Speech by the Taoiseach, Mr Brian Cowen, T.D., at “Turning the Corner”, the Annual Conference of Chartered Accountants Ireland, Dublin Thursday, 6 May, 2010 at 2pm.
A dhaoine uaisle, Is eagraíocht í Cuntasóirí Cairte na hÉireann atá sainmhínithe ag gairmiúlacht, ardchaighdeáin, scileanna agus macántacht. Tá na tréithe sin fite fuaite i leagan amach gairmiúil na heagraíochta le níos mó na 120 bliain anuas, eagraíocht a dhéanann ionadaíocht inniu ar os cionn 18,000 comhalta agus 6,500 mhic léinn. Cinntíonn an fócas láidir a chuireann sibh ar fhoghlaim ghairmiúil ar feadh an tsaoil go léireoidh na ndaoine sin a mhúineann sibh agus a ndéanann sibh ionadaíocht orthu sárchumas i ngairm na cuntasaíocta. Guím gach rath ar na gcainteanna anseo inniu agus guím gach dea-ghuí oraibh don todhchaí.
I am delighted to join you this afternoon to officially open the Annual Conference of Chartered Accountants Ireland.
The theme you have chosen for this year’s event—Turning the Corner—is, I believe, entirely appropriate. Because that is what we are doing.
The decisive action taken by the Government since the current crisis broke has seen stability restored during 2009. And the latest indicators are consistent with our expectations of returning the economy to growth during the course of the year.
European Commission Spring Forecasts, published yesterday, project that Ireland’s GDP will grow next year at 3% - double the euro area average.
Consumer sentiment in March is back to levels last seen in early 2008. The volume of retail sales (i.e. excluding price effects) in February is up 3% on a year previously, which is the first time in over two years that this figure has not been negative.
The Purchasing Managers’ Index (PMI) for the manufacturing sector reached its highest level in March since September, 2007. The April figures released earlier this week show further improvement, suggesting that activity is expanding again. The Purchasing Managers' Index for services sector activity in April was released yesterday and has now also turned positive, pointing to the first expansion in services activities in 27 months.
The Exchequer Returns published yesterday show that tax returns are on target for the period to end-April, and they will strengthen as the economy returns to growth. This is further reason for confidence in the Government's fiscal strategy
The labour market—where the recession has hit hardest—also looks like it is beginning to stabilize since the end of last year, including signs of seasonally adjusted gains returning in a number of sectors.
Recovery will be supported by the significant adjustment in relative labour costs that is also underway. The Central Bank’s expectation is that an estimated 4% decrease in unit labour cost last year will be followed by a further decrease of over 8% between this year and next.
This is against the backdrop of an expected increase in unit labour costs of an average 1.2% per annum between 2009 and 2011 in the rest of the euro area, and an average 1.7% per annum in the UK. This is a trajectory which would clearly see significant recovery of international competitiveness.
None of this is to underestimate the scale of the challenges that lie ahead – or the need to deliver on the plan the Commission have endorsed for returning the deficit below 3% by 2014.
But it is clear that international confidence has been restored by the difficult decisions we have already taken.
We must ensure that further recovery in domestic confidence now follows. That is why I see events such as today’s as important. Because further recovery in domestic confidence can build only from a clear and balanced view of current circumstances: from knowing that we are on the right path; and that the latest assessments—from the ESRI, the Central Bank, and others—support our view on this.
Despite fiscal pressures, the 2010 capital investment programme remains at about 5% of GNP—around twice the recent EU average.
Priority has also been given to protecting the real progress made in developing world-class research capacity—now supporting half of new IDA investments, and contributing in no small way to the resilience of our export performance.
Further confidence should be drawn from the recent banking sector announcements by Minister Lenihan. These mark an important turning point in stabilizing the sector, and include of course the lending targets set for SMEs, and the independent Credit Review Process to be led by John Trethowan.
Today’s audience will need no reminder of the crucial importance of a renewed banking sector—one that is fit for purpose, and meeting again the needs of the real economy.
We now have in place a more stringent regulatory system overseen by the Central Bank Governor, Professor Patrick Honohan, and the Financial Regulator, Matthew Elderfield. The new fully integrated structures replacing the Central Bank and Financial Services Authority of Ireland will be established in law by the Central Bank Reform Bill as soon as possible.
The new Central Bank will be responsible for maintaining the stability of the financial system, the effective regulation of financial institutions and markets and safeguarding the interests of consumers and investors.
The Bill enhances accountability of the Central Bank and oversight by the Oireachtas of its regulatory performance. We have also included a provision that gives the Bank new powers to ensure the fitness and probity of nominees to key positions within financial institutions.
This key provision will, from the outset, reinforce the tone of the new regulatory regime. It will help to restore confidence in the management of the banks here at home, and in the international markets.
I have emphasised the actions which we are taking and the significant indications that these are the appropriate measures, as evident in the signs of growing confidence at home and abroad. . The decisions we have taken are difficult, even unpalatable in many cases. There are more difficult decisions ahead. But I am convinced that they were necessary and are proving to be effective. We have sought to apply the burdens of adjustment fairly, and to encourage economic recovery and long-term prosperity, while dealing with the current crisis swiftly and credibly. As a small, open economy, we can observe clearly the price to be paid when confidence is lost by investors, lenders and the population itself. Loss of confidence can quickly be followed by loss of capacity to manage our own affairs.
My responsibility is to lead this country along the difficult path to recovery. I also have a responsibility to listen to those with a different view, to consider the criticisms and assess the case made by my opponents. I heed the views of respected authorities, at home and abroad. I consider carefully the experiences of other countries facing similar challenges. But at the end of the day, the Government's duty is to take the necessary decisions and to lead the country forward.
Our knowledge now about the irresponsible behaviour of people in financial institutions, the failures of our regulatory system and the importance of exposure to international financial markets, have pointed to the need for significant change in policy and practice. This is consistent with the experience of other jurisdictions, as well as the move to stronger and more effective financial regulation at European and global levels.
And it is important that we should understand fully what went wrong and how it went wrong. This is not just so that individuals can be held to account – as they will be – but also to ensure that we can be confident that a recurrence can be avoided. That is why the Government has initiated a comprehensive enquiry into the background to the current banking crisis, informed by a preliminary, detailed scoping exercise which is nearing completion.
There is a need for others, too, to consider their own role and contribution to the evolution of our current difficulties. Again, this comprehends both the egregious behaviour of individuals, and the policies and practices which were prevalent across groups and professions.
I would include your own profession in that context. The role of the accountancy profession has perhaps never been more important than at a time when so many of your client companies are reviewing their structures, their costs and their future plans.
And of course restoring confidence in the audit process is a further crucial factor in rebuilding confidence, and turning the corner.
The audit process is complex because true reform cannot simply be achieved by regulatory diktat. Our regulatory regime for auditors already fully complies with EU law and international best practice standards. However, we cannot ignore entirely the idea that fresh thinking may be needed to underpin confidence in the profession’s impartiality and independence.
Essentially, audits should be capable of alerting shareholders, investors and regulators to risks and problems arising. This may require a stretch beyond what has been traditionally and statutorily defined as constituting an audit. Indeed it may ultimately prove difficult to achieve in the form we might wish for in an ideal world.
But I think you’ll agree that defeatism is not the right place to start.
In the first instance, the auditing profession might examine and report on this issue, generating views that could become the basis for informed engagement with other stakeholders—including the corporate sector, the regulatory system and of course the policymaking community.
This is something that the auditing profession as a whole should consider setting in motion as a matter of urgency.
A very clear context for review along these lines is provided by implementation here of the Statutory Audits Directive, the consultations on the European Commission’s Recommendation on Audit Quality Assurance, as well as the planned publication in the autumn of a Green Paper on Audit Policy that was announced by Commissioner Barnier last week.
I have no doubt that deliberations of this kind will take place also in other Member States, and indeed in the world beyond the EU, meaning our thinking can be assisted by ideas that flow from discussions and debates in those locations.
For our part, the Government will take due account of the outcome of these reform discussions in our ongoing assessment and review of the regulatory regime for auditors.
I believe your emphasis here this afternoon is the right one.
We have been confronted with many difficult decisions. But our determination has been to ensure that they are the right decisions.
We are turning the corner. But we need to acknowledge that the outlook—the international outlook in particular—is not yet as secure as we might like. That is why we must keep a clear focus on those factors that are ours to control.
We are heading in the right direction. And that is the direction in which we must continue.
I wish you well in with your deliberations here today and tomorrow.
Go raibh míle maith agaibh.
ENDS