed at paying a levy for septic tank inspections, and then many refused point blank to pay the water charges which were needed to repair a (literally) leaky public service infrastructure. Ireland collects tax and social welfare in the order of 20 per cent of our GDP. In most other developed economies, according to OECD statistics from 2020, the figure is closer to 34 per cent. As of now, we don’t raise enough taxes to pay for current and future government services, but we don’t have the collective national will to introduce new taxes or allow existing tax rates to get any higher. One possibility is that instead of changing the tax rates, the government might change how much gets taxed. The easiest way to do that politically is to levy additional taxes from higher wages. If wages increase in both the public and private sectors, but allowances and reliefs do not, a higher proportion goes in income tax, USC and PRSI. This would not be a new strategy. In the 2016 Programme for Partnership Government, a stated tax policy was not to increase tax bands and allowances as wages increased, so that additional revenue could flow to the exchequer. This phenomenon is known as fiscal drag and is a form of taxation by stealth. It seems that stealth taxation is the only way in which an Irish finance minister can raise funds without being deflected by a political headwind. The effect of fiscal drag can be quite dramatic, particularly as the Irish tax system is very much skewed in favour of the lower-paid, as indeed it should be. Calculations are frequently wheeled out around budget time on the impact of a 1 per cent change up or down in an income tax rate. We rarely see tax calculations which involve changes in wages. Tax projections are not an exact science, especially given the distortions in income levels from the pandemic, but what might be the effect of everyone in the country receiving a 5 per cent wage increase? A rough and conservative calculation, based on the most recent publicly available figures, suggests an increase in income tax yield alone in the order of €800 million. Additional USC and PRSI yields would likely drive the total yield over €1 billion. That’s a huge amount of recurring tax money to raise with possibly little enough outcry. Of course, wage increases bring their own problems, not least the challenge of competitiveness. Nor would a general wage increase be a rising tide that can lift all boats. Increases in disposable income are all very well until met with higher costs of goods and services and last week’s inflation figures are a genuine cause for concern. When government addresses wage claims either in the public sector or for that matter in the private sector, the bigger exchequer picture will be factored in. What might be lost on the roundabouts could be gained on the swings. Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

In this week’s Public Policy Bulletin, Read about Ireland’s decision to reduce the VAT rate on gas and electricity to help with inflationary pressures, the new trade strategy for Ireland and the latest quarterly Director Sentiment Monitor survey. We also cover the release of the most recent Labour Market Report from the Northern Ireland Statistics and Research Agency. VAT rates on gas and electricity reduced to 9 percent Minister for Finance, Paschal Donohoe, confirmed plans this week to reduce the VAT rate on gas and electricity from 13.5 percent to 9 percent to help combat the rising cost of living. The temporary VAT reductions will begin on 1 May and will last until the end of October. The Government announced this reduction while launching their National Energy Security Framework. The Institute wrote to the Government in February recommending that they investigate the possibility of reducing the VAT rate on gas and electricity to 9 percent. New trade and investment strategy for Ireland published The Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar published a new trade and investment strategy Value for Ireland, Values for the World this week. The strategy, which contains seven key actions, aims to protect and grow Ireland’s trade with other countries, as the country faces rising competition from other fast-growing economies. In a press release the Tánaiste stated “This new Strategy is an opportunity for us to look at the changed global landscape and the implications it has for trade. Record levels of trade cannot be taken for granted. Maintaining and expanding global trade in a principled way will continue to be essential to Ireland’s economic wellbeing, living standards and sustainable development.” Ireland’s total trade with the world exceeded €840 billion last year, the highest level on record, and 1.3 million jobs, almost half Ireland’s workforce, is underpinned by international trade and investment. Minister of State with responsibility for Trade Promotion, Digital and Company Regulation Robert Troy recognised a need to "maintain our open, pro-trade outlook and continue to grow our global footprint” and stated that “in the past decade Ireland’s trade in goods and services increased by 171% from €310 billion to over €840 billion.” Read the press release here. Institute of Directors releases Q1 2022 Director Sentiment Monitor survey results The Institute of Directors in Ireland have released the results from their Q1 2022 Director Sentiment Monitor survey. A significant majority surveyed, 93 percent, have indicated that they believe Government should go back to the drawing board with the Draft Scheme of the Right to Request Remote Working Bill 2022. Only 28 percent believe the Bill balances the rights and requirements of both employees and employers. The survey also found that 48 percent of respondents belief that the hybrid working model has been a success for their organisation, but nearly one third think it is too soon to tell. We have previously 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 Institute recognises that clear guidance will be critical to help employers implement the new legislation and wrote to Tánaiste Leo Varadkar on the issue. Latest Northern Ireland Labour Market Report published This week, Northern Ireland Statistics and Research Agency (NISRA) published its most recent Labour Market Report. This report shows an increase of 4.8 percent in the number of payrolled employees in the twelve months to March 2022. March 2022 is the tenth consecutive month where payrolled employees are higher than the numbers seen pre-pandemic. The claimant count reduced again in March 2022 to 37,900 people, representing 4 percent of the workforce. This is still 27 percent higher than the figures seen pre-pandemic but is a 41 percent improvement from the peak in May 2020.  

Last week, we brought you the news that Tánaiste Leo Varadkar received Government approval for the publication of the General Scheme of the Sick Leave Bill 2022. The new laws plan to give all workers the right to paid sick leave, which according to a 2021 survey, has broad support from our members. The Bill has completed Dáil Éireann, First Stage and the Tánaiste plans to introduce the scheme as soon as the Bill passes into law. Chartered Accountants Ireland has written to the Tánaiste on several occasions outlining concerns over the planned timeline for its introduction, stating that businesses will need at least six months to implement a system of sick pay from the issuance of clear guidance. We wrote to the Tánaiste again this week and will keep members updated on this.