Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

Tá leithscéal faighte ón Teachta Ged Nash. Apologies have been received from Deputy Ged Nash.

Is mian liom na riachtanais bunreachtúil seo a leanas a meabhrú do chomhaltaí. Nuair atá páirt á nglacadh acu i gcruinnithe poiblí, caithfidh siad a bheith i láthair go fisiciúil laistigh de theorannacha suímh Theach Laighean. Ní cheadófaí do chomhaltaí páirt a ghlacadh i gcruinnithe poiblí nuair nach bhfuil said ag cloí leis an riachtanais bunreachtúil seo. Mar sin, má ghlacann aon chomhaltaí páirt ó lasmuigh den suíomh, iarrfaidh mé orthu an cruinniú a fhágáil. Maidir leis seo, iarraim ar chomhaltaí a dheimhniú go bhfuil siad i láthair laistigh de phurlán Theach Laighean sula ndéanann siad aon ionchur sa chruinniú ar Microsoft Teams. Fiafraítear de chomhaltaí cleachtadh parlaiminte a urramú, nár chóir, más féidir, daoine nó eintiteas a cháineadh ná líomhaintí a dhéanamh ina n-aghaidh ná tuairimí a thabhairt maidir leo ina ainm, ina hainm nó ina n-ainmneacha ar shlí a bhféadfaí iad a aithint. Chomh maith leis sin, fiafraítear díobh gan aon rud a rá a d’fhéadfaí breathnú air mar ábhar díobhálach do dhea-chlú aon duine nó eintiteas. Mar sin, dá bhféadfadh a ráitis a bheith clúmhillteach do dhuine nó eintiteas aitheanta, ordófar dóibh éirí as an ráiteas láithreach. Tá sé ríthábhachtach go ngéillfeadh siad leis an ordú sin láithreach.

I advise members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex in order to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, a member who attempts to participate from outside the precincts will be asked to leave the meeting. In this regard, I ask any member partaking in the meeting via MS Teams to confirm, prior to making a contribution, that he or she is on the grounds of the Leinster House campus.

Members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if members' statements are potentially defamatory in respect of an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative that members comply with any such direction.

We welcome to the joint committee the Minister for Finance, Deputy Paschal Donohoe, to discuss developments in the economy in the year to date. We are living in turbulent times, with international affairs requiring the State to respond in an economically appropriate manner. This committee, in its preparation of its work programme, aims to raise, consider and report on a wide variety of issues within the Irish economy. It intends to consider the impact of Ireland's position on holding Israeli bonds and the impact of tariffs on the Irish economy in the upcoming weeks. These are issues facing Ireland regarding which there is an opportunity for the Government to present a best-practice approach. To this end, the committee will raise these issues with the Minister today. It will also do so with other vital stakeholders. This is the joint committee's first engagement with the Minister in this Dáil term. It is hoped that it is the beginning of a positive and collaborative approach between members and the Government. I invite the Minister to make his opening statement.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I thank the Cathaoirleach for the opportunity to attend a meeting of the committee to discuss Ireland’s economic performance. The global trade environment we now face looks very different from what we became accustomed to in recent decades. It is one increasingly characterised by economic fragmentation, polarisation and self-reliance. This is very different from the old norm of deeper and deeper integration that was successful in lifting billions out of absolute poverty. Tariffs, which are taxes on imports, are a symptom of a new normal. Their introduction is regrettable. They drive up prices for consumers and businesses and create lose-lose outcomes. They run the risk of generating tit-for-tat responses and are almost always regressive.

As the committee will be aware, trade policy is a European Union competency. The Tánaiste is working with his counterparts in the member states and with Commissioner Šefovi towards agreeing a negotiated solution that will benefit those on both sides of the Atlantic.

Let me turn now to developments in the Irish economy. Despite trade, geopolitical and other challenges, incoming data confirm a strong start to the year. On an annual basis, the economy added 90,000 jobs in the first quarter, bringing the level of employment to 2.8 million. Never before have so many people been at work in Ireland. On the prices front, inflation has been at or below 2% for over a year now. Our budgetary figures remain in the black thanks to sensible management by the Government and the hard work of the people of Ireland. Looking ahead, however, the outlook for this year and next year is dominated by uncertainty. Earlier this month, my Department published its spring forecasts, as part of annual progress report. The key message from our analysis is that uncertainty is prompting households to increase precautionary savings and firms to delay, or even postpone, investment. This means that even in the absence of further tariffs, we have revised downwards our projections for growth this year.

The baseline forecasts were produced during March on the assumption that transatlantic tariffs would be introduced. On this basis, modified domestic demand, which is the figure for the Irish economy minus the figure for the accounting effects of larger companies, is set to grow by 2.5% this year and 2.75% next year. My Department published an alternative scenario that included a 10% tariff on US imports from the EU in most sectors. In this scenario, growth is expected to be around 1.5% lower than in the no-tariff baseline scenario by the end of 2026. Unfortunately, that scenario is now exceeded in the current tariff outlook. The impact on the Irish economy would be far more severe if US tariffs on EU goods were to increase to 50%, as was suggested late last week. There is simply no precedent from which to make confident projections of the impact of trade de-coupling. I have stressed that the numbers set out in the annual progress report are as much scenario analysis as firm forecasts at this point.

Let me turn to what we can do. Against the backdrop I have outlined, we have to double down on our ability to make Ireland attractive and create good jobs here. This means a greater focus on our competitiveness, most notably on those areas we can influence. I am talking here about improving our energy and water infrastructure, boosting our transport and housing stock, simplifying our regulatory environment and ensuring labour costs increase in line with productivity. We will also continue to invest in education, skills and training to boost our human capital. We must build up safety in our public finances, including through transfers to the Future Ireland Fund and the Infrastructure Climate and Nature Fund.

It seems as if we have been in a permacrisis for about a decade or so – from Brexit and the pandemic to energy prices and trade disruption – but the evidence is clear that our economy has been resilient and has recovered. A record number of people are at work and the public finances are currently healthy. That is not to deny for a second that there are many problems. I am well aware of the many challenges, including with housing. We are entering a period of economic turbulence and higher uncertainty. Overall, we are entering it from a position of economic strength.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

Go raibh maith agat, a Aire. Osclóidh mé suas é anois. I thank the Minister. I will now invite members to discuss the matter. I remind those participating remotely to use the raise-hand feature and cancel it when they have spoken.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
Link to this: Individually | In context

I thank the Minister for his contribution. Regarding the answers to questions he sent in beforehand, I want to follow up on No. 7. In his answer to that he stated that by the end of 2023, the Ireland Strategic Investment Fund, ISIF, had €4.2 million directly invested in occupied Palestinian territories and €9.4 million indirectly invested. He went on to say that over the course of 2024, €2.59 million had been divested. Does that €2.59 million come from companies directly or indirectly invested in occupied Palestinian territories? Are there plans to divest the remaining €10.65 million? Will the Minister give us the timeline for that? He might answer that before I ask a question on a different topic.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I do not know the answer to whether the companies were directly or indirectly involved in the occupied territories. I can find that out for the Deputy. I know what the companies are. I think that information was supplied in the written answer the committee received. It should be emphasised that the overall value, as the Deputy said, of the investment in the occupied territories is now very small. It is an extremely small share of the overall investment fund that ISIF manages. ISIF is independent of me. It makes decisions in line with its own investment mandate. I also know that it is well aware of the public debate regarding the investments.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
Link to this: Individually | In context

I touched on the issue of corporation tax, IP and related assets with the Minister earlier. Dr. Aidan Regan in UCD has done detailed work in this area and is a leading expert on this. The Minister said previously that these are operations of substance involving research and development, that people are employed and that there are services and manufacturing. Dr. Aidan Regan has done much detailed research on this area and has given a contrary view. He said what mostly resides in Ireland is not the intellectual property itself, but the right to monetise it and financial instruments designed to reroute global profits with minimal local activity. He goes on to say that windfall corporation tax receipts rest on fragile accounting arrangements, and that a multinational can therefore hold the underlying IP in the US while assigning the right to monetise it elsewhere to an Irish subsidiary, with the US parent retaining control of research and development while the Irish entity books international income, claims the profits and pays little tax. He says that these arrangements run counter to the spirit of international tax reform. He says that what is in Ireland is not substance but legal scaffolding. I would be interested in hearing the Minister's response to that because Dr. Regan has done detailed work in this area.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I respectfully disagree with Dr. Regan. I considered his analysis and saw the reports on it. I said earlier to the Deputy, when I made the case again, that in my experience the vast majority of IP that is located here is here due to people, history and the substance located here. Regarding the risks that Dr. Regan is flagging, I accept some of the points he has made. I have been making the same point for a number of years, saying this is why we need to run budget surpluses. The reason we are running a budget surplus of over €8.5 billion, which is a big share of the total amount of tax that we collect in Ireland, is that I have long acknowledged that a decision by a single company could have an effect on the tax revenue that we collect. For many years now, my Department has published an analysis that shows that some of the corporate tax revenue that we collect is dependent on a small number of taxpayers and I have used that as the argument for running budget surpluses. If that risk were to materialise, it would mean that the first way in which we would accept that loss of tax revenue would be through our surplus going down.

Shay Brennan (Dublin Rathdown, Fianna Fail)
Link to this: Individually | In context

I thank the Minister for taking the time for these questions. I have questions under three or four categories. The first relates to infrastructure. Are any infrastructural projects being delayed or deprioritised purely because of financing? I have seen figures suggesting that we need about €200 billion in infrastructural investment between now and 2035, which is ten years. It seems like a low figure to me. I am excluding housing from this and talking about general infrastructure. Even today, we see reports of Uisce Éireann needing €10 billion. The consensus about the current state of our infrastructure is that we have much catching up to do. In order to do that, given the low debt to GDP ratio, with the debt to GNI ratio being about 65%, which is 22% below the European average, we would seem to have headroom to borrow for infrastructural development. Given that infrastructural investment tends to bring a positive report and given that we have a low debt to GNI ratio, it would make a lot of sense to front-load much of that investment. Is the Minister able to comment on that?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I thank the Deputy for his question. There are always projects ready to go which need funding. Whether they are delayed or not depends on one's perspective. Every single State body will have projects that it wants to deliver for which it needs funding. State bodies have to make the case to the Government for that funding. I know the Deputy is not suggesting that every single project should be funded immediately, but I am answering his question directly when I say that I do not consider that those new projects are delayed, but I consider that to be the normal prioritisation that a Government has to make.

On the point regarding borrowing, it would be a traumatic swing for Ireland, which I would want to avoid, to go from a large surplus to borrowing quickly. We are in a better place where we are able to position ourselves as being a surplus economy. I would make the case for a large swing if we were to get into an environment in which our economic fortunes were really beginning to change and we needed to borrow to put a big injection of demand into our economy to keep jobs and stimulate our economy if our growth was beginning to go down. We are not in that position at the moment. I hope we will not be and I have just outlined my view of the economy. I also know, as the Deputy knows, how quickly things can change.

Instead, the approach that the Minister, Deputy Chambers, and I are working on, which I think is the right approach to use for now, is that we have at least €14 billion of funding that will be available from the Apple judgment and some billions of euro that are available from various decisions we have made regarding our banks, and we have existing capital ceilings that already show growth up to 2028 or 2029, but the money has not yet been allocated to different Government Departments. Between the combination of both those things, the Government will make significant additional capital allocation to individual Departments.

To try to answer the Deputy's question clearly, I would only countenance borrowing if we found ourselves in a position where economic growth was really beginning to change and we had a concern that the number of people at work in our economy was going to go down. Otherwise, we will run into real issues regarding whether people are available in our economy to do the work. Despite everything that is going on, I still encounter so many employers that tell me that the issue they have is getting and keeping talent. We need to be conscious of that too, as I know the Deputy will understand.

Shay Brennan (Dublin Rathdown, Fianna Fail)
Link to this: Individually | In context

I appreciate that answer. The second question is about the climate targets. What is the confidence level in the Department of Finance about meeting those targets? It is a financial risk and we are likely to be on the hook for between €8 billion and €26 billion, potentially. Given that there is an estimate of how likely we are to incur that cost, is the money being ring-fenced for if and when it is needed? Are we just proceeding to see if we do not get fined and, if we do, will we have to take it out of that year's budget?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I have a very high level of confidence that all that can be done to meet the targets, while assisting our economy in still growing, is being done. I can see a gigantic amount of activity under way. Meeting the targets will be extremely challenging and difficult. Many countries will struggle to meet them but we face a particular challenge due to the features within our economy.

In terms of how we would account for how we pay the fines in the future, we will, first, do all we can to avoid having to pay them by being able to show good faith, and, I hope, evidence, we are meeting or coming closer to the targets. If the fines are to be paid, they will have to be found in two different ways. We could either pay them from the budget surplus, as I hope we still have at that time, or from the money we will have built up on our balance sheet as a State, which we are slowly but significantly building. We have a particular pot in the climate and nature fund, although my preference would be to use that fund to spend money to minimise the targets, rather than having to leave aside money to pay fines.

Shay Brennan (Dublin Rathdown, Fianna Fail)
Link to this: Individually | In context

The Minister is referring to the sovereign wealth fund. There are two funds there accruing money; two saving accounts, in essence, for want of a better way to describe them. What are we saving for? What is the Government's ambition for those funds? I hope they will not have to be spent on fines. Is there an ambition down the road to build them up to €50 billion or €100 billion and, at that point, start to look at what projects are available?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I emphasise again that my preference would be not to use the funds to have to pay any fines. My expectation is that if we are in a position where we have to pay fines, it would, unfortunately, become a budgetary decision and we would have to look at the money we have available across our country as a whole.

The Deputy asked what the money is being used for. The climate and nature fund has a clear enough narrative around it, which is that the money be available to invest in climate-related activity, reduce emissions and help with decarbonisation of our economy. The rubber is really about to hit the road on all of that in the next few weeks. One of the issues the Minister, Deputy Chambers, will be considering is an early allocation of that fund to help fund projects in different Departments that would assist in decarbonisation.

For me, the really important fund is the Future Ireland Fund. Basically, we will have a stock of money we will build up for use in the event our country ever again gets into terrible difficulty. Hoping we can avoid that, the real benefit of the fund is the Government agreement that the returns from the fund would be counted as Government revenue and used to deal with the costs of demography in the time ahead.

It is possible, by the late 2030s or early 2040s, that we could have nearly €100 billion in these funds, which would be a colossal amount of money for an economy of our size. The late 2030s is a long way away but even to be where we are at the moment, with €15 billion or €16 billion built up by the end of this year, gives me some comfort that if we were to get into difficulty, we have money available to use. I hope that does not happen. The real benefit of it is not so much having it there as an insurance policy. The real benefit is that if we have a fund built up of €40 billion or €50 billion and it is sensibly managed by the State, as it will be, the return it will give back to us per year will make such an impact in dealing with costs we know are coming our way. Those costs are not only because we will have more people living in Ireland, which is amazing, and more people living for longer, which is great, but because they will be older and there will be costs associated with that for which we are not currently well set up enough to be able to pay.

Shay Brennan (Dublin Rathdown, Fianna Fail)
Link to this: Individually | In context

I have an ancillary question. With an €8 billion surplus per annum, give or take, are there any plans for additional sovereign wealth funds or will it be confined to just those two?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

We are doing well with what we have. We will do well to put in the deposits we want to make. The Government is committed to doing that, and the Taoiseach and Tánaiste are very personally committed to it. As much of a budget hawk as I am, even I would not propose to set up another fund at the moment. We have too much going on and too many demands, many of which will need real investment.

Shay Brennan (Dublin Rathdown, Fianna Fail)
Link to this: Individually | In context

What is the Minister's outlook on the lasting effects of the current global economic turmoil and tariffs in particular? If modified domestic demand falls to 1%, for example, does he see the economy being robust and resilient enough to rebound from that or is there likely to be a shift such that until those tariffs are taken away, we will permanently be operating at a lower level?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

My best judgment at the moment is that most scenarios are ones in which the Irish economy continues to grow but grows at a slower pace. That slower pace of growth would still compare really well with all parts of Europe and still deliver more people at work in Ireland than there were when I began working. That applies in most scenarios. There are extreme scenarios that could arise that relate to what would happen in regard to taxation and trade policy. That could affect, first, our public finances and then broader growth within our economy.

What is really important is the work under way by my officials dealing with our negotiations with regard to tax and also the work of the Taoiseach and Tánaiste in influencing the EU and trying to make points to the US to avoid the worst happening. That is the best answer I can give the Deputy. Many a finance minister confidently predicted what will happen. I have learned the value of a bit of humility in our predictions. I have also seen, on two different occasions, that our economy has recovered far faster and far stronger than most expected. There is an enormous strength within it but we must make a few decisions ourselves to make that strength at a higher level.

Shay Brennan (Dublin Rathdown, Fianna Fail)
Link to this: Individually | In context

I agree with that.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

It goes back to the point the Deputy opened with regarding investment. I have outlined the uncertainty that is there and the many different scenarios. I tend not to spend too much time contemplating all of them. Instead, we focus on what we can do that can make a difference. The Deputy opened with a good example in the question of how we can invest more and get more out of that investment.

Shay Brennan (Dublin Rathdown, Fianna Fail)
Link to this: Individually | In context

My last question is to do with scenarios. In the Minister's opening statement, he spoke about stress testing for a 10% tariff scenario and how that would reduce MDD by approximately 1.5 percentage points, taking it to just above 1%. I note he mentioned deliberately not testing for a 20% scenario, which is a likely tariff outcome, albeit one of the worst-case scenarios. Extrapolating from the figures given, such a scenario would initially take growth to a negative figure. Why did the Department not test for a 20% scenario?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

We found ourselves in a situation where if we were to test for higher than 10%, it would be very difficult for us to figure out when we should stop with scenarios. As we did more and more of those scenarios, it became harder and harder for us to understand what would be the sector-specific effects in our economy and what they would mean for the national performance of our economy overall. If we look at the 20% figure, it would have a very negative effect on our economy overall but there are particular sectors within our economy on which that effect would be even higher. As we get into those more extreme scenarios, we find it very difficult to forecast what the impact on a particular sector will be and what it would mean for our macro figures and macro forecasts.

When we were preparing the annual progress report, 10% was the figure President Trump had been talking about and most analysts were referring to. Obviously, everything has changed again since then.

Alice-Mary Higgins (Independent)
Link to this: Individually | In context

I thank the Minister for the overview he has provided. Regarding the medium-term fiscal plan, it came in almost a lacuna in that the first plan came in during the election period with the knowledge that it would be reviewed by an incoming Government. As a result of the timing of when this plan, which Ireland is sending to Europe as our medium-term fiscal picture, appeared, there was very little scope for it to be examined and we did not really have discussion of the assumptions underpinning it, for example, some of the demographic assumptions. The Minister indicated that there are plans to submit a new plan by the summer but it would be very useful for this committee if he could unpack some of the assumptions going into the medium-term fiscal plan and the timeline for it because we may wish to provide input into it, given that it will set the picture around our fiscal relationship with the EU.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

It is nice to see the Senator. I have not seen her since the Seanad and Dáil were formed and I look forward to lots of debates with her in the coming years. The Senator is correct that the medium-term fiscal plan was submitted as a technical document by the Government at the very end of our term. The reason for that was because the Government was very conscious as we concluded that we still had to fulfil our commitments to the Commission and to fiscal rules that had just begun. It was very technical. The assumptions were all based on the assumptions we prepared on the budget. Things did not change between budget day and the submission of the play.

It is fair to say that it is very challenging for us to put together the new medium-term fiscal plan and we are considering how we do it. The reason for this goes back to the question put to me by Deputy Brennan. It is hard enough to know where the rules of trade will be in the second half of this year. To be able to tell the Senator where the global economy and the Irish economy will stand in 2028 or 2029 will be a challenge for us. We will need to produce a medium-term fiscal plan. We are considering the best way of doing it. Government thinking is still that we will do it by the summer but we are in a very fast-moving environment. For me, the key thing is that we do one, it happens early in the Government's term and we set the parameters for budget 2026 to give Government enough time to plan for it.

Alice-Mary Higgins (Independent)
Link to this: Individually | In context

The Minister will be aware that the previous finance committee gave substantial submissions regarding the formation of the new fiscal rules at EU level, some of which may be relevant in terms of the question of assumptions, for example, the issue of preventative expenditure and the idea within our fiscal assumptions that we identify areas whereby early expenditure will have a preventative effect that prevents later expenditure. This is somewhat different from simply framing within an investment and profit return frame. It is more expenditure and expenditure avoided. This will be a significant piece, particularly in the climate context and in terms of prudent risk-proofing. Perhaps that is one we might engage with. It is something we have looked to in our work plan.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

As the Senator is aware, there is a tradition that once the economic statement is agreed, be it an economic statement for 2026 or a medium-term fiscal plan, the Ministers for Finance and public expenditure normally come before this committee to present our work to it. I am sure the Senator would want us to continue to do that.

Alice-Mary Higgins (Independent)
Link to this: Individually | In context

The ICJ opinion from July 2024 is very clear in its language. It talks about members states' obligation to take steps to prevent trade or investment in the illegally occupied territories. The language is extremely clear. It is not an encouragement. It is the highest level of interpretation of binding international law. What are the plans to ensure that Ireland has fully prevented and seized any investment in the occupied territories? I recognise that there has been some divestment but this is not a sanction per se. It is an obligation in terms of legal compliance that we would not have any trade or investment in the occupied territories. I mentioned auto enrolment retirement saving, the funds that have been discussed and the provisions relating to legislation. Regarding those funds, fossil fuels and cluster munitions, the language is somewhat clear but with regard to other areas such as compliance on investment in the illegally occupied territories, it was more ambiguous when those funds were being created so it would be good to get assurance regarding those funds.

The Minister said the national automatic enrolment retirement savings authority will act as a safeguard to ensure consistency of pension investments with national policy and legislation. When the Minister for Social Protection was bringing it through, I looked to see whether constraints on fossil fuel investment and the cluster munitions legislation would apply. There was a pushback yet it is a large amount of public money that will be directed into this auto enrolment scheme. Are there actual safeguards in terms of ensuring compliance with all of those matters that the Minister rightly tells us the Future Ireland Fund and the Infrastructure, Climate and Nature Fund will comply with - things like tobacco manufacturing, nuclear weapons, cluster munitions and fossil fuels and ensuring there is no investment in those areas? We do not have a hard legislative measure attached in terms of the auto enrolment piece. Could the Minister comment on that?

There is a concern about the Central Bank's performance of its functions. The response seems to be that we cannot interfere with the Central Bank's performance of its functions but there is a concern about the performance of its functions within EU regulations. Completeness, consistency and comprehensibility are due to be the tests that are meant to be applied in assessing prospectus documentation. There are very many powers that a competent authority has. It can suspend an offer of security to the public.

It can suspend an advertisement. It can prohibit an offer of security to the public. I would say this is not around admission to trading on a regulated market. This is an offer to the public. These powers are all there where there is a concern in respect of an infringement. Indeed, under section 5 they do not need to approve a prospectus, which is that crucial step in a bond going for sale, where they find that the issuer is unwilling to make necessary changes to provide supplementary information which relates to the risks. This is the core issue, which is that neither the advertisement nor the prospectus provided by Israel in these instances makes reference to international law as a risk, or makes reference to either the ICJ ruling in January on the risk of genocide or the ICJ opinion in respect of July, both of which are very substantial. There are no caveats and there is no information as to how a purchaser of these bonds can be assured that they will not be in breach of international law. There are very clear warnings from the highest court that we have about the breach of international law in respect of the illegally occupied settlements, on the one hand, and the risk of complicity in genocide. These are really serious signals and they are not reflected in the prospectus or advertisement. More importantly, from our side, it does not appear that the Central Bank sought that supplementary information, required it and regarded it as important in terms of the completeness of an offering being made to the public. That is very poor for our reputation. It is a very dangerous precedent to set for bonds and how the performance of the very important supervisory functions of a competent authority, like the Central Bank, are being performed.

Separately, Governor Makhlouf has been very clear that if there were national restrictive measures for the sale of bonds - they could include, in terms of Israeli bonds, national restrictive measures for example in respect of the sale of any bonds relating to war or military activity, or such a situation - the Central Bank would comply with them. I have two questions. First, what steps might be taken in respect of concerns around how the Central Bank is performing its functions? Second, are national restrictive measures being considered? I ask because they would be allowed and would mean that the Central Bank was in a position where it could refuse to approve any prospectus and, thereby, facilitate the sale.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

There is a lot in the Senator's questions. I will try to say a few words about each of them.

In respect of the ICJ ruling, the Government of Ireland takes very seriously the responsibilities that we have with regard to the ICJ. The issue that we need to consider is what is the mix of actions that will allow us to fulfil the obligations that we believe we have to that ruling. This does rehearse the answer I am going to give the Senator for her final question. We believe that the most effective interventions we can make to fulfil our commitment to the ICJ are the ones that we have delivered at a collective level. I refer in particular to the agreements or efforts in working with other members of the European Union. In order to exert that influence we, as a group of countries within the EU, have to move together and in a way that is co-ordinated, as opposed to individual countries going on their own and implementing national measures. It is my very strong judgment that Ireland implementing national measures, as the Senator suggested in her final question, would undermine our ability to build up those coalitions. It has been recognised, at least by the President and Prime Minister of the Palestinian Authority, that through our work within the European Union we have been working very hard on their behalf and have been at the frontier of diplomatic activity within the EU. I could give the Senator so many examples, that I know she believes we could do more on, where we have had such an influence on the stance the EU has taken. I refer, for example, to our recognition of the State of Palestine. We had to do that in a co-ordinated with other countries. To do something as significant as that requires other countries having trust that we are going to move together with them. The reason we have not gone down the national sanction route is that we know it would undermine our ability to act collectively. That is my experience based on years of these kinds of engagements within the European Union.

In respect of the question on auto-enrolment and the various guardrails that the Senator believes are not in place, again I take her point seriously. For much of this, it would deal with the issue for me regarding diversification to avoid excessive risk, which is a clear expectation that we have of our pension trustees. I would hope that the prospect of anybody running pensions on behalf of the people of Ireland investing in cluster munitions is negligible.

In relation to the other points raised by the Senator, I would expect our trustees to consider whether the decisions they are making with the savings of the people of Ireland are appropriate and whether they get the risk-reward balance correct. I am sure that in considering all of that, they would consider issues regarding the sustainability of fossil fuels and the serious issues raised by the Senator, for example with regard to defence. The reason I am reluctant to put in place legislative guardrails on top of these kinds of funds is simply because they will be managing so much money on behalf of Ireland, if we get these set up properly, that I think it is far more important that we have the right people in place running them with the right guidance, which they have received from us, with the ability to independently make decisions. I fear that if we put in place legislation after legislation on the operation of these funds, they will be constrained in managing our money well and effectively, and the perception of these funds will be altered in a way that will influence how they will perform.

On the point made about the Central Bank, I have full confidence that the work they did in assessing whether the very narrow requirements of the prospectus regulation were met was done rigorously. I know they are considering very carefully this work at the moment, and I know that the Governor has alluded to you on that.

On the point that the Governor made about national measures in the letter that he sent to this committee, I will go back to the point I made at the very beginning about the influence we have brought to bear on how we support the people of Gaza at their terrible hour of need to try to mitigate the unbelievable suffering they are going through at the moment. Ireland can only do that collectively. Beginning to indicate that we can go down a national route hinders and harms our ability to do that.

Alice-Mary Higgins (Independent)
Link to this: Individually | In context

I profoundly disagree. I believe we have seen the legacy of decades of waiting for an EU shift in position, which has led to a culture of impunity and the non-application of international law in respect of Israel. We are only now, after two months of starvation, seeing a shift. There are still nine EU countries that are not even considering a review regarding human rights under the association agreement, for example. We lead through moral leadership. To be clear, it would not be sanctions. A number of these measures would involve ensuring there is actual consistency with international law in how we conduct ourselves, how we use the resources or, indeed, how we apply the time and energy of our State bodies and those who answer to the Irish public. That is what shows leadership and shifts the dial. I do not believe that we will persuade Germany to change its position by not doing something. It is doing things that will lead to any effective action and will point to the gap in that regard.

There are clear questions in relation to these bonds, which we will have opportunities to follow up with officials directly. I do not share the confidence, given that there is no issue with issuing and approving prospectuses on what are named "war bonds" for Israel, that these very intelligent people, without guidance in relation to this public money, will be plying sense because fossil fuels and weapons make a lot of money. If their guidance is to make money and we do not give them clear, legislative, ethical indicators for how to act, they will seek to make the most money for the State but perhaps in a way that is damaging to the long-term future of all of us.

I have a final question in a completely different area. Time is running low. On the tax reliefs provided for indigenous businesses in the current context, the environment is shifting. Many of the tax reliefs we have set up for business are designed to support a fluid, but somewhat predictable, international financial environment, meaning investment, angel investors and movement. Is consideration being given to shifting how we apply tax reliefs to try to support areas where we know there will be an indigenous outcome and where we have a little more control of the controllables? For example, the angel investor relief and the revised entrepreneur relief funds seem to be almost designed to support a start-up that is then sold. Capital gains tax is reduced because they are being sold on. We need to be encouraging new start-ups, new businesses and entrepreneurs in Ireland not to sell on or cash out, but to become the seed for indigenous business. We have seen that in the tech area in particular where start-ups get bought, often by very large conglomerates. They are often bought simply so they will not compete. The Minister will know what I mean. It is time for a review or shift, so as not to reward the selling on of enterprises, innovative companies and start-ups, and for a shift to support them. Similarly, when we look to start up companies, we should look at co-operatives and, as others mentioned with regard to research and development, the knowledge development box. There is not even a minimal attachment of information around, for example, partnership with Irish institutions. In terms of our research and development tax reliefs, would it be possible to look for more information as a starting point and, ideally, more incentives, to support that research and development, which is tied not simply in-house in corporations, but directly to increasing the capacity, knowledge and research we have in the State, for example, in our higher level education institutions?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I thank the Senator. To respond briefly to the points she made, I agree very strongly with her on the value of moral leadership and I believe Ireland, at a bilateral level, has demonstrated to the people of Palestine over many years our willingness to do that. I respectfully make the case that there is an additional dimension to leadership in a situation as difficult as this, that is, the practical effect we can actually have. I contend that that practical effect is best delivered in the work we do in European Union and the influence the Minister for foreign affairs and the Taoiseach are having on the debate on this issue within the EU. There are many other legal issues regarding the Bill that is to be voted on in the Dáil tonight and the consistency between that legislation and the laws in place in the European Union. I am sure we will debate all that again in the coming weeks.

On the Senator's point on entrepreneurship, many entrepreneurs create businesses, work night and day and take personal risks because they ultimately aspire to sell them on. I have to respect that. They aspire to sell them on. These are people who have taken unbelievable risks in their lives, with their families, personal income and wealth, which is pretty modest for many at the start of setting up a business. They do so because they hope at some point they might have an opportunity to sell their business. I have to respect that. It is part of the entrepreneurial spirit that people have. Not everybody decide to do it, but many do. In a lot of cases when these businesses are sold on, and I have seen many examples in our economy, people move into bigger companies, the businesses move into a bigger or sometimes international business, and the people go on to do really well. The business begins to grow even more. We have countless examples of where that has happened in Ireland.

In relation to the various reliefs the Senator referred to, when I engage with the people who avail of these reliefs, they tell me they are too rigorous and that what they are asked to provide is too demanding. I would be careful about putting in place any kind of limitation that provides that someone who avails of this relief cannot sell the business on in the future. We have to allow people to make a decision-----

Alice-Mary Higgins (Independent)
Link to this: Individually | In context

Just for clarity, I was looking to the tax relief that we give for selling, rather than a restriction on selling.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I think we are talking about the same thing. I said I thought the Senator was talking about a restriction. The Senator said we were talking about a restriction on a tax relief. I think I was summarising what was said but, if not, I apologise. Again, I offer a respectful push-back that if somebody avails of this relief and goes on to create a very successful business, I do not believe we should be limiting that relief if the person decides to sell that business at some point in the future. That is their right and may be the reason they set up the business in the first place.

Erin McGreehan (Louth, Fianna Fail)
Link to this: Individually | In context

I thank the Minister for staying with us. I have a few questions, some of which may ramble, so please forgive me. My first is on the modelling the Department may have done on the risks from the US-EU trade tensions, particularly in heavy sectors such as pharma, medical, medtech and ICT. Has sector-specific modelling been done and plans devised with other Departments for the diversification of trade, supporting those sectors or opening up new export markets?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I thank the Deputy for the question. The model that she is referring to is all done at a macro level. We looked at whether it would be possible to more at a sectoral level and we had two difficulties in relation to that. The first is that within the sectors, there can be a small number of companies that can have a very big effect on the sector and we were not able to confidently model what could happen within that sector. That was issue number one.

The second issue was that at the point we were doing this work, it was so unclear what might happen with sector-specific tariffs that we were not able to model that in a way that would be of any use to thinking about the future of our economy. That being said, just to fill this out a little bit, we are having a huge amount of sector-specific engagement. At an official level, the Department of Finance is always engaging with companies in different sectors of our economy and under the auspices of the trade forum that have been put in place. What that forum is doing is taking a different sectoral focus every month. The Department is on it and we are getting very good feedback from the companies,the IDA and Enterprise Ireland on sector-specific risks and issues. I should say that it is not all risks; there are plenty of opportunities. We are getting feedback at that level. We could not come up with anything that would be useful to the Senator by doing it on a sectoral basis.

Erin McGreehan (Louth, Fianna Fail)
Link to this: Individually | In context

The Minister mentioned economic competitiveness. This has been key to the success of the economy. Our investment in human capital, research and innovation is crucial. The Minister mentioned that we have had 90,000 jobs in quarter 1. We pride ourselves on investing in these areas where we have high-value jobs. Is there a divide by sector in where those jobs been created? Are they high value? Are they potentially in lower wage or vulnerable parts of the economy?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

We definitely have an issue at the moment with productivity. A long-standing issue is that there is a productivity gap between different parts of the economy. For larger employers, those who are working with them either have very high levels of productivity or the measurement of it makes the productivity look very high. In other parts of the economy that are not traded and so are more on a domestic basis, that is, happening within the domestic economy, the levels of productivity are lower. There is a big gap. As to whether we have evidence at the moment of any kind of regional disparity in how jobs are being created, I would say it is the opposite. I can get my officials to see if we have analysis regarding this and break it down for the Deputy. In many parts of the economy that we have more direct responsibility for, I am seeing really healthy job creation taking place outside of Dublin, for example. If we look at the financial services sector and the funds sector - parts of the economy we know particularly well- they are unsung heroes for the number of jobs they have created outside of Dublin. I am reasonably sure that in the figures produced by the IDA in recent years, the regional balance has hugely improved. We are seeing more and more good jobs being created outside Dublin. I will ask John McCarthy and his team if we have information that we can break down on a regional basis to share with the Deputy.

Erin McGreehan (Louth, Fianna Fail)
Link to this: Individually | In context

To follow up on that point, I am looking at regional differences but also at the value of the job and lower-wage versus higher-wage jobs. Are the 90,000 jobs being created high paying or are they lower-wage jobs? I wonder because obviously, both will be created by virtue of an economy rolling over. I wonder about the ratios between the higher and lower-paid jobs. Lower-wage jobs would be vulnerable for many different reasons.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

We will check the figures, Deputy. From a quick check now with the team, we do not see any such imbalance at the moment. The jobs look to be evenly distributed across all the different parts of the economy.

Erin McGreehan (Louth, Fianna Fail)
Link to this: Individually | In context

At any time of economic crisis, investment in infrastructure is hugely important and is the foundation of any sort of recovery to make sure we get out of it well. Following on from that, considering climate action is key to all our future economic strategies, has consideration been given to front-loading any of the climate action investment to counteract potential fines? Are we looking at how we can make sure that we are investing before we are fined?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

That is a good question. I know the Minister for Climate, Energy and the Environment, Deputy Darragh O'Brien, will have plenty of ambition to front-load it. I know the ambition will be there to do so but there are two issues we will need to consider. I acknowledge the huge amount of work that my colleague, the Minister for Public Expenditure, NDP Delivery and Reform, Deputy Jack Chambers, is doing on that at the moment. The first one is having the productive capacity within our economy to handle a very significant front-loading. I know at times that this argument can feel a little abstract because we all want to make things happen quickly. The level of employment is now so high here, however, that we have to consider that if we were to make a really significant front loading in the economy and spend a lot quickly, whether we would have the people available to turn it into work. We have to consider this very carefully. I have been constantly impressed by the ability of our economy to grow that capacity. It is one of the things we have probably underestimated. We have put additional money into the economy and our labour market has grown. We have seen our economy continue to expand. The level of unemployment is now so low, however, that it is a real issue for us to be aware of and it is a risk to manage.

Second, as always, I go back to the point I made about uncertainty. I would prefer to increase our spending ambitiously but sustainably over a number of years rather than creating a big spike only to then find out in a few years' time that we cannot sustain it. That would be a terrible situation to be in. We would argue that is not the return of boom and bust. We would argue that there has been a spike but we have still come down to a reasonable level. It would be a damaging scenario for our economy to confront.

Erin McGreehan (Louth, Fianna Fail)
Link to this: Individually | In context

I thank the Minister. On that point, in his speech the Minister mentioned the doubling down on competitiveness. What new initiatives could be introduced to make sure we improve the regulatory environment and cut the costs to businesses and the cost to set up new businesses and encourage people to be creative and innovative?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I would highlight three. The first is an awareness of wage growth within our economy. While it was a difficult decision to make, I believe the decision we have made on the living wage is the right one. We need to ensure that wage growth within our economy increases living standards but is sustainable as well and that it helps with jobs being created, particularly in the domestic part of our economy.

I also highlight the importance of the work that the Minister, Deputy James Lawless, will be involved in. The then Minister for Finance, Michael McGrath, the present Minister for Public Expenditure, NDP Delivery and Reform, Deputy Jack Chambers, and I worked for years on this issue of the National Training Fund. Finally, in last year's budget we found a way to make progress on it. The use of that money and spending it smartly on further and higher education that delivers a real skill dividend is really important. I know that the Minister, Deputy Lawless, is very aware of it.

Third, I would highlight our planning system. The decisions are happening faster. The additional money we have put into An Coimisiún Pleanála is working. However, we all know that we need to try to have planning decisions made in an even faster and more predictable way. Those are the three key issues.

Erin McGreehan (Louth, Fianna Fail)
Link to this: Individually | In context

This is my last question. Across the financial sector we have seen companies embracing AI, reducing staffing levels in certain areas and moving staff from one area to another. Has the Department embraced AI in any way to create efficiencies within it and in the offices of Revenue?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

That is a brilliant question. I spoke earlier in the Seanad and Senator Conor Murphy raised the issue of AI. I made the point earlier that sometimes when we are thinking about how we do very well with AI, there is a tendency to think about it in terms of the number of data centres. However, I do not believe that is the case. There is a lot of economic research that says it is the dispersion and use of AI in an economy that is actually where the economy gets the productivity benefit and begins to grow. Data centres are hugely important for other reasons but the impact of AI on growth will depend on how we use AI. There is a Civil Service initiative under way at the moment regarding how we can use AI and do so in a safe way. Some agencies of the State are already ahead of that. I think the Deputy was here for the exchange we had on the Estimates and I picked Revenue as an example of it. Revenue is well ahead of the curve on this. I am not yet at the point in the Department of Finance where I have an AI agent available to me on my computer but I should be. All of us should be. The question we all have to think about regarding the impact of AI on the economy is how we use it. I will go back to the rhetorical question I used earlier in the Seanad. How many AI apps does everyone here have on their phones? That is the question that matters. The Deputy put a great question to me. Some agencies of the State are doing it well.

Erin McGreehan (Louth, Fianna Fail)
Link to this: Individually | In context

Okay, I thank the Minister.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I would say Deputy Timmins has a few AI apps on his phone.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context

I would not be as up to speed as the Minister, but someone told me the other day that Google Maps is an AI tool, so we probably have them, are using them and do not even know it.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

Yes, that is what is happening.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context

I want to go back to some of the comments the Minister made. We need to get away from the boom-bust cycle and become like Switzerland. This is how I would like to see the country go, whereby we constantly invest in infrastructure and build housing but at sustainable levels. This comes back to one of my questions on something the Minister mentioned earlier. I refer to five-year forecasts and looking further ahead. We cannot predict the rest of this year because of the uncertainty in the world market. It is still a very good exercise to do five- and ten-year forecasts because they throw up things we would not otherwise think about. For instance, there are the impacts of demographics and health. These will change. The reason for doing it, apart from realising what will happen in five, ten or 15 years' time, is that we can start to make changes now in order that we do not have sudden shocks to our spending down the line. It can be a gradual process. The Minister more or less stated that he agrees with this. He is welcome to comment.

Slightly allied to this, I have expressed concerns previously about the accuracy of the data relating to corporation tax receipts. These receipts are also impossible to predict. The Minister answered my question regarding there being more focus on, or a new focus on, different ways of accurately forecasting corporation tax receipts. Will he comment on long-term forecasting? I know it is not something that would be cast in stone and would be constantly evolving, but it would tell us things that would inform us on how to run our budgets in the short term.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I thank Deputy Timmins. I have never seen such a short-term forecasting difficulty as that which we have at present. It is a real challenge for us to be able to give a very accurate forecast regarding what will happen on a one- or two-year basis. This relates to the question Senator Higgins put on the medium-term fiscal plan. It is a real challenge we are working through.

The overall point Deputy Timmins makes is correct. Our long-term forecasting has been better than our short-term forecasting. Over the space of many years, with one exception that I will discuss in a moment, we have done a reasonable job of forecasting. For a particular year or the next year, it is harder to do. We are doing work on this. The Department has a project under way called Ireland 2040. This will conclude soon, and we will publish details and bring them to the committee. I am sure the committee will have an interest in seeing that work. It tries to look over, for example, a number of decades or a decade and a half at what longer term issues we need to think about from the point of view of demographics, climate and so forth. This work is nearly complete. We will be very happy to bring it back to the committee and take it through it. Short-term forecasting is very difficult. We have just completed a project on very long-term forecasting.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context

We speak about tariffs, and the line we have often spouted is that we control what we can control. Many things are outside of control. The biggest thing as regards our economy and our income is expenditure. We have a lot of control over our spending. The Minister answered my question on measures to improve cost control. They are all very worthy, but we need to do a lot more work in this area. It is monumental. We are speaking about cultural change in the country in how the public service operates as regards controlling spending. Even if we make small incremental changes, we need to drill down more to find better ways of saving money and getting people to think more about saving money. I know this is an easy generalisation, but we should provide incentives.

I was a member of the Wicklow County Council audit committee for about 15 years. I remember going to National Oversight and Audit Commission, NOAC, conferences once or twice. NOAC is a very worthy body that does benchmarking of the various county councils for expenditure and outputs. When I was there three or four years ago, there was not one person out of ten on the board who had any accounting or cost control experience. This should have been part of that body's modus operandi given its role when it comes to controlling costs. There should be more people on State boards with this type of focus and experience. Does the Minister have thoughts on this?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

That is a fair point. The Department of public expenditure is all over this. It is so focused on the issue of cost control and ways of saving money. We only hear, understandably, when it goes wrong, but there are many examples where the Department is successful in containing spending and costs. Of course, they do not get a public profile in the way our problems do. We have had problems and we have had things we need to do better.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context

It is something we should be all over. I do not think we can ever take it for granted. We have much more work to do.

I want to go back to the tariffs. We all know how dependent we are on US corporations for our corporation tax. This has been a good thing. I would not regret for one second the magnificent boon it has given to the country and the great things it has done in terms of income for the country. It has allowed this country to develop so much. There is a small issue. The Irish Stock Exchange is making a submission on the budget because it is looking to expand. As the Minister knows, many big companies have left the Irish Stock Exchange. It is very important that we support the Irish Stock Exchange. It has a good relationship with Enterprise Ireland. We should look to foster Irish companies to go on the main Stock Exchange or even the lower level stock exchange which has fewer costs and reporting requirements. I urge the Minister to do everything he can to support the Irish Stock Exchange. It has ideas about getting people to invest in products. Because of being burned 15 years ago, we are very reluctant to do anything with our cash apart from sticking it on deposit in the bank. Most people do not realise that inflation eats away at that every year. The Irish Stock Exchange has ideas about some of how some of that money could be released productively and safely into the economy. I hope the Minister will support this.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

We received its submission, which we are considering. I know what proposals it has pushed.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context

Deputy Brennan mentioned infrastructure. I will not go into that. I see infrastructure as an investment. It is not like current spending. There is a return on it. For instance, the new wastewater treatment plant in Arklow cost €140 million. It can generate 36,000 population equivalents. Let us say that is 10,000 houses potentially. The VAT on those houses and the development levies would be a return of multiples of the €140 million. I know other infrastructure must feed into houses also. Infrastructure is not current spending; it is an investment which has a return to the economy and to the Exchequer. I am sure the Department has done exercises on it. In an example such as that which I have given, there is a cash return to the Exchequer. It is like investing in our future. It is income that will be coming down the tracks in the period ahead.

I also have question on tourism. The drop-off in the number of tourists has been fairly dramatic. I have not seen the figures for April but in the first three months of the year, there was a significant drop-off. It was of the order of 30%. I am concerned about how this might feed in. How might we mitigate what is happening? It is a question I have just landed on the Minister, but I would like him to speak about the idea of infrastructure being an investment.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I entirely agree. The issue still revolves around how we can pay for it all in a way that is sustainable and whereby we can avoid making commitments which, in future, we find out we cannot afford. It is about how we ensure capital investment happens in a way, to go back to Deputy Brennan's question, that does not cause other issues in our economy. I agree with Deputy Timmins that capital spending is very different from current spending. It has a very evident and clear economic multiplier.

On the final question, I am aware of some of the reports and the work of the CSO on the slow start to the year in tourism.

However, I have also seen that the CSO is now engaging with the tourism sector on the figures it has used to see if there are any issues there that might be leading to the figures not being recorded accurately. I know how important tourism is. It is deservedly very important in the Deputy's own constituency. We will certainly be considering how to support that sector in the run-up to the budget.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

Is there anyone else who would like to come in? I might come in. I call an Seanadóir Murphy.

Conor Murphy (Sinn Fein)
Link to this: Individually | In context

I have two brief questions. I apologise for missing the Minister's opening statement but I was in the Chamber with his colleague, the Minister, Deputy Burke. With regard to restrictions on moving projects forward, the Minister talked about the unemployment levels being so-----

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

I apologise; we have to suspend. The bells are ringing but there was no vótáil. We were wondering about that. It seems there might be a vote. We are going to have to suspend until after the vote. Is that okay?

Conor Murphy (Sinn Fein)
Link to this: Individually | In context

I am happy to let the questions go if the Cathaoirleach wants to bring the meeting to a conclusion.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

No, I have a number of questions myself. I apologise for this. We will suspend the meeting.

Conor Murphy (Sinn Fein)
Link to this: Individually | In context

I had considered two questions but, given the vote that has just taken place, I will dispense with the second one. My question relates to what the Minister outlined in response to a previous question about the ability to ramp up investment in infrastructure. I believe it was Deputy McGreehan who asked the question. The Minister mentioned that there is a very low level of unemployment and that there is not a base to pick from to get the necessary workforce together with the required skill levels, meaning that foreign money would not necessarily lead to productive outcomes. There is obviously very significant urgency with regard to renewable energy, investing in the grid, supporting that infrastructure and investing in renewables. There is an ambition for the island to be self-sufficient and to perhaps even be a net exporter. There are targets with associated timeframes in that regard.

I would like to ask whether one particular pool is being considered. There are many people who are very low-skilled. They are not necessarily in the ranks of the unemployed, although significant efforts need to be made to reach into that cohort to provide skills and an ability for people to find ambition. It is similar with people who are working in fairly low-paid jobs. I hope the Minister will forgive me but I do not know the statistics regarding this group. North of the Border, the level of economically inactive people is significant. I believe that level is much higher than the level in this State. Is it an objective to reach into this pool? Not only is it a ready-made pool of available labour, but it is also the right thing to do to try to upskill this cohort, make it more productive and increase productivity and prosperity overall, giving people a chance to play a more significant economic role in their everyday lives and their work. As I have said, I do not know what the levels or statistics are but, when I see documentation coming from the Department of enterprise and the Department of Finance, they sometimes talk about investment at that very high level. Attracting high-level skills is very necessary but there is also a cohort of people whose skills could be brought up to a certain level.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I entirely agree with the Senator. In addition to the point he has made, which I agree with, I am sure he will agree with me about the dignity of giving people the opportunity to get a job, progress their career, go from job to job, earn more and feel they are having a good course through our economy, which has immeasurable benefits.

From the point of view of this particular economy, the economic inactivity levels we have now are exceptionally low. That is a feature of what we talked about earlier. Not only has our unemployment rate gone down but our labour market participation rate has gone up. To ensure we have more capacity available in our economy, even if a record number of people are at work, there are two things we need to do. The first is to use modern methods of construction. That sounds like a technical area, but I am convinced it is at the heart of how we can do more even though we have a high level of employment in our economy. I am amazed at the way homes are now being built in my constituency. It is completely different from how I used to see it happening. Where there were bricks from the bottom up, homes are now being erected. We must go down that route.

The second thing we must do relates to the apprenticeship programmes that are in place to help people early in their careers to get into high-paying jobs. A lot of work is now happening. It was kicked off by Deputy Harris, when he was the Minister for Further and Higher Education, Research, Innovation and Science, and his successor as Minister, Deputy Lawless, is going to continue the work. The simple act of having apprenticeship programmes on the CAO portal will do untold good to help people get a better start in their careers. We are in a different place on activity levels. I agree with the Senator's analysis.

Conor Murphy (Sinn Fein)
Link to this: Individually | In context

I recently had the opportunity to visit a factory in my area outside Newry and into south Armagh. It makes modular units for building. It is doing an enormous amount of trade south of the Border. Particularly considering the housing challenge, that approach allows for a higher level of productivity. It is a different way of building. People are preparing the units in a factory one mile from where I live and shipping them south where they are assembled immediately. I concur with the Minister in that regard and thank him for his answer.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I am less clear as to what that means for energy and renewables. So much of wind farms, for example, is pre-made. It arrives into Ireland and is shipped out of our ports. As I said, technology and helping people to get a better start in their lives, earlier in their lives, are hugely important.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

I have a number of questions. Some came up during the discussion. I am interested in modern methods of construction too, but I will stick to the questions I have. In response to an Teachta McGreehan, the Minister mentioned an issue with modelling the impact of tariffs on different sectors. He said the issue was due to a small number of firms having an outsized impact. For clarity, does he mean the ten big companies in terms of corporation tax or-----

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I meant it more in terms of employment than corporate tax.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

Okay. My next question is question No. 4 that was sent in. It relates to the note the Minister sent and the forecast for tax revenues as set out in the summer economic statement versus the actual outturn the following year.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

Yes.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

In the table the Minister provided, it is interesting that for four of the past five years, excluding 2023, the outturn was, on average, €7 billion ahead of the forecast. The general trend has been to outperform the estimates. The Minister mentioned that we have a sense of permanent crisis. We have had unusual times, with Covid-19 and the Russian invasion of Ukraine. There is now the caution around the potential for tariffs. The committee will look at tariffs in greater detail and it will be interesting. Tariffs are announced one minute and reduced the next. They are then made temporary and more announcements will follow. My only concern is that if we are too conservative in our forecast, what does it mean for our spending? Considering the challenges we are facing, if we forecast less than we realise, is there a concern that we could depress spending as a result and that could have an economic impact in itself?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

That is a fair point. I must break spending into two different strands. The risk could be there for capital investment. We need to ensure that our capital investment plans get the balance right between ambition and affordability. How to get that balance right is on our minds.

On current spending, I see it as more of a risk but the risk is different. We could end up with rates of current spending growth that become embedded at a high level. That would create a public finance risk. If we must, we can manage capital spending down more easily than current spending. That is how I see the situation. We have outperformed in some cases but that is the risk we now have. The reason we outperformed is that some particular sectors within our economy did an awful lot better than they or we expected. Those are now the parts of our economy that are in the middle of the global trade risk. If we look at the performance of life science and technology, they are big contributors to our improved tax outturn and the improved position in our public finances. Those are the very sectors, however, that are now at the heart of the trade difficulty we have. That which was a strength could become a public finance weakness.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

I take that point. The Minister is saying that we live in a new normal and a strange time.

My next question is about capital expenditure and ties into the discussion the Minister had with Senator Conor Murphy. The Minister talked about regional jobs with numerous people. There is an infrastructural deficit in more isolated areas and regions, for example, in the west or wherever else. Capital spending creates apprenticeships and those types of jobs. I am concerned that if our tax receipts fall and there is a downward trend in our capital spending, it would cause a further downward trend in our economic activity. That is what the Minister was-----

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

That is the risk, and that is what we are trying to prevent. The reason we are setting up all these funds, in particular the Future Ireland Fund, is that if we were hit with a downturn that would materially affect the tax we are collecting, we would have a fund available to us to help with the funding of capital investment. That is, in retrospect, at the heart of so many of our difficulties. Capital investment fell for so long. We were trying to avoid even harder decisions in respect of current spending when our country was insolvent. All that happened was the build-up of cost in the future. That is what we are trying to do with these funds.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

That is fair enough. The Minister and an Teachta Cian O'Callaghan talked about the risks posed by our concentrated corporate tax and the measures that are being taken as a result. The measure to which the Minister alluded was budget surplus. That is fair enough, but it does not shift industrial policy. I know there was a White Paper by the Department on that topic. It is an issue of concern, as an Teachta Timmins touched on. How do we develop an internationally competitive indigenous sector?

That White Paper mentioned technology and knowledge spillovers from the multinational sector but the concern, for example, with intellectual property protection and non-compete clauses, is how that spillover will happen. I am from Galway, where FDI is incredibly important but, in general, if we are looking to shift our industrial policy a little, apart from budget surpluses, what are the key tasks ahead for us?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

There are three things: having a better regulatory environment in which smaller businesses can grow; the work we do in the National Training Fund to help with the skills and knowledge development of these businesses; and how we support our organisations, such as Bord Bia and Enterprise Ireland, to help those enterprises grow within our economy. I pinpoint those three as the levers we can use.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

Údarás na Gaeltachta as well.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

Of course.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

That brings me to another question from what was discussed earlier, namely, how we support our indigenous industry. The Minister made quite an interesting point - I cannot remember who it was in response to - that, sometimes, for people who have put all the risk into their business and had the idea, the aim has been to sell it on to a greater company. An Teachta Timmins mentioned the Irish Stock Exchange potentially looking at us not having that many IPOs there. Maybe that is not something people are considering. People have put in all this risk and all that and they are considering what they can do long term, which is to sell it on. Their business will then grow and they will not have the risk. Does the Minister think we are maybe limiting ourselves in some ways? Is it a culture or thought process to just do it that way rather than in other ways? Is that something the Minister has come across? Does he think it is a cultural thing?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

No, not really. The difficulty companies face in scaling up from being medium-sized businesses to becoming very large businesses is a well-documented issue across developed economies. We have that issue in Ireland, as do lots of other economies. The issue of the Stock Exchange is not just an Irish issue. We are seeing stock exchanges all over Europe now begin to see businesses that were registered there move to America and businesses that grow in Europe list in America. This is an issue that is about the size of our equity markets and the fact there are different expectations in America regarding pay and remuneration than there are in Europe. That is all influencing the willingness of companies to decide where they list. As I said, the areas that I believe we can work on to help with the growth of our businesses are about regulation and law. It is about the National Training Fund and our agencies, including Údarás na Gaeltachta.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

We are hearing more talk of tariff engineering. That has come up a bit. We are obviously trying to avoid these tariffs. At this point, it is hard to know when we will know exactly what the tariffs will be. Does the Minister predict that will be something that will take off and have an impact going forward in reducing the impact of tariffs? Does he think that will not be the case?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

Is this the growth of our domestic economy?

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

No. It is the concept of tariff engineering, whereby a third country is used to try to impact on the-----

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

I see that having limited potential for our economy. The reason for that is the importance of the direct link between the US and Ireland.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

Okay.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

Companies that we have located here would not want to use a third country to circumvent tariffs because of the economic and reputational risks for them. From our point of view, the big benefit companies have is they can just ship right to the US. Geographically, it is harder to see where they could be diverted to. I think that will have a limited effect.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

That is interesting. I have one last question regarding a concept that was floated by the Minister, Deputy James Browne, which is the idea of a state saving scheme for housing funding. Does the Minister have any details on the outline of that proposed scheme? Would it work in a similar way to schemes in other countries?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

This is an idea that the Minister, Deputy Browne, raised. Like all these ideas, it is one I am certainly willing to consider, have a look at and work with him on. This is in the context of the new housing plan the Government is working on. If we were to agree to something like that, I am sure that is the place where we would agree it. At this point, the Minister has raised it as a concept. It is certainly an idea that we are willing to consider, but at this point that is all that it is. The housing action plan has not even been agreed yet. It is in that context that all of this will be worked out.

Mairéad Farrell (Galway West, Sinn Fein)
Link to this: Individually | In context

Does anybody else want to come in? Go raibh míle maith agaibh. Lá fada a bhí ann. It has been quite a long day. I thank the Minister and his officials for coming in and engaging with us. That concludes the committee's business in public session. I thank members for participating in today's meeting. The joint committee is adjourned until 11 June, when it will meet in private and public session.