Professor Alan Matthews:

Senator Lombard and Deputy Penrose raised the question of the budget gap, so I will make a brief comment on that. I estimate the figure for the net contribution per annum to be €10 billion to €11 billion. It has varied a little over the last few years because there have been revisions in national accounts and so forth. As a percentage of the expenditure in the remaining 27 member states, which is approximately €138 billion, it is not quite as big as 18%. It is 7% or 8%. One of the things about other member states making up that gap is that it would not be proportional. In other words, each member state would not be asked to increase its net contribution by 7% or 8%. Due to the complexities surrounding the British rebate, four member states get a rebate on having to pay for the British rebate. In other words, they do not pay as much of that rebate. If the British rebate goes, these countries will lose that financial advantage. The four countries concerned, Germany, Netherlands, Sweden and Austria, would be asked to pay possibly up to 15% more into the budget. I noted with interest last week that the German state secretary in the Ministry of Finance, Mr. Spahn, said there was no automatic requirement or expectation that the existing member states would make up the gap in the budget.

There are some ways in which the gap could be filled, although I am not suggesting that Ireland should look for these. However, if tariffs were re-introduced on trade between the EU and the UK, for example, that tariff revenue would be an additional source of revenue to the EU budget and would compensate, to some extent, for some of the loss. I am not suggesting that we should look to re-impose tariffs, quite the opposite, but that could be the way to secure additional budget revenue. The Prime Minister was quite vehement that she did not want to continue with what she called vast transfers into the EU budget in the future, but she did not rule out some payments into the EU budget. In most cases, these are payments for which the UK would get a quid proquo. They would be payments into the Horizon 2020 programme or the Erasmus student exchange programme where the UK would expect to get money back. In other words, it is not a net gain to the EU budget. The UK will also probably wish to stay in some of the EU agencies, such as the European Medicines Agency, and it will pay a share for that. It could be the case that at least over a transition period the UK might continue to make what could be called unrequited payments, namely, payments for which it does not get something in return and which therefore would be available to finance general EU budget expenditure. However, I do not believe the sums involved would be very significant.

We will talk about the CAP budget presently, where we can make other general comments. Brexit will certainly put pressure on that budget, but the CAP budget was probably going to be under pressure from other challenges which we can discuss later.

Deputy Penrose quite correctly raised the British attitude to farming, cheap food and so forth. Again, the qualification to bear in mind is that agriculture in the UK under its devolved government is now a responsibility of the devolved administrations. It is quite clear that the attitudes of Scotland, Wales and Northern Ireland to agriculture are somewhat different from the attitude in England. The question is whether the devolved administrations will have the resources through their block grants to implement somewhat different policies. Agriculture policy is a devolved responsibility in the UK, so we might see some differences across the United Kingdom in the future.

Senator Mac Lochlainn asked about the importance of the all-Ireland dimension.

The ability to move products and purchase raw materials, animals and so on, without having to worry, not just about the Border but what it means in terms of different regulatory regimes, is very important. It is a huge benefit to us. We have seen businesses build very profitable supply chains in both directions on the basis of being able to move products North and South. There will be a threat to that and it will be more difficult in future, despite the hopes expressed, in a sense, that we will have a soft Border. There are clearly ways in which we can try to minimise those issues. For example, we might see electronic and information technology systems used in customs administration and so on that could minimise some of those costs. It is clearly not a progressive move that we could welcome.