It is a real pleasure for me to be here today and I thank the Institute’s Chairman, John Casey, for the invitation to address this audience of esteemed members of the Chartered Accountants profession.
This, generally, is a very good time for the accountancy profession in Ireland. The growth forecast for our economy is positive and we have many reasons to be optimistic for the future. For both this year and next, it is estimated that real GDP will grow by at least 5%. Our inflation rate at 2.1% is at the Eurozone and EU average. The public finances are in a healthy state.
Over a few short years – indeed since 1997 – Ireland has been completely transformed. We are now one of the wealthiest economies in the EU. Then, our living standards, as measured in terms of GDP per capita, were significantly below the EU average; now they are 23% above the EU15 average, putting Ireland among the top four countries in the world.
Naturally, GDP growth is not an end in itself however. As I said at the recent IMI Conference, economic growth and social progress go hand in hand. I believe that economic success is best measured by a country’s ability to create and sustain employment and opportunities for its people. To this end, I regard our record on job creation as ranking amongst the most significant of this Government’s policy achievements.
In providing a policy framework that promotes strong employment growth, the Government has transformed the prospects for our younger generation. Employment grew by almost 3% last year – equivalent to more than 54,000 new jobs – the highest annual increase since 2001. We have also the lowest unemployment rate in the EU - 4.3% in March - which is half the EU average. In other words, we have virtually full employment.
Our young people today can secure quality employment with relative ease and we have seen an end to forced outward migration. This, together with an increase in the minimum wage and incentives provided by low taxes, results in a confident workforce that is positive in its outlook.
I affirm here today that the Government will continue to build on the economic progress achieved since 1997.
Infrastructure
One such area where we will continue to build on our progress to date is our national infrastructure - an essential component for sustainable economic growth over the years ahead. The ten-year transport investment envelope announced in the Budget will set out in detail, road and public transport developments that will be delivered over the next ten years. It will present an achievable and pragmatic vision of how Ireland’s transport system will look over the years ahead. Once published, I believe that you will share my excitement and enthusiasm about the ambitious and transformational nature of the plan.
An indication of the scale of investment involved can be garnered from the current five-year transport envelope. Covering the 2005-2009 period, it stands at a massive €10.2 billion. That, of itself, will elevate our infrastructure base onto a much-needed new plane of development.
Social Partnership
Such large-scale investment is vital from a competitiveness perspective. So too is our cost base. Overall, Ireland must compete, in the short to medium term at least, on the basis of cost competitiveness, including wage costs. The best way to protect our living standards is through setting wage growth at a sensible and affordable level. That will be important for the creation and maintenance of employment over the years ahead. It will set a key context for the Government’s position in the negotiations on a successor to the current social partnership agreement.
Jobs
The fall in the value of the dollar over the past couple of years has undoubtedly had an impact on the competitiveness of Irish exports in the US. In particular, indigenous companies which have relatively few dollar-denominated imports have felt the squeeze. Companies which have significant inputs denominated in dollars have been able to offset the impact on exports to some extent.
It is worth remembering, however, that in this period the US has become Ireland’s largest single export market. Last year, the US took 20% of Irish exports, amounting to €16.5 billion. The Minister for Enterprise, Trade and Employment, Micheál Martin, recently led a trade mission to the US during which a number of very significant contracts were signed by indigenous Irish companies, which shows that Irish companies are continuing to win business in the States.
For those companies experiencing difficulties because of the exchange rate, assistance can be provided in two ways. First of all, with advice on forward planning for foreign exchange needs, the impact of currency fluctuations can be minimised (although not removed altogether). Secondly, improved productivity can assist companies to remain competitive. Enterprise Ireland’s new strategy, launched yesterday, includes specific commitments to helping companies to improve productivity.
Challenges currently facing the accountancy profession
I realise that an issue of particular interest to the accountancy profession is the International Financial Reporting Standards or IFRS. As and from the first of January this year, all EU listed companies have had to conform to these standards. For many companies, this shift to a global corporate reporting language has raised many challenges.
The trend towards globalisation in recent years has been rapid. Ireland, as a small open economy, remains highly dependent on foreign direct investment. One feature that has made this country so attractive to date as a location of choice has been our willingness and ability to comply with international norms. Ireland’s acceptance of a globally recognised accounting framework will no doubt contribute towards maintaining our appeal as a location for further investment.
There is effort involved in implementing these changes, both for companies and for the accounting profession. I think it will be well repaid however.
The establishment of the Irish Auditing and Accounting Supervisory Authority (IASSA) marks another significant recent development. In summary, as many of you already know, this new body, which is already established on an interim basis, will take over certain functions relating to the granting of recognition to bodies of accountants under the Companies Act. A Draft Work Programme, a copy of which I understand has been sent to accountancy bodies, has recently been submitted to the Minister for Trade and Commerce, Michael Ahern. This will provide for the establishment of the IAASA on a statutory basis.
I know that negotiations on the submission are currently in progress with the Department of Enterprise, Trade and Employment and the Department of Finance. The Government is committed to the formal establishment of the IAASA as soon as possible and we hope that the remaining issues can be speedily resolved, so that the body can become fully operational without further delay.
Regulation
I understand the topic of regulation is one that has been covered by some of the more recent speakers at these lunches. My own Department plays an important role in this area.
As many of you here will be aware, the Government is working to progress the Better Regulation agenda and to ensure that regulations are not creating unnecessary complexities or burdens for business. Where Government does regulate, we are aiming to strike the right balance and achieve an outcome that does not negatively impact on competitiveness.
Regulation is a big issue, both for Government and business, and we all need to work together if we want to maintain the relatively light regulatory environment that has to date been such a source of competitive advantage to Ireland. To do this, we need not just innovative, high quality regulation but also ethical behaviour in our professions and compliance with necessary rules and regulations.
An issue that I know is of interest to you, is the recent announcement I made regarding the referral of the proposed obligations for the Directors’ Statement of Compliance to the Company Law Review Group for consideration. Obviously, the Government remains of the view that company Directors should be aware of what is going on within their companies. Effective business requires effective leadership and I do not think any Director would think it is too much to ask that they have an understanding of what is going on around them.
That said, I understand that the introduction of the Director’s compliance statement has led to concerns regarding the impact this requirement would have in terms of adding to administrative burdens.
I have accordingly asked for a Regulatory Impact Analysis of the provisions to be carried out. This, and the referral of the proposal by Minister of State Michael Ahern to the CLRG are intended to provide all of us with a full understanding of the costs and benefits that will arise from these provisions. They will enable us to see where the correct balance lies. The CLRG have been asked to report back by the end of July since it is clearly in everyone’s best interests to have this matter resolved quickly.
I am aware that a wide range of groups are concerned about this issue in relation to both the breadth of the requirements in terms of the areas of law, employment, environment, Health and Safety etc., which are covered, and the thresholds that trigger the obligation to comply.
However, as I mentioned previously, I think there is some confusion in the debate on this topic as to what it is Directors are actually being asked to certify. They are certifying that they have a system in place in their firms to underpin compliance and detect non-compliance, rather than guaranteeing absolute compliance with all areas of all laws.
We are determined to ensure the highest standards of governance in business. We will not go back to the type of practices that gave rise to the PAC Dirt Inquiry and which led to this legislation. Our aim now must be to achieve our original intention of ensuring that Directors accept their proper responsibilities, but I appreciate that it may be possible to achieve this more deftly.
As professional accountants, you are keenly aware of the standards of practice that you must reach and maintain. You know that you have civic responsibilities and that professional ethics are not just about ticking a few boxes. They are about the balance between a legitimate economic motivation and the need to fulfil your obligations to shareholders, consumers, citizens, and to society as a whole.
Conclusion
As I have outlined today therefore, this is generally a very positive and forward-looking time for the accountancy profession in Ireland. Many key developments are taking place. Many challenges have had to be addressed over a relatively short period of time, but I am confident that, as an organisation and as individual accountants, you are well placed to deal with those challenges.
As the largest district society of the Institute of Chartered Accountants in Ireland, the Leinster Society of Chartered Accountants plays an important role in ensuring the highest standards of professionalism and integrity within the accounting profession in this country. I have no doubt that you will continue that good work over the years to come. Furthermore, I can assure you that the Government is committed to working with you at every step along the way.
Finally John, I understand that that your term of office as Chairman of the Society is shortly coming to an end. I wish you the very best for the future.
Thank you for you attention.
ENDS