Category Archives: Blog

Brexit Breakthrough- a glimpse at the future shape of EU UK relations ?

It almost feels too good to be true. A deal to conclude phase 1 of the Brexit negotiations fell apart at the start of the week because north/south assurances were not matched by clarity on the east/west relationship. At one stage during the week, it looked like no deal would be possible, such were the questions and concerns about the workings of “regulatory alignment” with the EU.

Four days later, a different approach to negotiations was taken. Instead of working out how to avoid the return to a hard border, the British government crucially focused on the what. In effect, they signed up to a guarantee that committed to no hard border between Northern Ireland and Republic of Ireland and no hard border between the island of Ireland and Great Britain. Critically, these guarantees apply whether there is a deal on Brexit or not.

The detail of how all this can be delivered remains to be worked out but this set of guarantees now binds Theresa May to a specific set of outcomes. In effect, she leaves herself with little wriggle room in phase 2 of the negotiations. In order to ensure no hard border north/south and east/west, it seems that the British government will have to sign up to a free trade agreement with no customs tariffs and a common set of regulatory standards with the European Union. Anything less will mean a return to a hard border.

The significance of this deal in the context of the Brexit negotiations is enormous. Over the past nine months, there has been a simple incompatibility in British and Unionist thinking about the implications of Brexit. It is not possible to “make our own rules”, “control migration and our borders” and exit the Single European Market and EU Customs Union while retaining a frictionless border. Shared membership of the European Union meant that the Republic of Ireland and the Great Britain and Northern Ireland had to enforce the same EU rules. The beauty of that joint membership was that it allowed the physical border to disappear through the dismantlement of tariffs and different product regulatory regimes, while at the same time giving political cover to Northern Unionists.

To a certain extent, the guarantees of December 8th deal resolves the incompatible issues despite British Government spin that they can still leave the customs union and the single market. The text of the agreement goes beyond a guarantee to uphold the Good Friday agreement and by extension the sectors singled out for north/south cooperation and expresses a commitment to the all-island economy. Honouring this commitment will depend on the free movement of labour and capital, not just goods and services. However, the caveat for this phase of the negotiations to exit the EU is that nothing is agreed until everything is agreed.

What now remains to be addressed is the how and there are plenty of questions. The opposite of a hard border is not necessarily a frictionless border. There is plenty of negotiating to be done yet.

 

Real concerns about future of post office services in Phibsborough

Statement by Marie Sherlock, Local Area Representative, Labour Party, Dublin Central

Last Wednesday, November 1st, staff at Phibsborough post office were notified that the post office would be closed down.

This is a really worrying development as the post office serves a large population and is a critical resource for pensioners, social welfare recipients, those who need to purchase bin tags and the many residents who depend on the services within the post office.

It is essential that the post office offering a comprehensive range of An Post services remains in the heart of Phibsborough.

I understand there is a commitment to contract out the post office service to a private provider but there is no guarantee as to the range of services that will be offered in future and no clarity as to where this will be located.

I have written to An Post and the Minister for Communications to relay my concerns and to object to any diminution of post office services for Phibsborough.

I have also sought clarification on a number of key issues; the timing of the closure, the intended use of the current post office building, the intended location of the new post office service, the volume of services to be provided in the new post office and how that will compare with existing services and the staffing of the new service.

No change must take place until we have guarantees that there will no diminution of existing services in the future.

Strong unions and gender neutral parental policies critical to closing the gender pay gap

November 3rd marked EU Equal Pay Day. Women in Ireland are, on average, paid 13.9% less per hour than men. The gap is even more stark when comparing annual average earnings- 36.8%.

Part time work and a high share of females in low paid occupations and sectors is part of the cause, but there are other factors at play. I wrote an article in the Irish Examiner today discussing these issues and setting out specific recommendations for closing the gap. Link here.

Budget 2018- Exposing the shallowness of the current Government

This article appeared in the October, 2017 edition of Liberty.

For all the talk about providing for future generations and prudence in the face of Brexit and other risks, Budget 2018 was about “keeping the recovery going”- a crude stimulus that saw small amounts given to most people at the expense of bringing about real change in those areas that need it the most. Budget Day is the main opportunity in the legislative calendar for Government to signal how it intends to tackle the major problems of the day. Faced with a housing emergency and an interminable funding crisis in health, by and large, the FG, FF and Independent coalition opted to do more of the same.

With a budget of just over €1.2bn, Budget 2018 brought the prospect of real progress in health, housing and childcare no closer- in the main, it was a case of more sticking tape to temporarily alleviate ongoing problems. Despite all the hype, housing received less than 10% of new expenditure funding available in the Budget. Almost all of the €610m increase in Housing expenditure had already been provided for and pre-announced. In Health, there was no mention of the cross party Slaintecare 10 year plan and funding to outsource the waiting list backlog to the National Treatment purchase fund was more than doubled. The Childcare sector is in the midst of a recruitment and retention crisis due to unsustainably low pay and yet capitation barely increased by 7%.

At best, Budget 2018 reflected a big failure to understand the needs of the Irish economy and society at this point in time.  At worst, it showed up the hands off, non interventionist instincts of Fine Gael and their acolytes. Minor concerns about the economy overheating and the level of national debt were trumped up to justify smaller than necessarily investment into infrastructure and housing. There was window dressing with regard to fiscal prudence by shifting €1.5bn out of the potentially productive Irish Strategic Infrastructure Fund into the Rainy Day Fund. Claims that Ireland’s public investment will reach international norms by 2019 rang hollow when put in the context of the catch up that is required.

In effect, the role of the capital expenditure budget is entirely different to the current expenditure budget. It must meet pent up demand; significant in 2018 given that capital funding was filleted to about less than half of boomtime spending by 2012. It must be sufficient to maintain existing stock; the Fiscal Advisory Council (June, 2017) estimate that about half of what is planned between now and 2021 will go to covering depreciation and thirdly, it must meet future demands. The Irish population is expected to grow by 1.1m people over the next two decades. Despite all this, the capital budget is expected to grow by less than half that of the current budget in 2018.

This Budget was supposed to be about improving people’s living standards. Yet Government committed over a fifth of its additional resources to ensuring that a single person on €20,000 would get an extra €1 per week. Those who are self employed and on double average earnings will get 10 times that per week.

Ireland’s income tax system does have a problem in terms of fairness and simplicity. Amongst OECD and EU countries, higher income tax rates are typically paid by higher income earners. Wage growth has meant that those on average earnings in Ireland have experienced a fiscal drag- tax thresholds have not moved in line with wages. What gets lost in the debate is that Ireland currently has the lowest tax wedge for a worker on average earnings amongst the 21 EU countries in the OECD- it is the gap between what the employer pays out (pay & PRSI) and what employees receive in terms of take home pay. This matters in the context of “giving something” back to workers.  Living standards cannot be solely defined in terms of what is in people’s pockets- if the Government are really interested in prudent management of the public finances, then allocative efficiency must be a priority and that means targeting resources at public services, not people’s pockets.

 

Budget 2018- “Keep the recovery going”

Most of you will recall the FG pre election slogan in 2016- “Keep the recovery going”. Budget 2018 was precisely about just that- a crude stimulus measure where most people got less than 1% extra per year in take home pay. Using the pretext of “prudent economic management” and misleading concern about the level of national debt, the Government have opted to devote much less resources to overcome the housing crisis and tackling the interminable funding and management issue in health, than it can actually afford. On Budget Day, I debated the key issues on Today with Sean O’ Rourke. You can listen here

More Budget analysis to follow next week.

Key choices in the wake of the Brexit Referendum result

In July 2016, I spoke at the Magill Summer School about the key choices facing Government and Irish business in the wake of the referendum result.

The key question was whether we should retreat into a defensive mode and cautiously pare back investment and expansion plans or do we plan to make our economy more resilient. The speech covered the major challenges facing the Irish economy in terms of Brexit itself, fiscal policy and wage progression.

Link to speech is here.

Structural Reforms Driving the Irish economy?

The Irish economy has expanded by beyond what many of us could have imagined back in the depths of the crash in 2009. In 2010, the European Commission prescribed a number of financial, product market and labour market reforms to downward adjust prices and wages and move the country onto a more sustainable growth path.

In April 2016, I spoke alongside three other Irish economists and senior civil servants about the Irish growth experience ( Prof. John McHale IFAC, John McCarthy Dept of Finance and John McKeon, Dept Social Protection) along with  colleagues from Spain, Portugal and Latvia.

My conclusion? The Irish recovery experience had very little to do with the few structural reforms undertaken and was mainly determined by a number of key external factors. However, the long overdue institutional reforms in the social welfare should have a positive impact on long term unemployment rates into the medium term.

Link to presentation is here. 2016 April 14th European Commission Seminar- Role of Structural Growth Policies