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Speech by An Taoiseach Leo Varadkar T.D., European Financial Forum, Dublin Castle Wednesday, 31st January 2018

 

Opening

Minister, distinguished guests, ladies and gentlemen, you are very welcome to Dublin Castle for the Irish Government's Third European Financial Forum. I would especially like to welcome those of you who have travelled from overseas to be with us today.

And, I am delighted that the European Financial Forum has become such a significant event in the international financial services calendar. We hope to expand it and develop it in the years ahead.

In particular, I want to acknowledge the work of Minister Michael D’Arcy in planning this event, and as you know we’ve been supported by the Enterprise Agencies and the Financial Times.

I know that today's event will explore themes like technological disruption and diversity as well as trends in the European and Irish financial systems.

As you know, Ireland is one of the most globalised and most open economies in the world. So, more than most, we need to make sure we are up-to-date with emerging economic, social and technological developments.

Last week, I had an opportunity to spend some time in Davos and discuss the global outlook with various political and business leaders. Many of the ideas and challenges we identified there are incorporated into today's programme.

 

Ireland's economy

From hearing about the challenges that other countries face, I have a renewed sense of confidence about how we are facing our own. We have a vision of an Ireland that is ambitious and outward-looking, providing opportunities for all our citizens and all parts of our country. We are confident we can realise them.

Our confidence comes from the fact that we have developed our economic policy and five pillars for a successful economy.

 

These pillars are:

  1. Keeping the economy and public finances in particular on a sound footing. Last year is the first time in 10 years we recorded a budget surplus. We now have a budget that is in broad balance and we will continue that in the years ahead.

We are also paying down our debt, both public debt is falling and private household debt is falling aswell.

We have established a rainy day fund, putting aside some of the surplus, so that we have a fund we can dip into, if we need to, should if we face an external or asymmetric shock into the future

We’re preparing for challenges such as a chaotic, or unplanned, or hard Brexit, in the unlikely event that that should happen.

 

  1. The second is developing an ambitious programme for investment in infrastructure; roads, rail, hospitals, schools, universities, airports, energy and water among other things. So, we can remove bottlenecks that exist in our economy & also build up our society.

In the next couple of weeks, we will publish a 10 year capital investment plan, it will over 100bn in investment over 10 years which means that between now and 2021 we will go from a country that spends comparatively small amounts on infrastcuture to one of the highest spender on infra by 2021, comprising about 10% of all Gov spending. That is something we need, because unlike other European countries, we are very young, our pop is expanding and we’ve only been a wealthy country for 20 or 30 years whereas other countries had 100 years to build metros and motorways, we did not and we need to catch up.

 

  1. The third pillar is raising living standards in a sustainable way for all our citizens. That means real pay rises, but pay rises that are sustainable; an average pay growth in our economy at the moment is in the region of 2-3%.

We’re also reducing income taxes, reducing USC and improving tax credits for the self-employed, for home carers and for others. We are very aware as a Gov the extent to which our high marginal income tax rate is out of line with

that of other countries and people hit that high marginal in tax rate too soon. So we’re going to change that and in the coming years ensure that fewer people pay less of their income at that high tax rate. And you’ll also be aware of the change in the tax treatment of share options, which we are starting this year, allowing people to be taxed under capital gains when it comes to share options, rather than income tax.

We’re also working on reducing the cost of accessing services – because on one side is the money coming into your pocket and on the other side is money going out. So we’re reducing things like prescription charges for people who need medicines; we’ve introduced free pre-school for two years for people who have young children; we’ve introduced childcare subsidies without a means test for everyone who has  kids between the ages of 6 months and 3 years; introducing new treatment benefits; and we are also working very hard, and Minister D’Arcy is working on this, to reduce the cost of insurance and we are seeing this year premiums are falling in motor insurance and health insurance which is very welcome and we want it to happen in other sectors.

 

  1. The fourth is achieving full employment and, more than that, making sure that people have good jobs that pay the bills, with improved employment rights, and access to a pension plan for everyone.

Those of us that are public servant, have good pensions because we are forced to pay into them from the day we start, so even if you start at 22 or 23 you are paying in. Unfortunately in our private sector two thirds of the people have no pension provision at all beyond the state pension and that needs to change. We have a plan to introduce auto-enrollment with a soft opt out, similar to what’s been done in other countries and to do that between now and 2021.

 

  1. Fifth is taking our place among the nations of the world. Staying a committed member of the European Union, and also being very engaged globally. Supporting multi-lateralism, being a contributing member of UN, signing up to the climate change protocol, sending our peace keepers all over the world, and doubling our global footprint between now and 2025 – new embassies, bigger diplomatic missions overseas, increasing budgets of IDA, Enterprise Ireland, Tourism Ireland and Bord Bia, and our cultural offering around the world. Just to give you a small example of that, this year Ireland will open 5 new mission around the world – a fulltime consulate for the first time in Mumbai in India; a permanent presence in Vancouver, Western Canada; new embassies in Santiago, Chile, and Bogota, Columbia, a new embassy in Amman to serve most of the Middle East, and also for the first time a diplomatic mission in New Zealand, and we intend to do something like that every year for next number of years.

And we also have a very dynamic aviation policy, which is something that is close to my heart as a former transport Minister. We’re seeing increases in capacity at all airports, particularly Dublin and Shannon. When you think back 5 years ago, there were no direct flights from Ireland to the west coast of the United State and now we have loads – San Francisco, 2 flights to LA, Seattle and Vancouver. We now have direct access to Africa, and from this summer we’ll have direct access to Asia, through Hong Kong, and we’re working on Beijing and Shanghai aswell.

 

Brexit and International Developments

So while I believe that we are now planning well for an interesting and ambitious future, our journey, as is always the case for a small country, may be shaped by forces that are beyond our control.

Brexit and a broader international shift in attitudes to trade, tax and globalisation internationally will impact on our economic future to an unknown extent.

Brexit presents major challenges for the EU, the UK, for Ireland, and for all of you in the Financial Services sector.

The great British playwright William Shakespeare famously said “all the world’s a stage and all the men and women merely players”

Our great Irish playwright, Sean O’Casey, had a slightly different take on that, she said ‘All the world’s a stage and most of us are desperately unrehearsed’. When it comes to Brexit we will not forget our lines. We have been preparing since before the referendum and we will not be caught unprepared.   

So even though we do not yet know the shape of Brexit, we have already put in place a €300m Brexit Loan Fund, easier access to credit for business to prepare and help businesses prepare for any changes that might come down the line as a result of Brexit.

We are also reviewing our Medium Term Enterprise Strategy - Enterprise 2025- to ensure our enterprise policies are fit for purpose in the context of Brexit and other emerging global developments.

We are reforming our tax laws working with the OECD to close loopholes like the Double Irish, statelessness and to tax IP fairly. Country by country reporting begins this year.

We will not, however, change our 12.5% CPT rate. Not going up or down. 4 main xx. Policy certainty.

 

IFS

I know of course there are particular issues and concerns for the international financial services sector arising from Brexit.

During my meetings with leaders from your sector the issue of transitional arrangements is regularly raised.

Ireland has consistently pushed for such arrangements, which are hugely important in giving certainty to individuals and businesses.  It is in everyone's interest to avoid any gaps, between when the UK leaves the EU, and when a future relationship agreement enters into force.   There will be no cliff edge effect.

Negotiations on a transition period have been prioritised in phase two and work is already underway to agree these arrangements.

More broadly, the Irish Government's International Financial Services Strategy IFS 2020 provides a strong framework to deal with the challenges and opportunities arising from Brexit for the sector here in Ireland.

Following the withdrawal of the UK from the European Union, we will continue to offer multinational companies a unique gateway into the European Union and its single market. English-speaking, in the Eurozone and pro-enterprise with a talented and growing pool of skilled multi-lingual workers.

These strengths are already recognised globally.  Eight of the top ten global aircraft leasing firms are located here with over 60% of the world’s leased commercial aircraft owned or managed from Ireland.

Of the top 20 banks in the world 17 have bases in Ireland.  

A number of leading financial services companies have already chosen Ireland as their preferred location for Brexit-related activities including JP Morgan, Bank of America, Barclays, XL Catlin, Standard and Poor’s, and Legal and General.

Ireland is now the EU’s 4th largest exporter of financial services. 

You will be hearing shortly from Philip Lane, and he will, I'm sure, emphasise the Central Bank's commitment to high quality and effective financial regulation alongside effective communication and timely decision-making.

Likewise, as a Government, we will continue our strong track record in responding to business needs including through our quarterly engagement with the IFS Industry advisory group chaired by Minister D'Arcy.

 

As you know, we as a government are strongly supportive of the completion of the Single Market and the digital Single Market.

We believe in more free trade agreements with third countries, and in completing monetary union.

We are strong advocates for a banking union which can protect citizens’ savings on a pan-European basis and reduce the exposure of individual member states.

And we believe strongly in a capital markets union which will provide the building blocks for an integrated capital market across the continent.

 

Conclusion

Geographically on the periphery of Europe, Ireland is at the heart of Europe, an island at the centre of the world.  We believe that we are perfectly placed to take a leading role on debates within Europe and further afield, and we have a new confidence about our place among the nations of the world.

Your presence here today reminds me of how far Ireland has come in a short time, and how much potential we have to go even further.

I hope that you will be encouraged by what Ireland has to offer as a location for further investment in these changing times.

And I want to assure you that the Irish Government is very keen to do whatever we can to win more investment in financial services and to keep you here, if you’re here already.

There is a centuries old Irish piece of wisdom that says, ‘Bíonn siúlach scéalach’. I suppose it means literally that ‘travellers have tales to tell’, but it is really about the wisdom that comes from bringing together experts from different places.

There is such a collection of expertise at this forum, and as Taoiseach I thank you for being here and I wish you a stimulating and enjoyable day.