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Speech at the Financial Services Ireland Annual Members Dinner

 

Thank you Willie for your kind words of introduction and special thanks to you and everyone here for the warm welcome this evening.  I would like to begin by wishing you every success in your new role as Financial Services Ireland Chairman.  And can I also congratulate Aileen O'Donoghue on her important new assignment as Director.  I know that all of the team are very committed to developing financial services and I am glad to be here tonight to renew my personal support for your work.                 

I also wish Brian and the Board of IFSRA very well in their important and groundbreaking work to ensure that Ireland continues to have excellent standards of financial regulation and consumer protection.  My colleagues in government and I are very grateful to them for taking on this duty and they can count on our support in the years ahead.

All of us here agree about the importance of the financial services industry for this country.  It is the fastest growing area of the economy; it adds more than 5% to annual GDP; nearly €3.6 billion to the economy and now employs over 50,000 people.  That represents a 70% increase in jobs in the sector in less than 12 years.  And I think that those statistics remind us why we have both an interest, and a responsibility, to promote growth in the financial services sector as we develop our economy at the heart of Europe.  Tonight, I would like to take a few minutes of your time to speak briefly about some of the key challenges that lie ahead of us in that task.

Economy

Because financial services is a truly global industry, I know that this audience is especially conscious of the uncertain world economic situation at present.  Yes, there are some indications that a global economic recovery may be underway, yet the pace and extent remains uncertain.  If a recovery takes hold and there are no further setbacks, then it is reasonable to expect a pick-up in domestic activity in the not too distant future.  Meanwhile our economic performance, though slow compared to recent years, is significantly better than that of our EU partners.   

However, the reality is that general economic conditions are tighter now than they have been at any point in the last 5 years.  Therefore, it is important that realism should guide us all.  We have it in our own hands, to a large degree, to determine how the Irish economy will perform over the coming years.  If we make the right decisions about things that are within our control, we can be confident that the future for jobs and living standards will be bright.

In a short few weeks, I expect that negotiations on a new social partnership agreement will get underway.  In order to secure an agreed successful outcome, it will be imperative that expectations should keep in line with current economic realities.  That will be essential to sustaining and building competitiveness, thereby safeguarding the impressive progress of recent years - most notably, with regard to employment creation.

Progress

In speaking with colleagues over the last two days in Killarney, I could not help but be reminded of the scale of the positive change in the country since the years when I first became a TD. I am sure I am not the only one who remembers 1979, when there was an oil crisis, a post office strike and the break with sterling!  Or the difficult early 80's when there was a severe deterioration of national finances, and relentless rises in unemployment and emigration.  That was the background when I became Minster for Labour in 1987, which inspired our first partnership agreement.

We knew we had to try something to stop the slide.  Partnership agreements and sound financial management within an EU framework got us through. 

Intensive EU financial support was a catalyst in the fight against unemployment and it put investment into national development which readied us for economic lift-off in the 1990s.  We also tried a small, innovative idea:  an international financial services centre in North Dublin often against begrudgers. I wonder where are the critics and the naysayers now?

Ten years ago, I was Minister for Finance when we faced the tough challenge when sterling left the ERM setting off a European currency crisis.   Interest rates spiralled.  Mortgage costs rose sharply for householders.  There was real hardship for people and businesses.  We faced a difficult time then with our own devaluation and we came out the other side, all the stronger.  But how much better are we now with the euro firmly in place, and with low and stable interest rates.

I think it is worth looking back over those years because it shows that we have come through a lot to reach this phase of our development.  The foundations for building success looked a lot more fragile before.  Now our economic foundations are very strong as a Eurozone economy. 

And I can assure you that this Government has the resolve to meet any new challenges.  In the past we succeeded by prudent financial management, by being open to the global economy, by arguing our case and defending our interests in Europe.  That is the way we will succeed in meeting the new challenges ahead: certainly not by closing ourselves off, or by forgetting that we need to trade and stay competitive on world markets.

Nice Treaty

In the short term, the principal decision we have to make together is in the Referendum on the Treaty of Nice.  And political and economic realism is going to be vital on this issue too. 

The fact is, that membership of the EU has been vital to the success of our financial services industry. It has been as vital to the thousands of jobs there, as it has been to the progress we have made in the whole economy.  And I look forward to asking people to defend that progress and to secure those jobs by voting 'Yes' in the Nice Referendum.  

The IFSC is one of the clearest examples of the benefits of Ireland's engagement on the right terms with Europe and the world.   In fact, it is one of the greatest success stories of the Irish economy.  The most recent figures from the Central Bank show assets under administration for Irish domiciled funds of nearly €300 billion, while total assets administered out of Dublin stood at close to €500 billion.

This record clearly shows that after the ending of the IFSC 10% tax ring-fence, new businesses continue to build on the 11,000 jobs directly in the IFSC.  The social benefits to the north inner city have been very tangible also.  I am very pleased that IFSC companies have supported communities in their areas through the IFSC Trust.  EU support for the Dublin Docklands Development Authority has also been decisive.

I am also very pleased that IFSC jobs have spread out from the Dublin Central to other parts of the country, such as Galway, Wexford, Kilkenny, Cork and Mullingar.  People all around Ireland are benefiting from our success as a financial services centre. 

The decision we now face is whether we want to put any of that progress at risk?  Do we want to replace the old IFSC tax ring-fence with a cloud of doubt about Irelands place in Europe? 

You, along with the wider electorate, are the decision-makers on Nice.  Ask yourselves, has anyone given you one good economic reason to vote No?  You certainly will not get it from No campaigners who have muddled thinking about the euro and who are hostile to international business and investment in Ireland.

I will give you three practical reasons to vote Yes.

First, tax.  Let us remember that we replaced the IFSC 10% tax ring-fence with a country-wide low tax rate of 12½%.  This is essential for the IFSC.  It was at the Nice summit that my colleagues and I successfully defended our right to set the national corporation tax rate.  There are people who would like to undo that settlement.  And they would see a rejection by Ireland of the Nice Treaty as their opportunity to push for tax harmonisation again.  A Yes vote will secure Irelands position.  A Yes vote will also give the Irish Government a stronger mandate to defend the right of national governments to set corporation tax rates. 

Second, new markets.  The enlargement of the Union based on the Treaty offers great new opportunities to the financial services industry by opening up new markets.  We have never had such an opportunity before, starting where we are now as a prime financial centre, and the only English-speaking one, in the Euro-zone economy. 

We did not get to where we are now by being slow to take up opportunities and to get out there and market ourselves.  Now is not the time to stop as a market of 500 million people opens up.

Third, let us live up to the best of our traditions as a people by giving other nations a chance to develop their economies in peace and stability.  They see their best chance to develop themselves in the context of EU membership.  And if we do this one thing for them, I am sure it will open doors for us for a long time to come. 

I want to particularly welcome here tonight the 'IFSC for Yes' campaign which, along with those of IBEC and ICTU, present a broad-based and persuasive case for a Yes vote. 

Conclusion

Mr. Chairman, let me underline that this Government is firmly committed to continuing to work with industry to ensure that international financial services in Ireland continue to grow stronger.  I believe that we are well positioned to do just that.

As we look to that future, let us remember that a significant key to the development of the IFSC has been the close and continuing partnership between the industry and Government. 

In fact, the Clearing House Group and its sub-committees, which work closely with my Department, have been one of the earliest and most successful forms of public-private partnership!  We value that partnership and I thank all of you who have contributed to it.

I believe that it is a great foundation for our future work on the challenges ahead.  I would like to emphasise tonight my continuing personal commitment to working with the industry to meet those challenges.  

We have been awaiting the outcome of your own discussion on the establishment of representative arrangements that have the support of the industry and channel your collective expertise and insights. I think this is both important and urgent and we need to renew our efforts accordingly. Let us use this renewed partnership arrangement to work together to identify say, five key objectives to advance jobs and business for international financial services in Ireland.  

I believe that we can renew the energy and the commitment that created the IFSC in 1987 as we work to build a successful economy in an enlarged Europe. And I for one certainly look forward to getting on with that vital job.  

Thank you very much for your attention. Enjoy the rest of your evening.

ENDS