Mr. Colm McCarthy:

As the Chairman has pointed out, the Conservative Party is committed to holding an in or out referendum on EU membership, if it wins the general election on 7 May. The Conservative Party’s partner in Government, the Liberal Democrat Party, has not gone along with that and neither has the Labour Party. Unless the Conservatives win a clear majority on 7 May it is not certain that the referendum will go ahead. Mr. Cameron indicated on Sunday in a newspaper that he might hold the referendum in 2016. The original commitment had been for 2017. Whether this referendum happens depends on the result of the general election on 7 May. Recent opinion polls put the Conservative and Labour parties level in voter preferences. Each seems to have 32% or 33% support which means that neither would win an overall majority. Most of the political commentators say it will be a hung parliament with possibly another coalition Government or a minority Government. Possible coalitions could involve the Liberal Democrats who are in coalition with the Conservatives but could go into coalition with the Labour Party. The Scottish National Party, SNP, is expected to win a clatter of seats in Scotland. It is a first past the post, winner takes all electoral system. If the SNP gets even 40% of the vote in Scotland it could win almost all the seats and it looks as if that will happen.

Only a Conservative majority would lead automatically to a referendum on EU membership. Neither the Liberal Democrats nor the SNP favours a referendum but it is not inconceivable that they would agree to one as part of a coalition. That is pure speculation. The Labour Party is opposed to a referendum. If one pays attention to bookmakers' odds as a method of predicting the future, they will offer 4/1 or 5/1 against the Conservatives getting a majority and 10/1 against the Labour Party getting a majority, which shows that they expect a hung parliament. That of course could change.

There is no certainty that a referendum on UK membership of the EU will be held. If a referendum were to be held in 2017 or possibly sooner there is no certainty that it would result in a vote to leave the EU.

There is no certainty it would result in a vote to leave the EU. There are opinion polls hypothesising about a referendum and asking people how they would vote. Mr. Cameron is saying that he would renegotiate the terms of membership in respect of immigration and other matters. These hypothetical questions have been put to voters in opinion polls. If a victorious Conservative Party could achieve some concessions in pre-referendum negotiations with the EU partners and if it recommended staying in, the polls suggest the electorate might vote to stay in. A substantial number of people would vote to leave in any circumstances. The conditional question has been put on the basis of David Cameron negotiating a new arrangement and some concessions. When people are asked how they would vote if he recommended it, it is possible people would vote to stay in those circumstances.

Some members may remember a referendum on staying in or leaving held in 1975. The Labour Party was in government at the time and the Conservative Party was keener on Europe than the Labour Party at that time. It has reversed a bit now. The referendum resulted in a clear majority in favour of remaining in the European Union, or the Common Market as it was. A majority, it appears, would vote to stay in if the unspecified and hypothetical deal with the EU was recommended by the Conservative Party. That would presumably mean the deal is recommended by all of the UK political parties, with the exception of UKIP, which will recommend leaving the EU no matter what happens.

There is no certainty that the Conservative Party will win the election. If it does, there will be a referendum. If it does not win, or if there is a coalition, there still might be a referendum depending on the deal done and the coalition that is in place. The chances are there might be a referendum. If there is one, there is no certainty about the result. If some concessions are secured by the UK Prime Minister and the government recommends people vote to remain in it, it is entirely possible that there will be a referendum and that people will vote to remain in the EU.

I want to focus on the issues that this raises for us. A number of them are quite important. When Ireland joined the then EEC in 1973, Britain joined on the same day. Ireland has never been in membership of the European Union without the UK and the UK is still our biggest trading partner. If Britain were to leave and Ireland were to remain, Ireland would end up as the only Atlantic country, so to speak, in what would then be a continental Europe bloc. To most observers, it seems that Britain would draw closer to the US if it ends up outside the European Union. This could lead to pressure in British politics for an Atlantic trade deal between Britain and the US. The US is another important trading partner of ours, as well as being the principal source of foreign direct investment. That is not to say that we do not have a lot of trade with continental Europe, which we do and we have much more than we used to. However, Britain and the US remain big economic partners for Ireland.

If Britain was to vote to quit the EU in 2016 or 2017, which looks unlikely but is not a remote possibility and is not something we could say has zero chance of happening, there would be serious consequences for Ireland under a number of heads. It is worth reminding everybody that we never joined the EU until Britain did. We applied to join in the 1960s, Charles de Gaulle vetoed British membership and we promptly withdrew our membership application on that occasion. We have never been in the EU without the British. Under the terms of the Lisbon treaty, there is a provision for countries to leave the European Union. A British vote to quit would be followed by negotiations on the terms of departure.

There would be something almost like a treaty of departure for the United Kingdom in those circumstances.

Members should note these terms of departure would have been influenced by the pre-referendum negotiations that would have followed a Conservative victory in May. In this scenario, there will be two sets of negotiations. Let us pretend the Conservatives will win on 7 May, as that is the simplest situation. They will win by getting more than 325 seats and while it does not look like this will happen, let us pretend it has happened. There will then be a referendum, as the Conservatives will announce their intention to hold a referendum in one or two years' time or whatever. That government then will seek to renegotiate with its European partners certain terms of the United Kingdom's membership of the European Union and it is pretty clear what those terms would be. They would include Britain's budgetary contribution, about which people are unhappy, and various issues pertaining to immigration. As everyone is aware, there is completely free movement of labour and movement of people throughout the entire membership of the European Union and some people in Britain are not happy about that. There would be various other things like that. There also is a lot of resistance in the United Kingdom to what is seen as excessive European regulation and such like. There is a kind of eurosceptic opposition in the UK to the jurisdiction of the European Court of Justice and issues of that sort.

Consequently, the first thing that would happen following a Conservative victory would be an attempt by the government of the UK to negotiate various new terms under these various headings before the referendum. Depending on the outcome of those discussions, that government would recommend whether people should vote "Yes" or "No" in the referendum. The issues about which Ireland should be concerned will arise immediately after the election - if the Conservatives win and if there is to be a referendum - because whatever arrangement is arrived at prior to the referendum will condition the negotiations under the relevant article of the Lisbon treaty subsequently.

In view of this it is not the case that the Irish Government could wait until the referendum before it starts to take an interest in the matter. The terms of ultimate departure for the UK, if that is what happens, will have been influenced by the pre-referendum negotiations that would follow a Conservative victory in May or the election of a Conservative-led government that opted to hold a referendum. The Irish Government should insist from the outset on close involvement in these negotiations before the referendum. There can be little doubt but that a Tory victory in May would concentrate minds in Europe. I believe that many British demands would be met because nobody wants Britain to leave the EU. I rather suspect the leadership of the Conservative Party does not really want to do so either but has been forced into promising this referendum by the rise of the UK Independence Party, UKIP, and eurosceptic sentiment. Irish interests will be affected in both the pre-referendum and post-referendum discussions and the former are bound to influence the eventual divorce deal - if there is one - since the electorate's verdict will have been delivered on the terms put before it.

It appears to me there are three areas in which important issues will arise for Ireland. There may be others. The first is the free movement of people. Ireland is the only EU member state which shares a land frontier with the UK. Were this frontier to become the external border of the EU it could become difficult to maintain free movement without visas or passports. It is worth reminding oneself that Ireland has never faced - either pre-1922 or post-1922 - immigration or passport controls of any kind with the UK. Indeed, under the Government of Ireland Act, Irish citizens in the United Kingdom are called "non-foreign aliens". I used to live there and used to be very proud of being a non-foreign alien, whatever that is, but the impact in this regard is that there have been free movement of labour, free rights to reside and all the rest between Ireland and Britain. We were part of the UK until 1922 and the free movement arrangements, which are close enough to common citizenship, have prevailed ever since.

This reciprocal arrangement between Ireland and Britain goes beyond the free movement enshrined in the European treaties and predates our membership of the EU. If an external border of the EU were to exist between Dundalk and Newry, people would need to be very careful to negotiate arrangements which would permit our current situation to survive, if it is possible. The current arrangement is a more intimate relationship even than the Schengen Agreement between continental EU countries. It is clear that immigration is a political issue in the UK, including immigration from countries already in the EU. The issue of free movement will feature in the pre-referendum negotiations between a victorious Conservative Party, if that is what happens, and their European partners. It is a very important issue for Ireland.

The second issue is the free movement of goods. Ireland-UK trade is free of tariffs, quotas and customs inspections and delays. Britain remains Ireland's key trading partner, particularly in labour-intensive sectors, and Ireland has a special interest in the details of whatever free-trade arrangements the UK might negotiate were it to depart the EU. The post-referendum negotiations under the relevant article of the Lisbon treaty would be about such matters and the UK would try to negotiate a free-trade area deal with Europe. A number of non-EU countries, such as Switzerland and Norway, have detailed free-trade arrangements with the EU. We had a free-trade agreement with the UK in 1965, before we joined the EU. We have completely free trade between Ireland and the UK. There are no tariffs or quotas and, by and large, we have common standards and specifications. The Irish economy is more integrated with the UK economy than those of the continental European countries. It is also a matter of geography. Ireland, therefore, would have a very special interest whatever free-trade arrangements the UK might negotiate.

Free trade in agricultural products could be difficult to maintain with Britain outside the EU. The British have never taken to the CAP. They think it is too costly and constantly grumble about it. Agriculture would be a significant element of the post-referendum negotiations if exit from the EU is chosen. There could be issues concerning GM foods, to which opposition in the UK is weaker than in continental Europe and which are accepted in the USA. This is one of the bones of contention in the current negotiations on a free-trade agreement between Europe and the US. If the UK were to leave the EU, it might regard the ability to depart the CAP as a bonus and seek to negotiate arrangements on agricultural trade that might not suit Ireland.

Free trade in services is another issue, and for the UK it means financial services. Despite the UK's non-membership of the eurozone, the City of London remains Europe's financial capital. London and New York are the two great financial centres of the world.

It is still the case that most wholesale financial markets are built around London. This status is likely to come under threat should Britain depart the EU. Both the French and the Germans have always been jealous of London's status as the financial capital in this part of the world and there have been attempts to wrest away some of the financial business from London to Paris and Frankfurt. It is not an accident that the European Central Bank is headquartered in Frankfurt. Germany has always wanted to build that city as a financial centre, while the French have wanted to do the same with Paris. There are fears in the City of London that if Britain quits the European Union, it will be used as an excuse to screw the city's competitive position as a financial centre through various European regulatory oversight mechanisms. Many people in the City are keen on Britain staying in the European Union for that reason.

Members may ask what that has to do with us. The IFSC is partly a satellite of the London financial market, although many other activities are independent of London. Ireland has persuaded people to locate satellite activities here for operations based in London. Most people in the industry would agree that if the City of London gets screwed, it will not be good news for the IFSC.

At this stage it seems unlikely that the Conservatives will win the election. One can get odds of 4/1 or 5/1 against that proposition in the bookies. However, the election is nearly three months away and who knows what will happen in the interim? Even if the Conservatives win and hold a referendum, voters might decide to stay in the EU. Overall, a British exit from the EU is not the most likely outcome but stranger things have happened.

The Irish authorities should seek to get involved in pre-referendum discussions on the deal the UK might be offered, as well as in post-referendum negotiations should Britain opt to depart from the EU. Ireland has more at stake in this matter than any other EU member state.