Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Chairman for the opportunity to speak here today on the Government approach to the future EU budget and the next multi-annual financial framework for 2021-27; the country-specific recommendations for Ireland as related to my Department; developments on banking union and the recently published EU legislative proposals for whistleblower legislation.

Turning to the first item, the European project has helped to transform Ireland from being one of the least developed member states when we joined, to one of the most prosperous today. We all recognise how we have benefitted from the European Union and it is important to use that experience to help shape the debate on the future of Europe and on what our priorities should be. The post-2020 multi-annual financial framework, MFF, comes at a time of change and adjustment for the EU. Longer-term challenges such as economic competitiveness, youth unemployment and climate change, emerging challenges to international trade and access to the Single Market, as well as international challenges, such as migration, security and terrorism have become more pronounced. In addition, the departure of the UK will cause both short and long-term practical challenges for the MFF.

It is worth recalling how Ireland's relationship with the EU budget has evolved. As the committee will be aware, Ireland has traditionally been a significant net beneficiary of the EU budget. From accession in 1973 to 2016, we paid in approximately €34 billion but received €76 billion, €42 billion more than we contributed.

On foot of our growing prosperity, however, we have moved from being a net beneficiary to a net contributor. Member state contributions to the EU budget are calculated by the EU Commission in line with the provisions outlined in the own resource decision, which was ratified by all member states in 2016. There are three sources of EU revenue or own resources, namely, customs duties, contributions based on VAT and contributions based on gross national income, GNI. When taken together, the traditional own resources and VAT elements account for approximately 30% of member state contributions. The remainder comes from GNI. This is an important element, as it links the contributions of member states to the size of their economies.

Given the high levels of economic growth in Ireland in recent years, combined with a lack of such growth among other member states until recently, our overall share of contributions to the EU budget has grown and Ireland became a net contributor to the EU budget – on a cashflow basis - for the first time in 2014.

Ireland's current contribution as set out in the stability programme update and is forecast to be approximately €2.7 billion in 2018 moving towards €2.9 billion in 2019. It is worth noting that while these forecasts are volatile and contingent on a number of variables, the trend in Ireland's growing contributions is continuing.

Under the current MFF, it is forecast that Ireland will receive just over €12 billion over the course of the seven years, of which 80% comes through the Common Agricultural Policy, CAP, and is spent on areas such as direct income and market support to the agricultural sector. Further moneys are received for rural development programmes. There is broad awareness in both urban and rural areas of Ireland of the role which these funds play. While Ireland has benefited enormously from structural and cohesion funding, which continues to play an important role for many other member states in fostering economic development and prosperity, receipts in this area have been declining in recent years because of our economic growth. I welcome especially the Commission's proposal for a new PEACE PLUS programme to continue and build on previous PEACE and INTERREG programmes. The Government has been consistent about its commitment to the implementation of the current programmes and to successor programmes beyond 2020.

Ireland has also benefited from, and is supportive of, programmes for competitiveness for growth and jobs, including Horizon 2020, Connecting Europe Facility, and Erasmus+. For example, the Horizon 2020 programme to support research and development is an important driver of research excellence, and Ireland is on track to achieve €1.2 billion in competitive funding under the current MFF in this area. Ireland welcomes the European Commission's publication of proposals on the post-2020 MFF programme. While many parts of the proposal have been published, a number of others have yet to be released. A key point in the proposal is €1.135 trillion in commitments in 2018 prices, or €1.279.4 trillion in current prices, covering the period 2021 to 2027. This is equivalent to 1.11% of the EU 27's gross national income. Further key points in the proposal include more funding for priority areas, including research and innovation, young people, the digital economy, border management, security and defence, CAP, Cohesion Policy funding to be reduced by approximately 5%, and Erasmus+ to be doubled.

The Commission has made a number of proposals on own resources, including an increase in the own-resources ceiling from 1.2% to 1.29%; a reduction from 20% to 10% in the amount member states can retain when collecting customs revenues; a more simplified approach for calculating VAT payments to the EU; the retention of gross national income, GNI, and the elimination of rebates.In addition, the Commission proposes a number of measures to increase own resources, including, for example, 20% of the revenues from the emissions trading system; 3% of the proposed common consolidated corporate tax base, and a national contribution calculated on the amount of non-recycled plastic packaging waste in each member state, set at 80 cent per kilo.

The Government has begun to develop a national position on these matters. We believe that the MFF post 2020 should continue to adapt to evolving priorities. We also believe that we should not lose sight of the value and contribution of traditional policies, including agriculture and cohesion. CAP is a key national interest and will continue to be so. We want the EU to continue to fund programmes that work and work well. Expenditure in the area of agriculture helps to support 44 million jobs across the EU while contributing to food security and safety, rural sustainability and environmental standards. Cohesion is another important policy tool of the Union. Structural Funds for less developed member states of the Union will enable them to unlock their economic potential, which will benefit all of us in the long run. We will need to consider carefully the implications of any amendments in these areas. We welcome the emphasis on other policies that function well, including Erasmus+, the framework programme for research and innovation and the EU's global instruments. It is vital also that there be a continuation of the PEACE and INTERREG programmes post Brexit as foreseen in the Commission's progress report from last December.

Ireland believes that the amount of expenditure at EU level will need to be proportionate and appropriate to the overall levels of available funding and that the discussions on the post-2020 MFF priorities and objectives will need to be framed in this context. That accepted, the Taoiseach has indicated that Ireland is open to contributing more provided that it meets European added value objectives. As the committee will appreciate, the Commission's proposals are complex and will require careful analysis and study. They are underpinned by legislative proposals in each of the sectoral areas. All relevant Departments are examining these carefully and will prepare to engage in the detailed discussions which will begin at official level. We will engage in a positive and constructive way.

As members will be aware of what the country-specific process entails, I will skip to comments on the recommendations. Similar to last year, Ireland received three recommendations in the areas of fiscal policy, Government expenditure and investment, and the management of long-term non-performing loans, respectively. CSR 1 deals with the effectiveness of public finances and expenditure. In particular, it focuses on the reduction of Government debt and broadening the tax base, as it did last year. Our stronger than expected headline growth in 2017 has allowed us to make good progress towards achieving our medium-term objective and reducing Government debt, which has also benefited from the use of windfall gains from the sale of part of AIB.

CSR 2 addresses the implementation of the national development plan. This recommendation reflects the Government's investment priorities and dovetails with our stated priorities, including child care, housing and water services. For the first time, CSR 3 focuses on productivity growth, with particular regard for small and medium enterprises. This is welcome as the Department has collaborated with the OECD on firm level productivity research, which was published in March and on which a presentation was given at the March ECOFIN. CSR 3 also emphasises resolution of long-term loan arrears, building on initiatives for vulnerable households.

These recommendations have been examined by my Department and are not surprising given the emphasis placed on these areas in the country report. Such recommendations are to be expected for a growing economy and I agree with their overall substance. The country specific recommendations will be on the agenda for discussion and agreement at the ECOFIN Council on 22 June and, following that, they are expected to be endorsed by the European Council at the end of June. They will finally be adopted at ECOFIN on 13 July. Member states will then be able to reflect them in their budgetary and policy plans for 2019.

I turn now to the issue of banking union. As members will know, in response to the financial crisis, a number of initiatives were introduced at EU level to create a safer financial sector. These initiatives form a single rule book for all financial actors in the EU member states and consist of a set of legislative texts that are applied to all financial institutions across the EU. Specifically, the rules include capital requirements for banks, rules for managing failing banks and improved deposit guarantee schemes. The most significant elements are the capital requirements regulation, the bank recovery and resolution directive and the deposit guarantee schemes. The Commission has also proposed a European deposit insurance scheme, or EDIS. In addition to this single rule book, which is the foundation of banking union, there was a commitment to shift supervision to the European level with the introduction of the Single Supervisory Mechanism at the end of November 2014 and later with the establishment of the Single Resolution Mechanism. A roadmap for the creation of banking union set out the main steps to be undertaken. The three pillars to be set up comprise the Single Supervisory Mechanism, the Single Resolution Mechanism and EDIS, the European deposit insurance scheme.

At the ECOFIN meeting in May, Ministers agreed the latest measures in banking union, known as the risk reduction measures. These measures were proposed by the European Commission in November and are aimed at implementing reforms agreed at international level. The package comprised two regulations and two directives and is aimed at updating and amending the capital requirements regulation, the capital requirements directive and the bank recovery and resolution directive, which are the aspects of the single rule book which underpin the first two pillars of banking union. These proposals are simply aimed to ensure that banks have sufficient loss absorption and recapitalisation capacity in the case of a bank resolution.

The aim is to enable banks to continue critical functions without endangering financial stability or requiring taxpayer support. One of the key amendments introduced at EU level was the total loss absorbing capacity standard, which had been agreed at international level for global systemically important banks. The total loss absorbing capacity standard was integrated into EU law as part of the package that was agreed in May. The amendments to the capital requirements regulation and the capital requirements directive introduced stronger prudential requirements for banks to ensure they are adequately capitalised and less susceptible to liquidity issues. For the most part, these amendments aim to implement additional international standards that have been agreed since the implementation in 2013 of the original capital requirements regulation and the capital requirements directive. They also include measures which aim to reduce the regulatory burden on smaller and less complex banks. I believe that the package agreed at ECOFIN is a good one. I hope the European Parliament will be able to start negotiations shortly, thereby allowing us to agree these proposals and enact them as soon as possible.

The final item the joint committee has asked me to address is the proposed EU directive on the protection of whistleblowers. As members may be aware, Ireland is one of just ten EU member states to have enacted a comprehensive package of protections for whistleblowers. We did this when we introduced the Protected Disclosures Act 2014. While I welcome the EU initiative in this area, careful consideration of how the EU proposals will interact with the operation of the 2014 Act is needed. I do not want the protections offered by our legislation to be diluted. I am pleased that the approach taken by the EU mirrors many of the provisions of our legislation. For example, it applies to broad categories of workers. The protections from retaliation provided for in the draft directive are broadly similar to those provided for in our legislation. They include protection from dismissal and other forms of detriment such as reduction in pay, suspension, demotion or withholding of promotion.

There are a number of important differences between the proposed directive and the 2014 Act. The directive applies to a wider cohort of persons and a wider range of matters. It specifically obliges businesses with more than 50 employees or a turnover of €10 million or more to establish formal channels and procedures for receiving disclosures. Companies in financial services or other areas at high risk of being vulnerable to money laundering or terrorist financing will be required to establish internal channels irrespective of size. The practical implications will require careful consideration and clarification. The transposition of the directive, if it is adopted, may require some amendments to the 2014 Act to reflect the provisions of the directive and ensure harmonisation of the procedures for making a disclosure under the directive and 2014 Act. As the committee may be aware, a statutory review of the operation of the 2014 Act is being finalised. The potential impact of the directive will be taken into consideration in the review, which I aim to publish by the deadline of 8 July. I hope I have given the committee an outline of the various issues it asked me to address. I will be happy to take any questions that members may have.