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, we take a look at the latest Irish rental market statistics as well as the performance of Ireland’s exports in the first quarter of 2023. In addition we examine the annual rate of inflation across the Euro zone as well as Northern Ireland’s labour market statistics for April 2023.     Rate of rise in rental prices slows in first quarter of 2023 The rate of increase in advertised rents slowed slightly during the first three months of the year, rising just 1 percent compared to the average rate of 3 percent seen in 2021-2022 according to the latest Irish Rental Report from Daft.ie. In particular, the first three months of 2023 saw open-market rents fall in the cities outside Dublin - even as they continued to increase strongly in many rural markets. Nonetheless, market rents still rose by 11.7 percent in the year to March 2023, a high rate historically but a slowdown relative to the peak inflation rate of 14.1 percent seen in 2022. The total number of properties available to rent on May 1st was just 959. While this is up 13 percent on the same date a year earlier, it is one of the lowest totals seen on the site since the start of the report in 2005. Annual inflation up to 7 percent in Euro zone   According to figures published this week by Eurostat (the official statistical office of the EU), overall price growth accelerated to 7 percent in April from 6.9 percent a month earlier, as rising services and energy costs offset a slowdown in food price growth. The lowest annual rates were registered in Luxembourg (2.7 percent), Belgium (3.3 percent) and Spain (3.8 percent) while the highest annual rates were recorded in Hungary (24.5 percent), Latvia (15.0 percent) and Czechia (14.3 percent). Inflation has so far remained above the ECB's 2 percent target for nearly two years now with the bank raising interest rates by a combined 375 basis points since last July to arrest runaway price growth. Latest figures show Irish exports remaining strong in first 3 months of 2023 According to statistical data published this week by the CSO, the value of Irish goods exports came to €18.8 billion in March with exports of medical and pharmaceutical products accounting for nearly 40 per cent of this total figure. While this was down on same period last year, it was strong in historical terms and reflects the ongoing strength of Irish exports more generally. The figures show that total exports for the first quarter of the year were valued at nearly €51 billion. Irish goods imports for March amounted to €11.2 billion. In seasonally adjusted terms, the State’s trade surplus was €6.6 billion. Northern Ireland Labour Market statistics The Northern Ireland Statistics and Research Agency this week released its latest batch of labour market statistics for the region. According to the release, the number of employees receiving pay through HMRC PAYE in NI in April 2023 was 785,500, a 0.6 percent decrease over the month but a 1.5 percent increase over the year. Moreover, HMRC PAYE data indicated that NI employees had a median monthly pay of £2,062 in April 2023, a decrease of £56 (2.6 per cent) over the month and an increase of £128 (6.6 percent) over the year. Meanwhile, the seasonally adjusted number of people on the claimant count was 37,500, representing 3.9 per cent of the total workforce.

In this week’s public policy bulletin we take a look at proposals issued this week by the Department of Finance on the set up of a new national public savings vehicle. We also review the latest inflation estimates from the CSO as well as the launch of a public consultation on the right to request remote working by the WRC. In addition, we take a look at the latest data on the growth of the UK economy from the Office for National Statistics. Department of Finance publishes proposals to establish long-term public savings vehicle The Department of Finance has this week published a paper entitled ‘Future-proofing the Public Finances – the Next Steps’. This scoping paper outlines some of the merits of establishing a long-term public savings vehicle in Ireland. With the Government forecasting budget surpluses of up to €65 billion between now and 2026, the proposed long-term savings fund would be capitalised with some portion of windfall tax receipts and future budgetary surpluses. According to the paper, this approach would follow a well-trodden path of advanced countries establishing sovereign wealth funds in order to build fiscal buffers in good times to part pre-fund future liabilities. It is understood that the Minister for Finance is planning to bring forward legislation in the coming weeks to establish such a long-term savings vehicle, similar to sovereign wealth funds that have operated in Norway, Australia and Japan. Slight ease in rate of inflation recorded in April – CSO The CSO this week published its latest Consumer Price Index for April 2023. According to the Index, inflation fell to 7.2 percent in the 12 months to April, down from 7.7 percent in March – marking its lowest level in a year. The most significant increases in the year were seen in the costs of housing, water, electricity, gas and other fuels which rose by 20.7 percent, while food and non-alcoholic beverage prices increased by 13.1 percent. On an annual basis, the Index found that electricity prices jumped by a total of 51.3 percent in April, while gas prices increased by 55.8 percent. The CSO noted that the cost of education and transport were the only divisions to show a decrease when compared with April of last year, with prices in the sectors down 6.3 percent and 2.3 percent respectively. WRC launches public consultation on code of practice for remote working The Workplace Relations Commission (WRC) has launched its consultation on the Code of Practice that will govern the right to request remote working under the Work Life Balance and Miscellaneous Provisions Act 2023. The code will set out practical guidance for employers and employees when it comes to requesting remote or flexible work while complaints can be taken to the WRC where an employer has not complied with the code. The deadline for submissions from stakeholders is 5pm on 9th of June 2023. Further details regarding the consultation process can be found here. UK economy grows slightly in first quarter but slumps unexpectedly in March The UK economy marginally grew over the first quarter of the year, according to official data from the Office for National Statistics (ONS). UK gross domestic product (GDP) increased by 0.1 percent between January and March, the lowest amount possible to still be classed as growth as IT and construction sector activity offset the impact of ongoing strikes in other industries. However, the economy shrank 0.3 percent in March as retail and car sales fell sharply, and public sector strikes intensified. Contraction also came thanks to a 0.5 percent fall in services production while distribution and retail also underperformed as cost of living pressures hit consumers.  

In this week’s public policy bulletin we take a look at the latest interest rate hikes from the ECB. We also review the CSO’s unemployment rate estimates for April 2023 as well as an assessment of Ireland’s competitiveness from the National Competitiveness and Productivity Council. In addition, we report on a series of anti-corruption measures proposed this week by the European Commission. ECB hikes interest rates for seventh time in less than a year The European Central Bank this week raised interest rates by an additional 25 basis points to 3.25 percent. Making the announcement, the bank’s governing council warned that “the inflation outlook continues to be too high for too long” and that “future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2 percent medium-term target”. This week’s rate increase marks the seventh such increase in less than a year with the bank now signalling that further rate increases are likely in the face of growing wage and price pressures across the Euro area. Rate of unemployment falls to match previous record low of 3.9 precent   The CSO this week released its Monthly Unemployment Estimates results for April 2023. According to the estimates, the country's unemployment rate fell to 3.9 percent in April – down from a revised rate of 4 percent a month earlier. Noting a decrease of 15,200 in the seasonally adjusted number of persons unemployed in April 2023 when compared with a year earlier, there were approximately 108,200 persons unemployed in the State last month. The unemployment rate was last at 3.9 percent between October 2000 and April 2001. You can read the full results of the publication here. Housing supply the most serious problem undermining Ireland’s competitiveness – report The National Competitiveness and Productivity Council (NCPC) this week published its 2023 Competitive Scorecard Report in which it found that housing supply is the most serious problem undermining the State’s competitive performance. The report specifically notes that in 2021, Ireland was the poorest performer in western Europe in terms of housing investment and that such constraints ultimately pose a risk to the State’s overall employment and living standards. In addition, while noting that overall Ireland’s macroeconomic fundamentals are strong, the report goes on to highlight how “there remain important areas for improvement if Ireland is to maintain, or improve upon, its competitiveness position in the years ahead” including improved efforts on meeting environmental targets and tackling price levels. The NCPC reports to the Government on key competitiveness and productivity challenges facing the Irish economy. European Commission puts forward new anti-corruption package This week the European Commission proposed a broad anti-corruption package consisting of a new Directive on fighting corruption and an expansion of the Common Foreign and Security Policy (CFSP) toolbox of restrictive measures (sanctions) to cover serious acts of corruption. According to the Commission, the aim of the new proposals is to integrate the prevention of corruption into the design of EU policies and programs, and actively support Member States' work to put in place strong anti-corruption policies and legislation. The package specifically includes new and strengthened rules criminalising corruption offences and harmonising penalties across the EU, as well as a proposal from the High Representative, supported by the Commission, to establish a dedicated Common Foreign and Security Policy (CFSP) sanctions regime to target serious acts of corruption worldwide.