Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I remind members, witnesses and those in the Visitors Gallery to please ensure their mobile phones are switched off for the duration of this meeting as they interfere with the broadcasting equipment even when on silent mode.

We resume on a discussion on the all-island economy, with a view to generating recommendations on how to enhance economic co-operation and alignment across the island. I welcome Dr. Anthony Soares, research and policy manager at the Centre for Cross Border Studies, Mr. Padraic White, chairperson of the Border Development Corridor Steering Committee, Mr. Aidan Gough, strategy and policy director for InterTradeIreland, Mr. Michael Burke, independent economist, and Dr. Conor Patterson, chief executive at the Newry and Mourne Enterprise Agency, to the meeting to discuss the all-Ireland economy and how economic co-operation and alignment across the island might be enhanced.

Before we commence, in accordance with procedure I am required to read the following. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

I remind our guests that presentations should be no more than five minutes in duration. Members have already been supplied with the presentations submitted. I now invite Dr. Anthony Soares to make his presentation.

Dr. Anthony Soares:

I thank the committee for inviting the Centre for Cross Border Studies to this meeting. In addressing the theme of the all-island economy, the Centre for Cross Border Studies is informed by its core mission of supporting and promoting cross-Border co-operation on the island of Ireland as a means towards greater social and territorial cohesion. Greater cohesion will reduce socio-economic disparities between regions of the island, North and South, particularly where the Border may represent a challenge to developing co-ordinated strategies and implementing joint interventions aimed at areas of disadvantage and their communities.

In line with the Centre for Cross Border Studies' approach to cross-Border co-operation, the development of an all-island economy should adhere to the principles of integrated cross-Border co-operation. This entails the development of policies and interventions with effects across four pillars: the social, economic and environmental pillars and the co-operation pillar itself. Policies and interventions designed to have effects on only one of these pillars are normally unsustainable and more likely to have negative effects on the other pillars. Economic concerns, therefore, are not and cannot be divorced from other societal concerns and economic development, including the development of an all-island economy, must be placed within a wider well-being framework. In our understanding of the economy and the ways in which we look to develop it, we must view economic productivity in a holistic manner. This means regarding the public, voluntary and community sectors as economic drivers or enablers and not simply as sources of expenditure that drain the income derived from what are considered to be the primary or only producers of wealth in the economy.

If the further development of an all-island economy is to be pursued, it must become a platform for increased social and territorial cohesion rather than a mechanism to maintain or even exacerbate existing socio-economic disparities in either or both jurisdictions. If we are to achieve a genuinely effective all-island economy of benefit to all citizens, it will not be simply a matter of more intensive co-ordination between two economies but rather between several geographical areas with very different levels of economic performance and socio-economic disadvantage. While these divergences may represent a challenge to its development, perhaps an insurmountable one if existing disparities are ignored, the creation of an all-island economy could do much to redress geographical imbalances in economic performance and more general well-being.

Along with a range of stakeholders and partners that constitute the Border development corridor steering committee, the Centre for Cross Border Studies believes the establishment of a Border development corridor is an essential cornerstone of any all-island economy. The Border development corridor constitutes an invaluable opportunity to bring a strategic focus capable of revitalising the economic fortunes of the populations in the immediate region, as well as of those in the North and South of the island. Research undertaken by and on behalf of the Centre for Cross Border Studies provides an evidence base for the establishment of a Border development corridor and has informed proposals relating to the socio-economic revitalisation of the Border region. These focus on seven main themes: greater priority and urgency in advancing critical infrastructure projects, particularly roads and broadband; expansion by IDA Ireland and Invest NI of the existing foreign direct investment, FDI, base and giving more determined priority to locating new FDI in the Border region; focused support for the needs of small and medium businesses, SMEs, with export potential across the Border development corridor; strengthening the local food economy; recognising and working collectively to harness the opportunities presented by the natural, built, cultural and physical environment of the Border development corridor; advancing the region as a champion of the green economy and renewables agenda; and embracing the goodwill of the diaspora and engaging with the proposed national diaspora centre.

However, in order for there to be the required degree of co-operation between both jurisdictions to bring about a Border development corridor and an effective all-island economy, we need ambitious leadership at all levels. Such leadership and strategic thinking will need to counter arguments that potential investments will be lost if policy makers attempt to promote regions of the island, North and South, seen as underperforming economically, particularly in terms of their levels of innovation.

In the absence of the policy imperative for cross-Border co-operation that was contained within the common chapter, the establishment of an effective and regionally balanced all-island economy will depend on policy makers on both sides of the Border proactively “proofing” relevant economic strategies for opportunities for cross-Border and all-island co-operation. Leadership will then be needed to provide the necessary resource framework when such opportunities are identified in order to fully exploit their potential.

A possible and serious obstacle to the development of both a Border development corridor and an effective all-island economy is the UK’s possible exit from the European Union. It is the view of the Centre for Cross Border Studies, therefore, that leadership is also required in order to avoid the possibility of a UK exit from the European Union that would reinforce Northern Ireland’s peripherality and create more significant imbalances and obstacles in the creation of an all-island economy.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I thank Dr. Soares for his presentation. I now invite Mr. Padraic White to make his presentation.

Mr. Padraic White:

I thank the Chairman. The committee has a submission that I presented to the committee. I will refer to some of the points rather than go through them in detail. I recall that on 3 November 2014 in Stormont some members of this committee joined with members of the Northern Ireland committee on this subject, which I thought was a fruitful and supportive day.

As Dr. Anthony Soares has said, the issue of the Border development corridor arose out of an analysis of that area and the economic prospects facing the narrower counties alongside the Border, North and South, and their predicament and the diagnosis that they ran the risk of being economically stranded unless some particular actions were taken to counter it. While I am 100% supportive of the all-island economy, the basic thesis is that in itself will not trickle down sufficiently and deal with the issues alongside the narrower Border unless some specific actions are taken. That narrower Border area has additional acute problems because of its peripheral nature in relation to both jurisdictions and because of the legacy of the conflict. It suffers regularly from the distortion of taxes, North and South, which have a disproportionate effect. For example, we have a carbon tax on solid fuel which amounts to about €2.40 per standard bag of coal. There is no such tax in Northern Ireland and, therefore, for business adjoining that narrow Border area, there is a distortion of trade which has a serious effect.

In the past fortnight, the CSO has published statistics on income per county. Those statistics indicate that out of eight regions in Ireland, the Border region has the lowest amount of disposable income per head at the princely figure of €16,981. It has the largest deviation from the State average and that has actually got worse since the previous year. That bottom line deviation is extremely serious. Within that income, 35%, more than a third of disposable income comes from social welfare transfers. We have an economy on the Southern side that has the lowest income of any region and within that the highest proportion dependent on social welfare transfers. In page one of our submission we mention that the idea of a draft solidarity charter was to focus on a number of high level issues where jurisdictions and local authorities and business, North and South of the Border, could find common ground. Dr. Anthony Soares mentioned them. I will pick out one or two examples which illustrate the need for something radical.

On page 2 of the presentation, we refer to the infrastructure and the danger of a three-speed economy across this island where there is the growth of the conurbation along the eastern coast of Dublin and Belfast, which has half of the population of the country and which is growing rapidly, the city regions with the counties surrounding the main cities, and the Border region which fits into neither of those. The outstanding requirement of facilitating economic development in the Border areas in the north west has been identified for years as the N2-A5 road between Dublin and Derry, and the links into Donegal. It was a high priority a number of years ago. We cannot even generate €1.5 million on the Southern side to progress the planning of that part of the road from Clontibret to the Border. That is a fairly serious statement of lack of interest in facilitating economic development in the Border area and the north west.

Broadband is a significant issue. Every little business, such as a tourist business, needs broadband and Wi-Fi. The mobile phone systems have significant dropouts in the Border area where there are two different systems and, generally, they suffer along that area from under provision which directly inhibits the growth of small businesses.

On foreign direct investment, IDA Ireland has produced its new strategy, Winning: Foreign Direct Investment. It has a target of increasing, by 30% to 40%, the number of projects in the Border region between now and 2021, and there are moves to development regional enterprise action plans. It is really important that the commitment in those plans to FDI in the Border region, even though it is only one part of the equation, is sustained.

In the interest of time, I will move on to tourism and recreation on the next page of the presentation. Tourism and recreation has significant potential in the Border area. On the Southern side, we now have the Wild Atlantic Way and Ireland's Ancient East. If one were to symbolise the lack of joined-up thinking at a political level, it would be that Ireland's Ancient East stops at Carlingford. We have the Mourne Mountains and Carlingford Lough, and the Fáilte Ireland mandate stops precisely at Carlingford and the lake there. It makes no sense at all. Actually, it is offensive. A tourist is neutral as to jurisdictions. We need to sort that out.

Mr. Aidan Gough:

As everybody will be aware, InterTradeIreland is a body that has been supported by both Governments and it has its genesis in the Good Friday Agreement. Our regional legislative mandate is essentially to encourage cross-Border trade and business development.

Putting the firm at the centre is our practical and operational perspective of an island economy. It is one in which that firm can access whatever resources or opportunities it needs to grow, no matter where they reside on the island. We are an all-island body, not simply a cross-Border body. In that regard, we support businesses from every county across this island.

All our interventions are evidence based. Our all-island research will show that it is innovative and exporting companies that are more likely to create jobs. These, therefore, are the two areas in which we are helping businesses to avail of cross-Border opportunities. Our research also shows, for example, that 70% of exporters from this island took their first step in exporting by trading into the other jurisdiction on the island and, not surprisingly, our supports are focused on these two pillars of innovation and exports.

In trade, which is exports, we have programmes, such as Acumen, that help businesses develop the market through giving them the capabilities that they lack in the other jurisdiction. We also, under the trade banner, are helping businesses access the massive public procurement market on both sides of the island.

Among the innovation programmes, we have Fusion which links businesses to research institutes by putting a graduate into a company.

We are also helping both Governments to promote participation in what was the Seventh EU Framework Programme for Research, FP7, but is now Horizon 2020 and we are having a considerable degree of success in that regard. It makes sense for two member states which share a small island to co-operate.

Demand for our programmes is very high. In 2014, more than 470 inquiries were made for 64 places on a Fusion programme. In that same period, there were 430 inquiries for 112 places on the Acumen programme and the same applies for other programmes. We had only 81 places on our Elevate programme but 544 inquiries were made for it. Demand for these opportunities and programmes is very high.

Since our inception more than 15 years ago, we have demonstrated the value of economic co-operation across the island. More than 25,000 SMEs have benefited from our information and advice service, and 6,000 SMEs have been directly supported through our programmes. These companies have generated close to €1 billion worth of trade and business development value. We estimate that more than 3,000 jobs have been created over the past six years through our interventions but the figure is probably higher because in the early years, we were not measuring the number of jobs created. Our target audience is primarily the small indigenous-based companies. We have consistently over-achieved and over-delivered on our key performance indicators. There are some statistics in the documentation we provided. In the corporate planning period 2011 to 2013, we helped more than 220 small businesses take that on the export ladder and helped more than 200 small businesses take that on the innovation ladder through brokering opportunities on a cross-Border basis.

What we have achieved has been against a background of severe budgetary cuts, with our budget being cut every year since 2008. In fact, the budget has been cut by 30% since 2008. We recognise that the economic climate is volatile and yet we have continued to respond quickly and in a flexible manner to changing circumstances. We see emerging opportunities at which we are targeting our scarce resources in the increasing North-South applications to Horizon 2020. We are assisting SMEs on an all-island basis to access finance for growth. We are also exploiting public tendering opportunities, particularly for SMEs on an all-island basis. We are looking at current research on the potential to develop all-island clusters or sectoral ecosystems.

At a more strategic level, InterTradeIreland has also participated in a study for the OECD on collaborating across borders. This study provided lessons and made recommendations on good practice for cross-Border co-operation, including the need to devote more efforts to strategy development and policy intelligence when strategies and policies are being devised in the jurisdiction and not as an afterthought. It also recommended that we mainstream the cross-Border element in national and regional strategies and policy instruments or, at the very least, align programme rules so that businesses can easily participate on programmes on a cross-Border basis and also to make greater use of opportunities created by the Border and publicise success.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I thank Mr. Gough and invite Mr. Burke to make his presentation.

Mr. Michael Burke:

I thank the Chairman and members for inviting me. I will spend the brief time I have talking about the impact of the economic fundamentals in relation to Irish reunification and the unification of the economy. It is quite often portrayed that people advocating Irish reunification do so from some sort of romantic rather than sober-headed perspective. I would argue the contrary that the continued division of the island, particularly economically, is based on romantic ideals and is not attuned to the economic needs of the population of the whole island.

My starting point is the starting point of economics, the division of labour, which is the fundamental driving force of economic prosperity going back to Adam Smith. Within that, a key element is the size of the home market. The size of the home market in both cases is limited by separate jurisdictions. If we take the relationship between the Northern economy and this economy in terms of relative size and using purchasing power parity estimates from the OECD, we find the Northern economy is about 25% of this economy. Leaving other practical issues aside, the simple reunification of the island economically would provide a 25% increase in the home market for businesses and all public and private sector enterprises operating in this jurisdiction. Given the difficult economic circumstances pertaining on both sides of the Border, it is not insignificant. The history of the economy in the Republic of Ireland is such that the separation of the Northern economy from Britain would lead to the Northern economy growing more rapidly than this economy. The reason is that it would be in a position to catch up with living standards and productivity here.

My second point relates to the relationship between the two economies as they are composed. An appendix at the back of the paper I produced identifies some of the key components of the two economies relative to overall. To compare on a like-for-like basis, I have used gross value added as the proxy for GDP as there is no GDP estimate for the North. We see significant similarities, such as the role of agriculture, which is almost exactly the same. There are significant potential synergies and productive new elements of competition that could be introduced. It might surprise people that the output of the agriculture sector is as low as it is in both economies. Food processing is inordinately high and it might be to the advantage of small farmers in both jurisdictions to have a greater weight to countervail the dominant food processing companies, which are close to monopolistic.

Taking the two economies as a whole, we might regard the economy here as having a dynamic private sector and the Northern economy as having a highly efficient public sector and clear synergy between the two. There are two caveats to the assessment, the first being that very little of the private sector, in its dominant sectors, is indigenous. The growth of a home market would aid it. In the Northern economy, there is a somewhat greater degree of indigenous industry. The public sector in the Northern economy is quite efficient, with one important exception. The comparative sizes of the civil service and defence sectors account for 5% of output here and 10% of output in the North. That relates to another important debate about the so-called size of the subvention the North receives from Westminster.

It relates to the outsized civil service and defence sectors. In the absence of that, and in a unified, and, one would hope, peaceful, economy, that would be wholly unnecessary, and such output could go to productive investments.

There are also specific sectors, which I only touched on in the paper, where definite synergies can be identified, such as aerospace. In the South, there is a highly developed sector related to financial, engineering, advisory and legal work regarding aerospace and in the North there is a productive aerospace sector, so there is a clear synergy. There is a similar situation with medical supplies. An indigenous industry exists here which is highly advanced and internationally competitive, and the NHS or a public health service - whichever one prefers to call it - is an efficient buyer of health services, so clear synergies exist.

My last point is that this is not abstract in the sense that it is something that is unfeasible. This is something that there is a tendency towards naturally. The tendency arises mainly from the private sector. For example, the ESB is now the main energy provider on the island - all of it. As a result of the financial crisis, NAMA, which is a public sector body in the South, became a very large property owner in the North. One can see that a former public sector monopoly for letter delivery, the Royal Mail, is now close to a private sector monopoly for letter delivery. I speculate that the Royal Mail, in the private sector, will not want to keep its outposts in the North and, therefore, there is a clear synergy. These things happen naturally, but it is policy that gets in the way.

Dr. Conor Patterson:

I thank the committee for inviting me to speak. With respect to the subject of today's discussion, there are significant barriers that affect pan-island trade and generate profit-diminishing transaction costs. They also encourage an illegal trade which seeks to exploit the fiscal differentials, with resultant reputational damage and loss of revenues, especially in the Border region.

Given the extent of the aforementioned trade distorting barriers, my view is that there needs to be an intergovernmental action plan to achieve a real uplift in pan-island trade and shared development outcomes. As part of that strategy, the transport network surely has to feature as a major priority, with the ultimate aim of ensuring that links between Northern Ireland and the Republic are of such a standard that trade-related travel would no longer be punitively expensive or slow and the scheduling of services would help business collaboration.

The future economic development of most of the island - the areas that are not in the hinterland of Dublin and Belfast - depends on the extent and success of indigenous business growth. A key predictor of indigenous business success is the extent to which those businesses engage in collaboration and networking. Where there are cultural constraints on the propensity to network, or jurisdictional limits on the territory across which it can happen, less business collaboration will take place, with the implication that indigenous businesses will be less successful than they would otherwise be in a more open trading environment. Businesses will only thrive if the ecosystem within which they operate is supportive.

I am an economic development practitioner who has worked in Scotland, Northern Ireland, the Border counties in this State and various EU jurisdictions. Therefore, my perspective is that the model which is most likely to yield the greatest returns is one based on the principle of subsidiarity, which is to bring the conception and delivery of policy as close as possible to the end beneficiaries. In my experience, the greater the distance between their design and management and their intended impact, the less successful publicly funded interventions are likely to be. In the context of promoting more trade and economic co-operation across the island, this means more involvement of stakeholders at county and district council levels in the making and implementation of policy. Such a framework would allow finely calibrated locally sensitive solutions to be quickly put in place. However, this proposition is not at the expense of but complements a macro-political and macroeconomic strategic framework.

Given that an intergovernmental structure to promote all-island trade already exists, through InterTradeIreland, and that governance arrangements are already in place, a signal of intent would involve two things: first, to empower that institution with serious budget and substantive powers; and second, to mandate Enterprise Ireland, IDA Ireland and Invest Northern Ireland to collaborate with it much more actively, with the extent of that collaboration regularly reviewed.

At the sub-regional level, I and other colleagues in my area of Newry, Mourne and Down, along with our partners in County Louth, have been working in an innovation alliance to look at ways in which we can utilise our limited resources better and collaborate more effectively to promote greater economic collaboration, trade and growth in the region. We recognise that as partners we are all assets and that by pooling our efforts we can encourage more cross-Border business collaboration. This cross-Border innovation alliance is part of a much more ambitious collaborative effort led by the local authorities in the region which have signed up to a memorandum of understanding. The commitment of central government policy and budgeting is needed to support this effort. The focus of the new regional action plan for jobs on the importance of cross-Border collaboration can offer a real prospect to achieve this. A similar shift is required in Northern Ireland.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I invite the members to make their contribution, starting with Deputy Tóibín.

Peadar Tóibín (Meath West, Sinn Fein)
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Gabhaim buíochas leis na finnéithe as ucht na cuir i láthair. It is a pity we do not have more time to discuss some of these issues, but I thank the witnesses for coming here individually to give the presentations. I believe this is one of the most important issues for our committee to discuss and it is disappointing that aside from the Cathaoirleach, there are no Government Deputies here to listen to the presentations. The importance of this is immense, as has been articulated by the witnesses.

I have a number of questions. Dr. Anthony Soares spoke about the integration of the two economies and the planning involved. I am anxious to get a quantitative understanding of that. Between one and ten, how disintegrated are the planning processes currently with regard to the economies, North and South? Some of the evidence has been that there have been backward steps in respect of the all-Ireland economy. Is the policy of an all-Ireland economy being pursued in the witnesses' view?

The next question is more open and relates to the Border corridor. Are we talking about all of the Border or a specific element of it? How deep is the level of integration being discussed? Are we talking about co-operation as regards planning, development and enterprise, or are we talking about creating a space perhaps where there is different taxation, excise and other costs and engagements with the Governments on equalisation there?

On the disjointed element of the Border, Mr. Padraic White mentioned the poverty and the fact that income in the Border region is far lower. Could he say that the disjointed Border economy is a direct cause of poverty? The figures he mentioned appear to show that. Is a difficulty with finding the €1.5 million an example of a deprioritisation of that Border infrastructure? On the issue with regard to Ireland's Ancient East and the Wild Atlantic Way, where was Tourism Ireland in that process? If we do not plan in a joint fashion, the natural result is a disjointed plan. Tourism Ireland is one of the few bodies tasked with the development of an economic issue on a cross-Border basis. Should it not have a central role in those developments?

Regarding the InterTradeIreland issue, Dr. Conor Patterson spoke about the opportunities that exist. Again, would one indigenous enterprise organisation on the island of Ireland not deliver a more integrated enterprise policy, North and South?

Is a breakdown available on the development and staffing of InterTradeIreland? Has any other enterprise agency, North or South, experienced a 30% cut in its income? Why are there 64 places, 112 places and 81 places when the demand is far higher? Would the logic be, given that engagement with enterprise has a positive effect on income and jobs, that we seek to meet that demand? I was interested in Mr. Michael Burke's point of view as an economist. TTIP between Europe and the United States is a significant issue which is being discussed. The Government has been very happy to quantify the potential benefits to the Irish economy, with 5,000 jobs here and this level of growth there. Is it possible to quantify the benefits to the economy as a result of the raising of the barriers to trade created by the Border? Is it possible to seek to identify the cost of the Border to the economy as a whole and to every individual pocket in the State? Mr. Burke referred to the GDP figures. I ask him to elaborate on the GDP figures. Pound for pound, what would be the best reforms that could be initiated by the Government?

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I will invite the delegates to respond to some of those questions.

Peadar Tóibín (Meath West, Sinn Fein)
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I have a final question for Dr. Conor Patterson. New council structures are in place in the North. It is sometimes the case that councils have somewhat more freedom and speed of movement compared to North-South institutions. What roles can councils start to have? Dr. Patterson is involved in the Newry and Mourne element. Is there a stronger role that these councils should be taking?

Mr. Padraic White:

I will respond to what I think are three points.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Yes, whatever the Deputy referred to.

Mr. Padraic White:

On the Border development corridor, the approach is ad hocat the moment. I chair an ad hocgroup of people from North and South who are interested. It relates to the counties immediately adjoining the Border area and, therefore, it is narrower than an all-island economy. The Southern side is made up of Donegal, Sligo, Cavan, Leitrim, Monaghan and Louth. Within that we identified at least seven strategic areas where there is a common interest which should override jurisdictional and other issues. This has been endorsed in any discussion we have had with the cross-Border networks. There is a strong willingness to work on that.

Deputy Tóibín asked about income figures and whether there is a direct correlation with the disjointed nature of the Border. Many aspects come together in this regard. For example, there is a weak economic structure, a weak urban structure, a weak communication network and the resultant peripheral aspect in both jurisdictions. The most recent figures confirm absolutely in my view that the trend is negative and that it is a symptom of the failure to develop the economies in an optimum way on each side of the Border. That brings me to the Deputy's final point about tourism. Fáilte Ireland developed the projects of Ancient Ireland and the Wild Atlantic Way. The mandate of Fáilte Ireland stops at the Border. Tourism Ireland promotes the whole island but basically, in so far as I can make out, never the twain shall meet. Fáilte Ireland is constrained by the fact that its political mandate stops at the Border, even though on the ground, for example, in Newry, Mourne and Down, and Louth, there is a major commitment to develop the whole Newry, Mourne, Carlingford, Cooley peninsula. The Narrow Water bridge was a symbol of that commitment and the local commitment but that is almost in spite of the official system.

Peadar Tóibín (Meath West, Sinn Fein)
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In terms of national spatial planning, there is often a strategy of linking particular hubs in order to rebalance regional disparities. In the context of cross-Border co-operation, would it be useful to have specific zones with particular characteristics, such as Letterkenny-Derry, Dundalk-Newry and Armagh-Monaghan, which could be strategically used to equalise the damaging effects of the Border?

Mr. Padraic White:

I agree that such an approach would be useful. The draft charter includes innovative ideas for developing new high-tech industries of the future that involve collaboration between the two third level sectors, which would involve institutes of technology and so on. There would be a natural tendency to build those around Derry, Letterkenny, Dundalk and Monaghan. As Mr. Gough mentioned, there is a concept of creating clusters of like-minded industries, whether in furniture, fabrication or whatever. All those potentials are there but the dialogue is not really encouraged to commence, partly because the relevant state agencies on either side of the Border, namely, Enterprise Ireland and Invest Northern Ireland, have no mandate to collaborate on these issues.

Dr. Anthony Soares:

Deputy Tóibín asked me to give marks out of ten in terms of the level of integration between economic policy in the two jurisdictions. I will preface my answer by pointing out that I am a former academic who was known for not giving the highest marks ever. Our approach is to see the glass as half full rather than half empty. We are ambitious in our work and would like to see more happening. In our longer written submission we refer to some of the positive developments we have seen, including InterTradeIreland's recent launch of the Elevate programme. These are good things which give us some hope.

In terms of economic policy and the levels of integration, it is a question of identifying areas where co-operation makes sense and will bring a benefit to both jurisdictions and to citizens of the island. In order to identify those types of opportunities, one must proof policies and seek out potentials. If one does not look for opportunities, one will not identify them. In addition, if only one side is looking for opportunities and the other is not, there will not be a common view of where opportunities might lie. It is a question of facilitating co-operation in addressing issues like socio-economic disadvantage but also identifying opportunities to exploit potentials that are currently not being availed of because of the Border and the two jurisdictions managing their economic policies separately.

The Deputy referred to opportunities at local government level. Councils certainly are doing a lot in terms of cross-Border co-operation. A difficulty arises at local government level, however, in that community development looks at one part and economic development is hived off as a separate part, with the two only being joined together at the end. That approach will lead to missed opportunities. We must bring the two together, community and economic development, at local authority level. As I said, there is a lot going on at this level. I agree with Dr. Patterson that we need an emphasis on the principle of subsidiarity such that where there at people at the right level who are capable of addressing problems and opportunities for cross-Border collaboration, then it should be done at that level. At the same time, the two jurisdictions need to provide a larger framework for co-operation by local authorities.

Peadar Tóibín (Meath West, Sinn Fein)
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Will Dr. Soares give marks between one and ten?

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I must give the other delegates an opportunity to answer the questions that were put to them, Deputy Tóibín.

Peadar Tóibín (Meath West, Sinn Fein)
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I have asked a supplementary question.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Members may come back in after all the witnesses have had a chance to respond to the initial round of questions.

Mr. Aidan Gough:

The Bradley-Best study that was commissioned by the Centre for Cross Border Studies identified two key problems to be addressed.

The first, fragmentation in the institutional structure at local and cross-Border level and between local and national policies, has not been addressed. The other key issue was the lack of resources. InterTradeIreland has demonstrated within our legislative and institutional framework that cross-Border co-operation delivers value, particularly for the small indigenous businesses with which we work. We have shown we can deliver more value but we are constrained by the lack of resources.

Peadar Tóibín (Meath West, Sinn Fein)
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I put a couple of questions to Mr. Gough and it is important that they are answered before I move onto supplementary questions. I asked whether Mr. Gough is aware of any other enterprise agency on the island which received a cut of approximately 30%.

Mr. Aidan Gough:

I cannot answer that. I do not have all of the details.

Dr. Conor Patterson:

Local authorities have lots of ambition not only in the east Border region where I practice my business, but throughout the Border region. The problem is the lack of budget and authority. I look back to the period in the immediate aftermath of the Good Friday Agreement when there was institutional innovation and the principles built into it. Perhaps one of the unspoken successes of the peace process was the commitment to subsidiarity and local partnerships holding real budgetary responsibility and being able to innovate policy and interventions. At local level, the north west is very different from the mid-Border region, which is different again from the east Border region. The local players and stakeholders know what is needed in each area. They just need to be empowered by several Government institutions working alongside them. They are not seeking to displace them. In my experience, the memorandum of understanding between Newry and Mourne District Council, Down District Council, and Louth County Council, signed in Brussels in 2010, lacked budgetary teeth and the regulatory powers to institute anything significant. The ambition and will are there but the power is lacking.

Mr. Michael Burke:

Several questions were specifically directed to me on the benefits of reunification reforms and the GDP and gross value added, GVA, data. The presentation document I have provided includes a table. The North's economic output is approximately £30 billion per annum, while the economic output of Ireland is approximately €180 billion. If they are converted to a common currency, the Northern economy is approximately one quarter of the size of this economy. I would expect both to rise significantly with unification, simply from the process of unification. The Border region provides a very good example of this. It is as if we have a railway going nowhere. We have a series of what should be natural links between the two economies, because they should be one economy, but they are stunted and have atrophied because there is a stopping point. The point on tourism was very well made, but in my view it applies across the board.

The quantification of the benefits of unification is a somewhat tricky calculation. My view is that, at a minimum, based on growth in the home market and the size of the market in the North, which is 25% of what it is here, at least half of the benefits would apply to living standards for all of the population of this economy.

That is not a fixed sum in the sense that the Northern Ireland economy would not be static or even grow at the same rate as this economy. It would grow faster for a considerable period as it caught up and, therefore, at a minimum, living standards would increase by approximately 12.5% simply through the process of reunification.

In terms of reforms, the obvious one to suggest would be to get rid of the Border. In the absence of that, the obvious no cost reform is for the governments and the agencies to be instructed to collaborate with each other to improve the living standards of people across the entire island, that is, to stop whatever it is that prevents them from working together such as turf wars or a dislike of the cut of people's jib and so on and to get on and do the job they are tasked with in terms of improving living standards. People are not asked to do things like Tourism Ireland for the fun of it. They are supposed to be there to produce an increase in tourism across the island of Ireland.

With regard to the longer-term picture, all the benefits increase massively with investment. That should be plain. The enormous increase in living standards that has taken place in this jurisdiction relative to both the North and Britain, the former power here, was a long process but it accelerated with the arrival of European investment in the 1980s and 1990s. The level of investment accelerates the growth of an economy. I would suggest all the types of obvious infrastructure development that one would expect. The three keys areas include major investment in rail transport across the island. I would invest significantly in broadband, which has been mentioned and I would invest heavily in a unified education system because these three actions would allow the unified economy to grow rapidly.

Dara Calleary (Mayo, Fianna Fail)
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I thank all the contributors. One of them referred to the elephant in the room, which since last Friday morning, has been on the loose and on the rampage and that is the in-out EU referendum in the UK. Any discussion about an all-island economy, therefore, has to take that into account. The referendum will happen within the next 18 to 24 months. What are the delegation's views on the potential impact of Britain's exit from the EU on an all-island economy? If the representatives were on the negotiating team with Brussels seeking various concessions to sell the notion of Europe, what concessions should be sought that would assist the development of the economy in the North?

Mr. Michael Burke:

I will take that question because I live in London and we see the effect sometimes in politics of the ability of people to whip up all sorts of nonsense about foreigners and so on. Apparently, I am now to understand that Scots are foreigners. I do not believe that Britain will leave the EU for the very good reasons that the overwhelming majority of big business does not want that to happen and the overall majority of big business in the US does not want it to happen because of the close links that exist, which is an important factor. However, after last Thursday's events, I would never say "never" to anything and it could happen. That would be a divisive change in the relationship of both economies to the rest of the world. The key factor is the EU is the biggest market in the world and Britain would cut itself off from it. The Northern Ireland economy has been a forgotten annexe of a slow growing British economy on a relative basis for a long time. Cutting itself off from Europe would deepen those trends significantly and accelerate them.

Therefore, it might become obvious to many in the North, where, perhaps, it is not already the case, that, in economic terms, the future does not lie with Britain.

Dr. Anthony Soares:

On cross-Border studies, I raised the possibility of a Brexit and how that would fundamentally place an effective all-island economy - if such a thing is to be pursued - at risk. Mr. Gough also highlighted the fact that one of the things InterTradeIreland has been very successful in doing is enabling cross-Border co-operation between businesses and research institutes in the context of drawing down Horizon 2020 funds. These are European funds which lead to innovation. Northern Ireland, in particular, has been assisted by the allocation of European funds.

One of the themes to be addressed at this meeting is that relating to job creation and the possibility of staff exchanges, North and South. The European Union has funded a very successful project run by the Centre for Cross Border Studies, which is the Border People project. If we are discussing the creation of an all-island economy and co-operation, North and South, then the mobility of citizens between the two jurisdictions in order that they might work, study, live and retire in either is a factor. Such citizens need information and the Border People project currently provides it. It is a very practical project and has been funded by INTERREG. Research undertaken in 2010 indicates that at that time there were an estimated 23,000 cross-Border workers. We know that this is an underestimate because it was only those 23,000 who identified themselves as cross-Border workers. There are many more individuals out there who might not perhaps be forthcoming in terms of identifying themselves as being such workers as a result of the lack of information regarding their general rights, their duties in the context of where they should pay taxes and their rights when it comes to retirement.

We have received support from the European Union in respect of this very practical project, which has been assisting many citizens and providing free advice. However, as is frequently the case in circumstances of this nature, the European funding for the project has come to an end. We have tried to identify alternative funding so that the project might continue in the absence of INTERREG funding. In that context, we have sought the support of the Department of Foreign Affairs and Trade through its reconciliation fund. Unfortunately, we do not believe we will obtain all the funding necessary to support all the activities relating to the project.

Situations of this type arise frequently. In other words, we receive European money to fund very positive projects that help in terms of economic development, particularly cross-Border co-operation, but once that money runs out, there is no desire on the part of the authorities in the two jurisdictions to step in and say "Yes, this is a valid project, it needs to be supported and we will both provide that support". It seems to be the case that if one jurisdiction does not become involved, the other will not do so. Both tend to wait to see who will step in first and by the time a decision is made, the relevant project is already dead and the expertise relating to it is lost. It is very difficult to get such projects up and running again.

The threat of a UK withdrawal from the EU is serious. Such an exit would place the possibility of creating an effective all-island economy in serious doubt.

Dr. Conor Patterson:

Notwithstanding the desire of big business to remain in the EU, I agree with Mr. Burke that the very large vote for UKIP in Britain shows the risk that exists and the destabilising effect of such risk. Let us consider the implications ahead of any referendum. In that context, £1 billion in EU funding has been allocated in respect of agriculture and fishing in Northern Ireland. In addition, Structural Funds have also been allocated. A total of 60% of SMEs in the North trade into the jurisdiction of the Republic of Ireland. We must also consider the effect on the peace process and the fact that the Government in this jurisdiction and its counterpart in the UK are co-guarantors of that process. The Irish Republic would lose a key ally at the EU negotiating table if Britain were to withdraw. There is also the fact that Britain is a key trading partner for the Republic.

I refer to the cost of managing a land border, what ultimately could be an international frontier. The history of my own area is not just one of economic liberalisation post the peace process. That began in the early 1990s with the removal of customs barriers between North and South and the fact that trade could move freely up and down the A1-N1. In my view, this is the biggest geopolitical risk to this island. It speaks volumes that the Ulster Unionist Party, the Democratic Unionist Party, UKIP and the Traditional Unionist Voice, TUV, party all support an in-out referendum. Moreover, the TUV supports the United Kingdom's withdrawal from the European Union despite what in my view are the catastrophic implications economically for the North of Ireland and the fact that from a Unionist perspective, I would have thought it would be likely to accelerate the break-up of the Union.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Is Deputy Calleary satisfied with that? I call Senator Cullinane.

David Cullinane (Sinn Fein)
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The witnesses are all welcome before the joint committee. The first obvious point to make is that we have an all-island economy. It is not something we want to happen; there is an all-island economy. Much of it happens organically because businesses and entrepreneurs recognise the value of the all-island economy if they can create jobs, grow their businesses and so on and if they can take advantage of markets on either side of the Border, they will do that.Moreover, it often is despite the political institutions, but it is because businesses themselves perceive the value in an all-island economy that we have one. The question is how to nurture, build and grow it, which obviously requires plans, strategies and policies. I have a number of questions in that regard, including the first and obvious one. The previous speaker spoke about the elephant in the room that is the possibility of an in-out referendum on the future of the North and Britain in the European Union. There also is the elephant in the room whereby there is, I will not state a hostility but certainly a fear, from some partners in the Assembly of any talk of a unified economy or an all-island economy and a resistance to it for obvious political reasons. It can be pitched to them to a greater extent that it actually is in their interests that the all-island economy grows in respect of jobs and so on and we continue unashamedly to make that argument. I was taken by the presentation made by Mr. Michael Burke that it makes sense economically, socially and so on.Consequently, this obvious elephant in the room also must be considered.

My questions primarily concern institutions because if one wishes to go beyond the organic, obviously the institutions must be fit for purpose to develop proper plans and strategies. If one considers the Good Friday Agreement and its outworkings including North-South bodies, the North-South Ministerial Council and so on, how effective or how ineffective are they in driving and developing the all-island economy? I am sure much good work is being done, even such as when this joint committee travels north to meet its counterparts. The health committee often travels north and vice versaand good work is being done at a cross-Border level by many committees of both jurisdictions. While this obviously is good, how robust are the institutions North and South, in particular in the North, in respect of driving on the all-Ireland economy?

In a follow-on regarding the in-out referendum on the European Union, some of the parties have proposed, with the support of some businesses, that were there to be a referendum and were it to take place in 18 months or two years' time, there should be a separate vote in the North. In other words, whatever way the people in the North voted, such as if they were to vote "Yes" to stay in the European Union, then that should be respected. How would that work or is that something to which the witnesses have given thought in terms of their own organisations? The second element is one now may be looking at more fiscal powers for the North. It was a commitment that was given by David Cameron after the election because of similar commitments now being given to Scotland. Consequently, what pitch would the witnesses make? What fiscal powers does the North need? I note Mr. Padraic White also touched on this in terms of a distortion of taxes. If one is looking at harmonisation of taxes, which would make sense and which would benefit an all-Ireland economy, what ones would the witnesses consider and what would they advocate should be the priority at that level?

The final question I have relates to another reality. It might be unpopular to say it at times, but we are told that the public sector in the North is too big and the private sector is too small. I agree that the private sector is too small. The question is how we can grow the private sector in the North. If we had a more unified economy, would that in itself deal with that reality? Perhaps that is a question for Mr. Michael Burke. That links in with the fiscal policies, because if we grow the private sector and we have more fiscal powers, that would give the Assembly and the devolved politicians the resources to meet the needs. Mr. Burke touched on the social, economic, environmental and co-operative priorities. That can only be done with resources. If we had more capacity to do it within the Assembly, it would benefit the situation greatly. How beneficial would the growth of the all-island economy be to the growth of the private sector in the North?

Mr. Padraic White:

I will cherry-pick some of the questions on which I think I am competent. Senator Cullinane asked how effective are the North-South ministerial bodies. Having been engaged in different arenas, my sense is that the political momentum both North and South has declined. I take the example of the N2-A5. At one stage that road was a major political priority and the Government was prepared to commit €400 million of our money to the northern section of it but now it hardly figures. I do not detect any political momentum in regard to it. Unfortunately, that is a fact of life at the moment, which is regrettable.

In terms of fiscal powers for the North, the one on which the business sector and the Governments have been campaigning is the right to lower the corporation tax rate to 12.5%, which is the rate in the Republic. I personally am a strong advocate for an all-island economy. In a way, one of the real tests of that is whether one is prepared to support a 12.5% rate of corporation tax on both parts of this island, and I am.

I am also a strong advocate of co-operation between the agencies, North and South, in foreign direct investment in the interests of the whole economy. However, it is an area on which people speak with forked tongues. It is the last area that is effectively untouched by North-South co-operation because in both jurisdictions there is a highly protective attitude towards it, in addition to a lot of undeclared attitudes. I have always been unequivocal on the need for much greater co-operation between the investment agencies on both sides, in particular in the interests of some of the Border areas. That is my position on the matter.

In the private sector, the work with InterTradeIreland on the SME sector in the North and in the Republic is helping the evolution of the private sector. In a way, there is no magic bullet. One has foreign direct investment, which comes in with its intellectual know-how and its markets. There is no short cut to growing one's indigenous companies. It is painful. Much work is being done. Mr. Aidan Gough referred to schemes which are part of the process. We miss the co-operation, in particular in the Border areas, between Enterprise Ireland and Invest Northern Ireland where collaborative work across the Border looking at clusters of like-minded industries with a positive attitude to collaboration in an area of weak urban structure could achieve a lot.

Parts of the ecosystem for emerging SMEs are being put in place in the North. I am involved in the Bank of Ireland kernel capital growth fund, which invests between £250,000 and up to £2 million in emerging companies in Northern Ireland. We have invested in six emerging companies in the past year. They are the classic emerging companies that Northern Ireland needs that are not dependent on the local market, which are essentially global companies.

Dr. Anthony Soares:

I have a very brief comment in response to Senator Cullinane's question on the institutions and how effective they are. He referred specifically to the North-South Ministerial Council.

I would say the effectiveness of the institutions generally depends on the energy and ambition of the policy makers or, in some cases, political actors who inhabit those institutions. Great work has been done by the North-South Ministerial Council specifically, for example, in the area of cross-Border and all-island co-operation on health. In the enterprise area, a great deal of work is being done through InterTradeIreland, which is at the centre when these sectoral meetings take place. There has been a great deal of talk about how successful the two jurisdictions have been in working together to draw down EU funds. I would say the secretariat of the North-South Ministerial Council is very effective and supportive. It does great work. I have to acknowledge that it has been a great supporter and partner of the Border People project, which does very practical things to enable people to take up employment on either side of the Border. It is very effective in that case.

Dr. Conor Patterson:

I think the challenge with public sector efficiencies is that we have six rural counties and a relatively mid-sized or smallish industrial city with serious socio-economic problems. The public sector is already quite efficient, by the standards of other regions in these islands. The only way to achieve greater efficiency is by achieving economies of scale and we cannot do that. We need to have two health departments, two education departments and so on. The same structures are having to be made twice in one small population area.

I worry a little about fiscal devolution. I have some experience of Aberdeen, a city that is broadly comparable with Belfast. Could we tell people living in Aberdeen and six counties around it to sail off into the North Sea, be independent and pay for it? I think the Tories would love the North of Ireland to go wholesale for fiscal devolution because they would no longer have to cross-subsidise from the south east of England. I would like to know whatever happened to Northern Ireland being a failed economic entity in that analysis. In a region with a legacy of socio-economic problems that are products of partition, notwithstanding the great improvements that have been made since the Good Friday Agreement, how can there be fiscal devolution in the absence of an all-island framework? My response to the proposition is that fiscal devolution can only take place within an all-island framework.

Mr. Michael Burke:

I will comment to the two issues that were addressed to me in part. It was suggested that the private sector in the Northern Ireland economy is underdeveloped. I agree with Dr. Patterson that the public sector in the North is, with one very important exception, pretty efficient. I have already mentioned the important exception, which is the outsized level of the civil service and defence system there. It is twice the size of the equivalent system here as a proportion of GDP. I think that is a function of the political circumstances in which it operates. One would expect that would not be the case in a unified Ireland.

The private sector is underdeveloped. I would like to speak about one of the key problems in the history of the state. At the outset, the private sector there had a real role in the world. At that time, it was part of the British Empire, which was an enormous market, and it had a very specific industrial and shipping role within that. The British Empire has gone and there is no new role for the Northern economy. Successive Governments have attempted to overcome that by offering inducements to the private sector to invest. I suggest that the word "DeLorean" should be on the headstone of that policy. It really does not work. Public sector investment is required. Public sector investment does not work unless there is private sector investment as well. One cannot have public sector investment on its own. There is no reason on earth for the private sector to carry on investing in a tiny economy like that. The only way it would make sense would be if it were part of a larger unified economy with access to the European Union. It does not make sense to pursue the other policy I have mentioned. We have tried it and it has failed.

That relates to the issue of harmonisation of taxes and the devolution of fiscal powers in the North. There is an awful lot more heat than light generated by this discussion. It seems to me that the terms "harmonisation of taxes" and "devolution of fiscal powers" boils down to 12.5%, as if there are no taxes other than corporate taxes and that taxes have no purpose other than the tax rate, which is completely untrue.

I refer to corporation tax. Britain has a system whereby one can carry forward and carry back losses for, I understand, five years. That is unique in advanced industrialised economies. It is about what is taxed, rather than the rate at which it is taxed. The devolution of fiscal powers should be about what will be taxed, not simply the rate of tax. In all the jurisdictions we are discussing, the contribution of corporation tax is abysmally low across all fronts. Corporations do not pay much tax in any jurisdiction.

We should think about the whole gamut of taxes and their devolution, which I very much support in regard to the North, what we use them for, what we are taxing and what we are trying to achieve with taxation. I agree with Dr. Patterson. All of this makes sense only in a unified Irish economy because the required investment will not be achieved in a tiny economy like that in the North.

Feargal Quinn (Independent)
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It has been a very interesting debate and it has been good to hear the comments. Senator Cullinane touched on the point I was going to make when he referred to the possibility of Britain leaving the European Union. It would have such a major impact on us that it is very difficult for us to talk about the rest of the issues when that elephant in the room is hanging over us. It is perhaps only two years away and, hopefully, we will get through that. I will cover some questions.

I was impressed by Mr. Burke discussing agriculture versus food processing. The future is in food processing, which is more important than agriculture. There should be two different Ministers, one to cover agriculture and another for food processing. If a food processor states the best ingredients it can source for a product are not Irish made but will come from elsewhere and it will create jobs, that cannot be done if the same Ministry deals with food and agriculture. It is not a popular thing to say but it seems that is one of the areas we can address.

Mr. White's contribution was interesting, in particular the importance of the Dublin-Derry road. What do we have to do to get that off the ground? What went wrong? He said he does not know what went wrong, other than the fact the money we had allocated was not provided in the end. We do not hear a word about the project. It is an area about which we have to do something.

I refer to InterTradeIreland. What would Mr. Gough like to see happen? Is there anything we, the Northern Government or the British Government can do that will address what he wants? Could one button be pressed to achieve that? It seems that it is something we have to achieve.

From the point of view of Dr. Soares, what are the barriers to the Border development corridor? What is slowing down the process and stopping it from getting as far as it should?

I remember shopping for a wedding present with somebody from Limerick. When I suggested we buy Irish linen made in County Antrim, she asked, "Should we not support our own?". It seems the further one goes from the Border, the more partitionist one becomes. My father came from County Down and my mother from County Armagh. It never dawned on me not to regard County Antrim as part of my country but some people from Kerry and Cork do not seem to do so. What do we have to do, from the customer point of view, to get customers to be loyal to an all-Ireland economy rather than just being loyal to the part of Ireland they think they pay their taxes in and, therefore, recognise?

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Would Mr. Gough like to go first?

Mr. Aidan Gough:

We fully recognise the fiscal constraints under which the Governments are operating, both North and South, but if we had a wish list, it would be to be able to meet the demand from small indigenous businesses to participate in our programmes and to avail of the value we know is generated within those small businesses through cross-Border co-operation.

Dr. Conor Patterson:

My mother is from Dundalk and my father is from Newry. That was very common when I was young, but it is less common now. Social separatism has developed over the past 40 years. People follow institutional change, and given that policy and systems are back-to-back, with regard to currency and so on, it is not surprising that people in the North look north and people in the South look south. It is inevitable. The only way we will achieve change is through more locally led intervention supported by central government. It is the local people most affected by partition who know where change can be made in the most cost-effective manner.

Mr. Michael Burke:

There is a common answer to both points Senator Quinn raised, about food processing and agriculture and about how people internalise the partition Ireland has experienced. At an economic level, that is dealt with by branding. It is true that food processing adds more value to the production process than agriculture, but we cannot simply gear everything towards food processing and not concern ourselves with the agriculture sector. Apart from anything else, there will be major social deprivation as a result, which would destroy far more jobs and livelihoods than a world-beating food-processing sector would create, because a world-beating food-processing sector in Ireland would rely very much on capital investment and not on labour. The way to overcome that is to turn what is already a very productive food-processing sector into a world-beating one through the branding of Irish products. That does not happen on anything like the scale it should. I am old enough to remember, as are others here, how Kerrygold launched the career of Tony O'Reilly. That happened because a very good-quality product was turned into a global brand. People in all parts of this island would be very happy to buy Irish linen, or whatever, if they, like everyone else, saw it as the best in the world. To do that on an all-island basis requires an all-island economy, but that is what we should aim for.

Mr. Padraic White:

I will respond to some of the points made by Senator Quinn. The Dublin-Derry road has two parts, one of which is the N2 from here to Monaghan. After the St. Andrews Agreement and all the excitement about peace, that route was regarded as being of major significance to the whole Border area, opening up the north-west economy and helping to create an all-island economy. It is an eloquent testimony to the lack of public or political interest that we cannot find the €1.5 million to give to Monaghan County Council to advance the planning on our part of it. On the northern side, the planning permission was quashed, and it is now making its way in a leisurely manner through the new planning process. On both sides, one sees a lack of any real political urgency or engagement. It speaks most eloquently to the lack of interest in this subject.

Regarding the Border development corridor, we have a draft solidarity charter. If it is going to work, it must be built on the platform of support from local authorities, North and South, in the Border area.

Given that there are new local authorities in the North, their interest in it remains to be seen as they bed down. Dr. Anthony Soares and I were invited by the Irish Central Border Area Network, ICBAN, to a meeting of its management group which was attended by councillors from North and South in February 2015. We discussed it fully and it was unanimously endorsed by the councillors on both sides. As Dr. Conor Patterson said earlier, at local authority level people want to co-operate. It is almost as if they are trying to do it in a vacuum. I believe the will is there, but it remains to be seen.

I will make one final comment on the Senator's anecdote in respect of the wedding gift and so forth. Members might recall after the Good Friday Agreement the excitement in the South about visiting Northern Ireland. Hundreds and thousands of people from the South who had never been to Belfast visited the area and people were beginning to rediscover Northern Ireland. In my opinion, because of the lack of public and political engagement and the lack of a continuous espousal of an all-island economy, we retreated into our insularity and our separatism. It offends me personally when I hear representatives of the farmers' organisations imply that milk from Northern Ireland that is in our supermarkets should somehow not be regarded as Irish. I find that offensive and totally opposed to any sense we have of common solidarity as an all-island economy.

Dr. Anthony Soares:

In response to Senator Quinn's question regarding barriers to support of the Border development corridor, Mr. Padraic White has already addressed one of those which is not a barrier. The impetus has to be there from the local authorities, and local government reform on the Northern side has slowed things down slightly. On the issue of a higher policy level in terms of the two jurisdictions coming from both sides, I will give the committee an example of what was perhaps a missed opportunity which would have given an impetus to the Border development corridor. The European Commission designed not different programmes or a different set of funds but something called integrated territorial investment. The Commission recommended to both the Irish and UK Governments - this would affect specifically Northern Ireland - that they draw pots of money from whatever fund, the European Social Fund or the European Territorial Co-operation Fund, and put them together to strategically address one particular territory that they agree needs development. Both Governments could draw down all sorts of funds and combine them with their own central funds to strategically address something in the territory. We promoted this idea that integrated territorial mechanism was a tool that should have been used in this new EU funding period, but that potential tool was not used. That was a missed opportunity which would have given impetus to the Border development corridor.

Anthony Lawlor (Kildare North, Fine Gael)
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I welcome the representatives and apologise for my late arrival. Like Senator Feargal Quinn, I was doing business in the North for the first time in 1992 and 1993 when I was buying wool in Nationalist and Unionist areas. When I asked Unionist farmers how they felt dealing with a company from the South, I was fascinated when they said - typical of any businessman - that they were loyal to the Crown but more loyal to the half-crown. From that I found that if business could be done to break barriers it was easy to achieve much success.

A question I have not yet heard discussed is that of currency differentiation. Four years ago, many people travelled to the North to do their shopping, but that has stopped, due in part to the currency differentiation. At the time the UK economy was devaluing sterling against the euro. Now the reverse is happening, with the euro being devalued against the two major currencies.

From an all-island perspective, how should we address this situation? Should we have one currency for the whole island or a fixed rate? When the euro was being brought in, for a period of time there was a fixed rate between the various currencies. We may talk about tax harmonisation but unless something is in place, there will be violent fluctuations, such as those between the two currencies over the past year. It leads to difficulties for individuals and small companies, in particular, to trade cross-Border.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Would anyone like to come in on that?

Mr. Michael Burke:

My background is in currencies and forecasting analysis. The reality is there will be no fix between sterling and the euro. It would not be possible and it is not in the interests of the wider EU or Britain to do it simply because of the costs it imposes on the economy here, which is particularly, but not solely, felt in the Border region. That sort of proves the point that for one very large currency area and one significantly lesser currency area, the Northern economy is irrelevant. I say this in all honesty. For someone who lives in London, the Northern economy is never mentioned. No one cares about the Northern economy. One might argue that here people care insufficiently but at least there is some discussion. It is hardly ever mentioned in England. It would not be mentioned in the context of setting of currency or interest rate policy. It is never a consideration.

That being said, the point is very well made that the currency fluctuations between the two cause considerable disruption and dislocation. It makes it impossible to do long-term planning and investment. It even has the dislocating effect where one year, shops on one side of the Border do well while those on the other side go to the wall and then vice versabecause of currency movements. This is a factor in this sort of desolation or hole around the Border area which is where lesser economic activity takes place.

In the history of this State, there was a very decisive moment, which I remember well because I was working in the currency markets at the time, when sterling devalued and was ejected from the exchange rate mechanism, ERM, in 1992. The punt had been linked to sterling ever since the foundation of this State in one way or another and the very intelligent decision was made to devalue but stay inside the ERM. It was following that decision, FDI flooded into Ireland. That was helped along with European investment. The reason for that was that Ireland still had access to this considerable market, which is now 500 million strong in terms of population. If we take the European economy as a whole, it is the largest economy in the world.

For a unified Irish economy, there is really only one decision. One could not possibly go back to having sterling. That would be to partly undo all the achievements of the past 90 odd years. The other possibility is a new punt. That presents its own severe difficulties, with a tiny economy and also cutting itself off in a way that Britain would be doing. An alternative is to have the euro, for all its ills, for the whole-island economy. To me, that is the only sensible solution.

Anthony Lawlor (Kildare North, Fine Gael)
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Mr. Burke has definitely thrown a cat among the pigeons or among the politicos in the North of Ireland by suggesting that.

Mr. Michael Burke:

Probably.

Mr. Aidan Gough:

In InterTradeIreland, we work closely with small businesses across the island. We like to be on the pulse of small business so that we can form our supports to meet the challenges and opportunities they are facing.

One of the ways we do that is through our business monitor, which is a quarterly survey of businesses across the island. In our survey we routinely ask our clients about the main challenges facing them as a small business. Since we started the survey, the exchange rate has never been a major issue for businesses. Businesses can work around it. Those in the Border area have a depth of experience and operate largely as a dual currency area. Volatility, however, can be a factor. We have noticed in our latest survey, the results of which have not yet been released, that only 6% of businesses say the exchange rate is a factor, which has trebled from the 2% who considered it a factor previously. We are keeping an eye on this. The issue seems to be volatility.

Mr. Padraic White:

As has already been said, I think the currency is stuck. If the United Kingdom were to leave the European Union, the currency would be more stuck. The Governments on both sides of the Border have control over taxes and levies which do affect and can influence and distort trade. I mentioned that we unilaterally imposed a carbon tax on solid fuel. This does not apply in the North of Ireland. It has led to a distortion of trade and a major impact in the Border area, not to speak of the environmental effects.

Probably one of the few areas where there has been co-operation is in relation to excise duties on alcohol. My perception is that because of the horrendous effects of low alcohol pricing and binge buying, North and South, there is, whether explicit or otherwise, some kind of understanding and an awareness in both jurisdictions If we are serious about minimising distortions, the Executive in Northern Ireland, which has jurisdiction over taxes of various kinds, and our Government should at least consult with each other on the effect of tax on trade flows and on business. I do not believe that has been happening in any conscious way up to now. That is something within their own jurisdiction.

Dr. Anthony Soares:

I would like to underline what Mr. Gough has just said on the initial findings of a small piece of research. We are looking at North-South flows in terms of products, clients, and employees in the agrifood sector in four counties and we are looking at micro businesses, farmers, retailers, restaurants and some hotels. On the issue of currency differentials, very few of them mentioned this as a problem. In fact, in response to the question on whether the currency differential is a problem, they have said that it is not. In fact, they mentioned that some of the businesses they deal with are so used to the currency differentials that they invoice them in the appropriate currency that will minimise the disruption to the buyer. Farmers were the one exception and they mentioned the currency more frequently, although it still was not something they brought up as a major issue.

On the question of whether smaller businesses were looking for buyers on the other side of the Border, I can give an example of a business with an export licence which was asked if it exported to the other side of the Border and its response was, "No, we do not go looking for them and they do not come looking for us". They had some very good reasons for their business as they were happy with the market they had and they did not really wish to expand to the other side of the Border. They thought trading with the other side of the Border would complicate matters as they would have to deal with two sets of regulations and, therefore, they would rather stay within the one jurisdiction. Every now and again there was the case that the grass was greener on the other side, that things were done better and that business was better on the other side, but one would hear the same response if one questioned people on the other side of the Border. People in the South think the North has it better. If one is in the North, the southern business sector has it better. The currency differentials did not come up as a major issue.

Peadar Tóibín (Meath West, Sinn Fein)
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Senator Cullinane mentioned political resistance in the North but I would be surprised. There is passive political resistance in the South to issues such as harmonisation.

With regard to currency differences, I can understand why businesses in the North did not previously identify currency as a major problem. Historically, the currency differential has been beneficial until the present but it must act as a brake on investment. If I was looking for a retail investment on the Border, given the retail benefits that have swung to the South, it must act as a brake.

Are there international comparators for the objectives we share with regard to an economy being further integrated? What steps can be taken? It might not be specifically obvious right now.

Mr. Michael Burke:

Historically, there are any number of examples. Many countries have been unified sometimes after a period of colonialism. While I do not know of one, there may be the odd one or two where the situation has not been improved by unification. In general, the simple act of unification is an economic boon for the reasons I advanced earlier.

In the more recent period in Europe, particularly in eastern Europe, we have seen countries break up. Arguably, some of them were yoked together bureaucratically but, in general, the economic picture in eastern Europe has not been bright, although there are exceptions. Part of the argument about the division of labour is that it takes place both in the home market and the international market. The more collaboration and co-operation we can achieve, the greater the scope for the division of labour, which is the primary factor driving prosperity. With any US car, only 35% of it is made in the US, with the rest made in many other countries around the world. There is a general tendency for trade to be internationalised. Having barriers between natural economic units like the two jurisdictions on this island makes no sense in that general environment.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I thank the witnesses for attending to engage with the committee. All contributions and submissions will be considered in the context of our committee's deliberations on the report on the topic. Our next meeting will resume the discussion on the all-island economy and engage with the designate chair of the panel of adjudicators required under the Construction Contracts Act.