Wednesday, 29 November 2017
Ireland's Bid for European Banking Authority: Statements
I am grateful for the opportunity to contribute to the discussion on Ireland's bid for the European Banking Authority. We also had a very good discussion last week in Dáil Éireann.
Ministers from the 27 EU member states decided last week where to locate the European Banking Authority, EBA, and the European Medicines Agency, EMA, when both agencies leave the UK. This was a real and visible example of how the EU is moving on in light of the UK voters' decision. Both processes were hotly contested with eight countries in the running for the European Banking Authority and 19 for the European Medicines Agency. The decision on both counts came down to the drawing of lots and in the end, Paris was confirmed as the new host of the EBA and Amsterdam as the host for the EMA.
Ireland had submitted two credible bids to host either the European Medicines Agency or the European Banking Authority. The Irish bids were seen by other member states and the EU Commission as strong due to the size of our pharmaceutical and financial services sectors, the large number of global companies based here from those sectors and also the significant number of skilled workers with relevant experience in both sectors. Connectivity to other parts of the Union was also noted as being good in the case of the Irish bids. In addition, Ireland was seen as one of the locations that would be least disruptive to the important work of the two agencies and to their staff and families as they relocated. As the process advanced we decided to concentrate our efforts on the EBA campaign. This allowed us to allocate our resources to one bid. Like a number of other member states, we formally withdrew our candidacy for the European Medicines Agency shortly before the bidding process closed.
The bids for both agencies involved intensive work by the Government to showcase Ireland as a modern, developed economy that is outward looking and has the proven ability to host large modern entities. The bid documents detailed Ireland's rich historical and cultural roots as well as the cultural diversity of modern Ireland. The European Commission's analysis of both of our bids was strong and this was also recognised by our European partners during political and official engagement to seek support.
The process of building support for our European Banking Authority bid involved engagement with other member states. This involved a number of ministerial visits to capitals, including my own visits to nine member states over a two-week period in late September. Our bid was also promoted through engagement by Ministers and officials from the Department of Finance and the Department of Foreign Affairs and Trade on the margins of meetings held in Europe and elsewhere. Contact was also made through our embassy network as well as with the relevant foreign embassies in Dublin. Indeed, our embassy network proved to be invaluable to us in our efforts.
As a result of all of these engagements, it was widely held that Ireland had a strong, well thought-out and professionally presented bid and was a credible and strong candidate to host the European Banking Authority. Ireland received strong support in the first and second rounds of the contest and secured the support of 12 other member states from right across the Union. This strong support for our bid remained, despite the fact that two larger member states, France and Germany, were also in the final stages. Our support came from founding member states, the Nordic and Baltic member states, new member states from the east and from member states in the Mediterranean region.
The European Banking Authority plays a vital role in the European system of financial supervision and it is essential that its work, which helps to protect consumers and contributes to the Union's financial stability, continues during the transition. What is most important now is that there is a smooth transition and successful relocation for the authority.
In all of our engagements throughout the bidding process it was clear that we are seen as a good neighbour by our European colleagues and we are seen by many of the newer member states as a country that they can learn from. I believe it is important for us to recognise the efforts made at a political level and by officials from the relevant Departments involved in the two bids. This was a highly-competitive process and to get to the final round was a major achievement. To have it be decided by the drawing of lots makes the outcome even more disappointing.
However, while disappointing, Ireland obtained support from across the Union and across regional blocks. That was due to the professionalism we showed in preparing our bids, the strong message which we had, and the way that we went about building support for our case. During that process it was clear that Ireland is held in high regard by our fellow member states and I believe this will stand to us in the future. It is important for us to remember that despite the disappointment of losing out, we have proven that even as a small member state we can mobilise our resources in Departments and overseas missions to convert that positive view of Ireland into tangible support when we need to. As such, the job at hand now is to build on this momentum and I believe we will.
I welcome the Minister of State, Deputy D'Arcy, to the House. The decision came down to the split vote of 13-13 and the drawing of lots. We are disappointed at the outcome. However, it shows the strength of the case put forward by Ireland that even Frankfurt, vying to be one of the financial centres of Europe, did not make it to the final round with ourselves and Paris. No doubt the French Government is delighted because of course it adds to its efforts to make Paris the new financial centre of Europe. We have to commend the diplomats and the officials who worked on this issue. While the authority does not have a huge number of staff it does assist in enticing other banks to Dublin.One issue that came up in the Seanad discussions and debates on Brexit was that the Central Bank no longer goes out and sells Ireland as a location. It came as some surprise to us that it was unaware as to whether other European central banks were selling their particular capitals or countries as locations for financial institutions that would be leaving London and going to the eurozone or the European Union. I know it is a side matter but it is important. There is a problem as after a crisis, there is a tendency over-regulate. People said central banks should not be a policeman and salesman at the same time so they split the function and they would not allow the Central Bank to be a salesman any more. The other central banks are doing it and we need to follow suit.
There was support for the bid in the form of €13.5 million in rental support and €1 million for staff relocation, which was part of the package put forward by the Government. It sounds like an enormous sum but I am sure it could have been recouped if we managed to secure those bodies, as other businesses would have been attracted and located around them. We are now in a highly competitive world and when it came to the drawing of lots, unfortunately it was in the lap of the gods. Other matters came into play with regard to child care and taxation considerations for high earners, as well as the issue of accommodation. There are other agencies and EU functions we hope to be able to attract, as well as other businesses. The fact we came so close with this one demonstrates we are making a competitive case with Dublin and Ireland as a location for much of the business that will fall out of Britain as a result of Brexit.
That is in no way to demean the work of other Senators who are extremely busy outside the Chamber. The rub of the green was not with us in this proposal. I hope a double-headed coin was not used but we were just unlucky. That we got to the point where we were unlucky is indicative of a phenomenal amount of work being put in, both by the Minister of State with responsibility for financial services and other ministerial areas, including the Minister of State, Deputy McEntee, and the Minister for Foreign Affairs and Trade, Deputy Coveney, etc.
We are now in a new European paradigm. Britain is no longer involved, although we hope perhaps it will reconsider and see the light. We must prepare for the strong possibility it will no longer be involved. Ireland was competing against one of the big two in the form of France and it was a competitive bid. To use a soccer analogy, although we have beaten France on occasion, the likelihood is we would not be playing at the same level. Here, Ireland was playing competitively in terms of skill sets. This is not to demean the standard of Irish soccer players but I am making the point that we were competing on a very high level. I hope and expect this augurs very well. As a country we must now consider our competitive advantages and disadvantages across a range of areas with regard to our partners in Europe and the UK. I have no doubt the Department is doing the good exercise of examining where we stand with legislation, regulation and competitive advantage. Other countries may have updated or changed regulations and authorisation procedures and we must ensure we are as competitive as them. We must operate in a European and global arena in a competitive manner. With regard to the European Banking Authority, generally the expectation when this process started was that Ireland would not have been at the races. It showed that we adapted very quickly to the new environment with the UK not being involved in the long term. Ireland was very much able to compete. There was a strategic decision made to withdraw from the bid for the European Medicines Agency, which was correct.
I appeared before the European Parliament's Committee on Economic and Monetary Affairs approximately one month ago. The issue in question was the common consolidated corporate tax base and I represented the finance committee of these Houses. We were dealing with various matters but the UK input was missing. It would have been a natural ally but it was not there. We must adapt to this and deal with it. There has been a change in the paradigm of how we will operate. France and Germany must realise it is important we have an inclusive Europe, and we should operate on the principles of the founding fathers of Europe, namely, that people are equal and we all have something to contribute. Ireland brings skill sets and we are very much leaders in the likes of financial services and banking. We had a Minister recently visiting Northern Trust in my constituency, which is expanding at a major rate. Close to 1,000 people will be working there in a relatively short period and these are the growth areas for us.
We did not win this bid but it was not through any fault or lack of effort on the part of the Government or the Minister of State in that area. We were unlucky. I hope that in future the smaller countries on the periphery like Ireland will see comparative weighting in such processes. This would ensure a proper spread in the regions. I commend the work done on this, which augurs well for the future paradigm in Europe. I hope Britain sees the light about the impact that will come from a harsh Brexit. I hope the British people will at some point reconsider their decision. They may see it as positive for Britain to stay within the EU.
Try not to. It suits you. Cuirim fáilte roimh an Aire Stáit go dtí an Seanad arís agus gabhaim buíochas leis as a bheith linn anocht. Mar a dúirt an bheirt cainteoirí a chuaigh romham, ábhar thar a bheith tábhachtach é dúinn a phlé agus ba chóir dúinn comhrá a bheith againn fá dtaobh de na cúrsaí is déanaí. An rud is tábhachtaí ná go bhfuil seal againn foghlaim ó na botúin agus na meancóga atá déanta, agus is léir é sin, ó thaobh an bid de chuid an Stáit.I want to approach this topic as respectfully as I can. Before I came here tonight for these statements, which is not a debate, I thought to myself what is the point in us having statements on Ireland losing due to our bid not being drawn out of a hat. I say that very respectfully to the Minister of State and his officials who worked on what I have no doubt was a significant bid. One wonders when it comes down to something as blunt, and some would even suggest as crass, as that, what is the point in us coming here to talk about a bid that was drawn out of a hat. To reduce the bid to that level does a huge disservice to the level of input that the Minister of State and many of the officials had made to the process.
I would have liked to have seen the European Banking Authority relocate to Dublin. It may well have done a better job of keeping an eye on the banks here than our own gatekeepers have done. Ideally, I would like to see a situation where we could make an argument, campaign and bid for the facility to locate to the cities of Belfast and Derry as a result of a special status or arrangement being granted to Ireland, given the negative impact of Brexit facing the entire country. Sin scéal eile fá choinne lá éigin eile, áfach.
The potential of the European Banking Authority relocating to Ireland raised some serious questions. For example, where would the hundreds of staff live? Would we honestly be able to say that the transport links, education, health and housing are up to scratch? There was potential for 141 staff to move from floor 147 of Canary Wharf in the centre of London to Dublin. It was not a greenfield site move but where staff in an existing organisation would have to move en masse. Therefore, in any bid like this Dublin would have to demonstrate that existing transport links, schools and housing stock are up to the task of taking in a large number of families all at once.
Very often there is a lie peddled that Sinn Féin in government would be a threat to foreign direct investment. It has been said repeatedly by major companies who decide against locating to Ireland that the major obstacles are the lack of investment in social infrastructure. Instead of investing in these areas the Government recently decided to prioritise tax cuts for the well-off. A lack of infrastructure is one of the major challenges the State faces as a consequence of nearly a decade of underfunding of capital infrastructure. In light of Brexit this investment is all the more critical. The 2016 global competitiveness report ranked inadequate supply of infrastructure as the most problematic factor for doing business in Ireland. We cannot face the challenges of Brexit with such a handicap at the start. I am sure that the Minister of State recognises and appreciates that viewpoint.
As Members will know, Ireland has the fastest growing population in Europe and will continue to do so for the coming decades with the population of the island estimated to reach 10 million by the middle of the century. However, we have one of the lowest levels of capital investment in Europe. Successive EU Commission reports have highlighted infrastructure deficiencies as a threat to long-term growth. That is neither acceptable nor sustainable. The face of the under-investment can be seen in the housing and health crises, the lack of flood defences, our children being educated in prefabs and raw sewage flowing into our rivers and seas. That is not an economy that can face and survive the impact of Brexit. Now is the time to invest in our infrastructure.
With the myriad of crises we face from the lack of capital investment and the dark clouds of Brexit looming large, it is essential that we develop and support indigenous enterprises properly to safeguard the economy. The economy is very exposed if multinationals decide to relocate away from the State at any stage. The risks are clearly evident when it comes to our corporation tax receipts. The Revenue Commissioners' annual report for 2016 shows that more than 80% of the corporation tax yield comes from a small number of foreign-owned multinationals and only nine groups or companies pay almost 40% of corporation tax in Ireland.
I was surprised at the response by the Minister for Foreign Affairs and Trade to Ireland losing the bid. He called it bad luck. The Government needs to recognise that until improvements in infrastructure are made then there is no point in blaming the system or other states that do not vote for us.
I thank the Minister of State for coming here to address the Seanad.
I share some of the concerns expressed by Senator Ó Donnghaile. I am referring to a feeling of what is the point in rehashing a defeat. I have not watched the match where the Irish soccer team lost 5-1 to Denmark again and I have no intention of ever watching it again.
Losing the EBA bid is not an ordinary defeat. To paraphrase another sportsman, one never loses, one learns. The Irish negotiating team will learn a lot from the bidding process. I genuinely and wholeheartedly commend the Minister of State present, the Minister of State at the Department of Foreign Affairs and Trade, Deputy Helen McEntee, and the entire team behind the bid. It is a great achievement for Ireland to reach the final two, particularly as so many countries applied and financial services is a large area. It offers huge potential for Ireland and Dublin going forward in the post-Brexit era of the European Union, particularly in the area of financial services and finance. The sector has been stressed so many times and not just by the Government, which the Minister of State is a part of. As I have said 1 million times, Brexit is a disaster and will be terrible for this country. We must grasp any sliver of opportunity or chance with both hands to offset the overall negativity. The financial services sector will present us with opportunities.
I know how hyperactive the Minister of State is and how his predecessor, the current Minister for Housing, Planning and Local Government, Deputy Murphy, was in attracting financial services not just to Dublin but to Ireland as a whole. I say this as somebody who is Dublin based and sometimes shivered when I went outside the M50 for a Seanad campaign. The importance of attracting financial services to the entire Twenty-Six Counties is vitally important. At the moment only one third of our financial services are located outside Dublin. Some people will be surprised by that fact. One only has to point to FEXCO that is located in Senator Mark Daly's home county of Kerry. There are many more examples of financial companies being located throughout the country be they in Waterford, Carrick-on-Suir or wherever else. That is where the potential lies be they in back office or front office opportunities.
I truly believe that the showing by the Irish Government and the Irish bid in the EBA process will stand to us. At the end of the day the decision was made by the toss of a coin. Ireland was in the final against Paris, which has a massive financial centre. I remember reading about the CAC 40, the French stock exchange, during my geography exams in school and everything else in my class on business organisation. I hope that everyone appreciates that it is an achievement for Ireland to get so far in the bidding process. There is no point saying, "Ah, well. We did not get it so why did we even bother?" It was worth going for and presents us with an opportunity to put what we have learned into the process.
There is one area which moves beyond finance and into the whole dynamic of the internal politics of the European Union. I refer to the countries that supported our bid. It was an impressive achievement for Ireland to reach the final round and an awful lot of diplomatic engagement was required. The countries that supported us are now our new allies. The Taoiseach and the Minister for Foreign Affairs and Trade have said at length that we must develop relationships with our new allies. It is quite obvious in certain areas such as agricultural policy and the historic ties between Ireland and France when defending the Common Agricultural Policy, CAP. Let us consider the small member states, newer member states and member states to the east that want to embrace some of the taxation measures that we have introduced as a country.
When it comes to guaranteeing solid financial systems and services within the European Union we must answer the following. Who are our allies? Who can we go to again? Who will support us when we go to the next round of multi-annual financial framework discussions for 2021? Will these allies support Ireland again? Most importantly, how can we lead? Just because Ireland is a small country with a population of 4.6 million citizens does not mean we cannot play an important role in the European project and lead it post-Brexit. Ireland will be the only English speaking country in the EU after 2019 and, indeed, we will be the only country that will have a common law jurisdiction. Such a situation will provide a lot of interactions. We can lead. We can look beyond the original six member states of the European Coal and Steel Community. We can look at smaller member states. We can look at member states which have fought for independence in their own way much like we did. We should ask ourselves why we should not lead. We have been in the club for over 40 years and have been good Europeans. We are leading at this stage of the Brexit process so let us lead the financial services sector when it comes to Europe post-2019.
Again, I commend the Minister of State on his efforts and sincerely thank him for them.
I very much echo the comments of Senator Richmond. I acknowledge the amount of work done on the bid by the Irish diplomatic corps and the Minister of State. It would be worthwhile to analyse what we did well. We did an awful lot of things really well. There were elements that we could do better, which we can learn from.
One of the most important things that we must do now is acknowledge the countries that supported the bid by Ireland. We must build on that relationship, especially in terms of the newer countries that have joined the EU. We can build a strong alliance with the smaller EU countries.The role that Ministers, Ministers of State and diplomats play on 17 March gives us access to governments. We need to build on those strong relationships. We just missed out. On the toss of a coin, we missed out to France, but to get to that stage was work well done. We now must settle down and see how we can work together to ensure our international reputation is enhanced.
Unfortunately, the incident of the proposed visit to North Korea did not do our international reputation any good. The news that a Cabinet Minister proposed to go to North Korea went across the wold. We joked about it and had a wry smile at the idea, but from talking to friends in other European states, I know they did not see the funny side of it. We knew the individuals and we took it as a joke. That damages Ireland's international reputation. Ministers must understand they are in Cabinet and utterances such as these damage Ireland. I ask them to be cautious in future.
I thank the Minister of State at the Department of Finance, Deputy D'Arcy, for the work he has done on behalf of the State. It was difficult and meant that he put up a significant number of air miles. We came close and I hope the next time we will win through.
I thank the Acting Chairman. I thank members for their comments. On the question of air miles, I covered 16 countries in six weeks. At one stage I was in nine countries in two weeks.
At the start of the process, it was said that we had no friends, that it would be like the Eurovision song contest, and that we would get six points. That was not the case. We have many friends. We are liked in Europe. We have worked hard and put in a good shift. We are not one of founding states of the EEC but we joined the European Community 44 years ago. Many of the newer member states see us as an example of where they would like to reach over time. We have become their yardstick. We have put in the work diplomatically. I thank the diplomats, who are superb. I must be honest and say that I did not now how good they were until I went on this mission. They put in a really good shift in term of the work they did all over Europe.
I thank my colleagues in Government, the Minister of State at the Department of Foreign Affairs and Trade, Deputy Helen McEntee, in particular, as she has responsibility for Europe, and her senior line Minister, Deputy Coveney, who put in major work, and my senior line Minister, the Minister for Finance, Deputy Paschal Donohoe. We were not just flying to a capital city or a country and meeting people. On every occasion there were diplomats meeting other officials, whether it was at Eurogroup or ECOFIN meetings. I went to Washington for three days for the IMF and the World Bank meetings. It was quite remarkable that I was going to the capitals, meeting people I had met at Eurogroup and ECOFIN meetings. I went from not knowing these people particularly well to having met them three times in two weeks. It did add up.
I will put the voting system in context. Each country had three votes, one for three points, another for two points, and the third for one point. We felt strongly that we could get into the third round. Our strategy was correct. One has to plot a pathway, whether in life or politics, and we plotted a pathway to get to round three in the banking authority bid. Part of that pathway was to withdraw from the European Medicines Agency bid. We prioritised one bid and got into round three. Subsequent to that, when everybody went back to zero, and each country had a single vote, we got 13 votes out of 27, a whisker away from a win on the first round. Looking back, we had to win on the first round. We had 13 votes, France had ten votes and Germany had four votes. The Germans were eliminated and we went to the next round. It looked pretty good. In the next round, one country spoiled the vote by marking both boxes. The three other votes that had been cast for Germany went to France. The combined power of Germany and France united. In my view, a deal was done, France was able to draw level with us, and we each had 13 votes. The names went into the hat and we lost.
There is a new dynamic. We have friends in the Nordic and Balkan states. We have friends in the new member states as well. Some state that after the UK leaves Europe, Ireland's friends have gone, but that is not the case. There is a new dynamic and that is probably the really big story. We are part of a group of like-minded countries that have liberal views on trade and are non-protectionist. We are a small nation but we must trade and sell our products. We do not have a population of 60 million to 80 million people with whom we can trade in our own boundaries. We must get out and sell.
Dublin, Ireland is a financial services centre and is the fourth largest exporter of services in Europe. When the United Kingdom leaves the Union, we will be the third largest. I am being very proactive to try to ensure we push as strongly as we can. All the jobs do not need to be in Dublin. I get accused of being anti-Dublin, which is absolutely incorrect. All the jobs do not need to be in Dublin. There are superb examples of companies throughout the country. Letterkenny is a medium-sized town of 20,000 people, and the number of jobs created by both Pramerica and Optimus is 2,500 jobs. Northern Trust is located in Limerick. Somebody mentioned FEXCO in Killorglin. State Street is located in Kilkenny. In my own town, Zurich and BNY Mellon set up in Wexford town. Cork has a very strong sector also. One third of the companies are located outside of the capital city. The location of financial services in the capital city is a good deal higher than most of the other capital cities. I am satisfied we can do more.
The Central Bank of Ireland does not have a promotional role now, but it had that role once upon a time. Both Senator O'Donnell and I were members of the Joint Committee of Inquiry into the Banking Crisis. We spent two years in a windowless room and one of the issues we discussed was that it was not good for the Central Bank of Ireland to have a promotional role. Very few central banks have promotional roles. A promotional role is my job and that of IDA.
In our preparation for the bid, we assessed schools and housing. We were quite satisfied that we had sufficient school places and housing for 200 staff. Two hundred staff does not always mean 200 families, and some people were certainly going to commute. There are 370 flights from Dublin to London every week. I think Dublin-London is one of the busiest flight paths in the world. We had no concerns about schools, housing or infrastructural development. There was concern on whether we would have the capacity to get out and sell ourselves. We really did that well. The combination of the power and wealth of both Germany and France could only draw with us. Our name ended up in the hat, but we did not win.One thing I can assure the House that I saw very clearly in so many European capitals, and which I would not have known, is that they have traffic there as well. In fact it is worse than ours. Other states' capitals have infrastructural deficits as bad as ours where housing, homelessness and other areas are concerned. I know of no jurisdiction where it is perfect. Some are better than others in some aspects, and indeed we are better than others in some aspects.
Senator Humphreys raised the question of what we did really well. We did a lot really well. For me, there is nothing as important as going to a capital as those of us who are politicians know, and we are all politicians in this Chamber. Looking our counterparts in the eye and telling them we wanted their support and their vote was something we did really well. I mentioned the diplomats earlier. They kept abreast of it. They supplied running reports to Dublin pretty consistently. The reports were fed up the line to me, and we kept on top of it as best we could. I do not say this very often, but I honestly do not believe we could have done any more. I compliment the officials from the Department of Finance. We were all over Europe in a very short spell. People might think it is great to fly around Europe. We were in Vilnius for four hours. One flies in, drives straight from the airport, does the meeting, turns around, goes back to the airport and flies out. One of the people with me observed that one morning I got up and had breakfast in Riga, had my lunch in Stockholm, had my dinner in London and went home to bed in Wexford. That was the degree of flying and travelling that we were doing. It was busy and I really do not believe we could have done more. I want to thank everybody involved. The toss of a coin is what it got down to. Did people believe we could get into that race? A lot of people did not believe we would be in the race at all.
There is one thing I wish to conclude upon. We got into the race with Frankfurt and Paris. In the first round, we beat the pants off Frankfurt and we beat Paris. In the second round we were level with their combined numbers. Dublin, Ireland is on that level as an international financial services centre, and it is important that people realise how important this sector is to the Irish economy. There are 90,000 jobs in the sector, one third of which are outside of County Dublin. Ireland is the fourth largest exporter in the European Union, and I believe we can continue to be attractive. It would have been very nice to have the European Banking Authority based in Dublin, but such is life. On we go, and as Senator Humphreys said, we move on, we learn from what we did well, if there is more we can do, there are other opportunities, although I really do not believe there was more we could have done. We have a lot of friends and we are very highly regarded and respected throughout the continent of Europe.