Oireachtas Joint and Select Committees

Wednesday, 2 December 2020

Seanad Committee on the Withdrawal of the United Kingdom from the European Union

Engagement on Withdrawal of the United Kingdom from the European Union

Photo of Simon CoveneySimon Coveney (Cork South Central, Fine Gael) | Oireachtas source

I will deal first with Senator Dooley's comments on the VAT retail exports scheme. This is a scheme that allows people to claim their VAT back after they have made a purchase. It is for people from the US and other third countries outside the EU. As the UK is now becoming a third country, there will be a dramatic increase in the number of non-EU tourists who come to Ireland. Tourists from Great Britain will effectively be coming from a third country. Therefore, the Department of Finance saw the potential for a substantial loss of VAT revenue as a result of this. Originally, it proposed that we put in place a threshold of €175. In other words, people would have to spend €175 to be able to claim back the VAT. Because of concerns raised by a number of political parties, the Minister, Deputy Donohoe, has reduced the threshold significantly by €100 to €75. Some retailers are still concerned about this but because of the numbers who might be using the scheme, if people were to be claiming back VAT on relatively small payments of €20 or €30 there would be significant bureaucracy and cost in doing so. That is why it has set a medium threshold. It is not over €100, which is what it was. The figure of €75 was seen as reasonable.

Senators will have an opportunity to question the Minister for Finance on it tomorrow in the Seanad. He has committed to review it so it could be changed or adjusted if it is not working for retailers or for Revenue. It could be adjusted in the finance Bill next year. The Minister has committed to having a review within 12 months. We will have a budget next September or October and a finance Bill. There will be an opportunity to adjust it if we do not have the threshold at the right level. We are very conscious of the fact this is a new approach to the VAT retail exports scheme and there will be an opportunity relatively early on to adjust and change it, if necessary, with the finance Bill next year.

With regard to Senator Black's question on the common travel area, for a number of years, linked to Brexit, we have been speaking to the UK on a bilateral basis about formalising the common travel area. It goes right back to the 1920s but there was never a bilateral treaty on it. It was always a loose enough series of arrangements, with some of those arrangements backed up by legislation and other elements not. With the previous British Government, when Theresa May was Prime Minister, I signed with David Lidington a memorandum of understanding on protecting and maintaining the common travel area through the Brexit process and out the other side, adding more formality to it. We decided consciously not to put in place a bilateral treaty on the common travel area because if we needed to amend it or change it, it would become much more complicated if a treaty needed to be amended and changed. We felt we should have the flexibility to be able to adjust and adapt to the new realities of Brexit and redesign elements of the common travel area, if necessary. Having this flexibility made a lot more sense to both sides. As long as there is a bit of goodwill on both sides it can be done and is being done.

Essentially it is a recognition of each other's citizenship, although this is not fully true but it explains what we are trying to do, when British people are in Ireland and Irish people are in the UK, in terms of access to education, healthcare, social welfare payments, voting in many elections, being able to carry pension entitlements, recognition of qualifications, obviously the opportunity to work and all of those other privileges that Irish people get in Britain and British people get in Ireland that even go beyond EU membership. We got an agreement early on with the EU that we would have to protect the common travel area through the Brexit process which, in many ways, meant Irish citizens get a lot more privileges and rights in the UK than other EU citizens. We were careful in how we managed that messaging so as not to raise hackles in other member states because there are more Polish people in Britain than there are Irish people but the Irish will get special treatment under the common travel area. Brexit is now exposing this difference in quite a significant way.

It is a really good arrangement for Irish citizens in the UK and UK citizens in Ireland. It will help to protect many of the practical arrangements we have on the island of Ireland in terms of free movement of people to work, study and access healthcare. The formal EU directives that have reinforced this in EU law, such as, for example, the cross-border healthcare directive, will no longer apply to Northern Ireland. We are going to have to put some other arrangements in place to accommodate the practicalities of children coming from Belfast to Dublin for paediatric care, people from Donegal going to Altnagelvin hospital or people from west Cork going to Belfast for cataract operations. These are things we will have to ensure can continue but we have to do it now in the absence of an EU directive that requires it. That is easier said than done but we are committed to doing it.

Likewise, we are also ensuring that we try to protect many of the other rights linked to the Good Friday Agreement. This time last year, I announced that the Irish Government was committed, if necessary, to pay for Northern Ireland students to benefit from Erasmus, or for Northern Ireland citizens to benefit from the equivalent of the European health insurance card, EHIC, which allows EU citizens to travel across the EU and access healthcare. They will not work in the exact same way as they did previously but we are committed to redesigning a scheme that goes as far as we can to replicate EHIC, which will allow people from Northern Ireland to travel across the EU and if they have health bills because of an accident or because they get sick when abroad, they will be able to recoup the cost of it from the HSE south of the Border when they go back to Northern Ireland. There is a cost to this that we are willing to pay. Likewise, the arrangements for Erasmus will probably have to happen through Irish universities south of the Border if there is not an agreement between the EU and UK to facilitate Erasmus. The Department of Education has been working on this. There is a hope and expectation that EHIC-type schemes and Erasmus will be facilitated through negotiations between the EU and UK.

If that negotiation does not result in a positive outcome, we will intervene to offer that to people in Northern Ireland if they want to avail of it. The Government is willing to commit to the taxpayer paying for that, which, I hope, people will support us on if it comes to that but I do not expect that it will. I think the British Government will be supportive of those approaches in principle.

I want to reassure the committee that this is not all about economics and trade. It is also about citizens' rights and protections. Irish people living in Northern Ireland are European citizens. They are EU citizens who happen to be living outside the EU but that does not mean they lose their rights as EU citizens when they enter the EU to work, travel and study. We will try to ensure that those rights and privileges are protected. Unfortunately, we cannot guarantee them that while they are living in Northern Ireland EU law applies because it does not. Under the protocol, there is an obligation on the British Government to ensure that Northern Ireland mirrors or has equivalence to EU standards in law in many areas. Under the protocol, Northern Ireland becomes a de factoextension of the EU Single Market for goods. As a result, there needs to be a commonality of standards and a level playing field to allow an all-island economy to function in that context without any border infrastructure.

This a complex arrangement. It is, however, the best possible arrangement in view of the circumstances we were landed with in the context of Brexit, trying to protect the Good Friday Agreement and prevent border infrastructure re-emerging on the island of Ireland, respecting that Northern Ireland remains part of the United Kingdom and, therefore, is leaving the European Union. We are trying as best we can to manage all of these issues in a way that limits disruption. It is about no diminution of rights for people in Northern Ireland, which is very much the language of the protocol, and about facilitating trade in the absence of border infrastructure North-South while facilitating unfettered access for businesses in Northern Ireland into Great Britain, GB. The price of all of this, which is where the controversy lies in regard to the protocol, is that goods coming into Northern Ireland from GB have to have some checks because, owing to how the protocol works, that is effectively an entry point now into the EU Single Market for goods. This limited series of checks is a necessary consequence of the protocol to ensure that Ireland's place in the EU Single Market remains protected and that its integrity is protected too. In other words, we cannot have a protocol that opens up an unguarded backdoor into the EU Single Market via Northern Ireland. That will not wash with our EU colleagues or the European Commission. That is why the protocol is controversial. It is the best outcome that we could have designed in view of the politics of the issues.

I will try to brief in my responses to the next questions but perhaps in this response I have answered some of the questions members had intended to raise.

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