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Speech

Address by Paschal Donohoe T.D., Minister for Finance and Public Expenditure and Reform, Bloomberg Centre, London

Published: 15 March 2019
From: Department of Finance and Minister for Finance Paschal Donohoe, TD

Ladies and gentlemen,

It is always a pleasure to be in London, and to be here this morning at the Bloomberg Centre, after a busy few days promoting the broad and deep ties between Ireland and Britain.

I am also here, of course, to celebrate Ireland’s National Day, St Patrick’s Day.

Every year at this time, Government Ministers travel to our most important partners, to strengthen Ireland’s global network of relationships.

The size of the celebrations across Britain reflect just how many generations of Irish people have come to the UK to work, to study and in so many cases to live.

My own family is a good example of the types of connections that exist between our two countries. I lived and worked for 6 years in the UK. My wife is English and my nearest family live in the United Kingdom.

Those connections are mirrored in families right across our two islands.

So, today I’d like to talk to you about those connections. About the Irish-British friendship, and the partnership between our countries.

About the changing relationship between Britain and the rest of the EU including Ireland.

I also want to talk to you about Ireland’s place in Europe and the wider world.

But first, I would like to thank Constantin Cotzias and Dara Doyle for the warm welcome here this morning, and for hosting this event.

Bloomberg has a reputation for its reporting and its analysis, and the Bloomberg Centre is a place where ideas are discussed and exchanged.

It is a place where the notion of exchange is central. Where the exchange of ideas provides the underpinning for the exchange in markets that drives our global economy.

So, I am looking forward to engaging with your questions and comments in the discussion afterwards.

A modern Irish-British relationship

Sometimes it feels like over the last two years when it comes to the Irish-British relationship we haven’t been able to speak about anything but Brexit. For some in this room, I'm sure it sometimes feels like you don't often get to talk about much else.

Decisions that have been discussed, debated, and voted on this week will shape the future direction of relations between the UK and the EU.

I will say a few words in a moment about these changes.

But first, let me talk about the modern relationship between Ireland and Britain, a relationship defined by inter-dependency.

Last year, the combined value of two-way trade between Ireland and the UK was worth €72 billion.

Britain is Ireland’s third largest market, accounting for 15% of our exports of goods and services.

And we are the UK’s fifth largest export destination.

This means that British trade with Ireland nearly outstrips your combined trade with Brazil, Russia, India, and China.

Our businesses support 200,000 jobs in each of our countries.

Over 60,000 Irish citizens are company directors here in the UK.

This is a two-way economic relationship that is extremely important for both our countries.

But, as Seamus Heaney once reminded us, a country is not just an economy, and our two-way relationship extends far beyond economics and trade.

We share so many things – a common history, language and culture.

With so much going on between Ireland and Britain, it is hardly surprising to learn that the Dublin-London air corridor is the busiest in Europe. Or the second busiest in the world.

Over the space of a generation, the relationship between Ireland and Britain has been transformed.

A relationship that struggled to escape the confines of a contested past has arrived at a position of parity, trust and close friendship, where we are co-guarantors of peace on our islands.

And while there were many steps on the journey that has brought us close together, I think two stand out in particular.

The first is our shared decision to join the then EEC in 1973.

Joining the EEC changed Ireland. It set the stage for an unprecedented economic expansion.

It helped to open and transform our society. And it firmly established our confidence as a nation on the world stage.

It also changed the relationship between Ireland and Britain.

We found ourselves colleagues for the first time: from Government Ministers at Council meetings, to politicians in the European Parliament, to officials discussing technical points at EU working groups.

This contributed to a second major change in our relationship, the Good Friday Agreement in 1998.

The cornerstone of our shared commitment to peace and stability on the island of Ireland, it was agreed between the two Governments and the political parties in Belfast on 10 April 1998.

It was the start of a new chapter in the relationship between Ireland and the UK, which was transformed for the better.

The challenge of Brexit

We now face a further shift in the relations between our two nations.

Brexit is an immense political and economic challenge of our generation.

We deeply regret the UK is choosing a different path, after forty-six years of shared EU membership.

However, Ireland’s future remains as a committed member of the European family we have helped to shape and grow.

Indeed our membership of the EU is our greatest protection from the challenges that Brexit will bring.

So whatever the outcome of the Brexit process, Ireland will remain a committed member of EU with all the solidarity, stability and certainty that membership brings.

We were disappointed that the British Government has to date been unable to secure parliamentary approval of the Withdrawal Agreement.

The subsequent confirmation by the House of Commons that it does not support leaving the UK without a deal is, of course, welcome.

However, simply agreeing that a no deal should be avoided is not enough. In order to avoid a no deal outcome, MPs must set out in concrete terms how they propose to avoid it.

We remain firmly of the view that the best way to ensure an orderly withdrawal and protect the Good Friday Agreement and the integrity of the Single Market is to ratify the Withdrawal Agreement.

It is worth recalling why the backstop is needed. This is about protecting the peace process, and the daily lives of communities living on both sides of the border.

If we are to avoid physical infrastructure, there needs to be alignment of regulations on both sides of the border.

And we need to be certain that this alignment will not diverge over time.

This is what the backstop sets out to achieve.

It is an insurance policy that would only be used if we are unable to agree a sufficiently ambitious future relationship between the EU and the UK that would remove any need for it.

If it is triggered, it would be temporary, until a better solution is found. We have no desire to trap the UK indefinitely in the backstop.

The EU provided strong assurances and guarantees in response to concerns raised in the UK in this regard.

And while we have heard repeated contributions about the role that alternative arrangements and technological solutions could possibly play, there are currently no technological solutions in operation anywhere in the world that would solve the issues needed to avoid a hard border.

This two-year negotiation has not been an easy process. There have been compromises on both sides. The political uncertainty in Westminster is a cause of worry for our people and our businesses.

Ratification of the Withdrawal Agreement would allow us to move towards building a strong future relationship with the UK after its departure.

Preparing the Irish economy for all scenarios

Given the continuing uncertainty, we have no choice but to ramp up our no-deal plans, so that we can do everything possible to limit the inevitable disruption to consumers and trade that a no-deal Brexit would bring.

My focus, as Minister for Finance, is to protect our economic and financial interests, and to minimise the disruption to the Irish economy to the greatest extent possible.

A Brexit Omnibus Bill has passed through our National Parliament, with the constructive and responsible support of the opposition.

This is an unprecedented legislative measure. It focuses on protecting our citizens and supporting the economy, enterprise and jobs, particularly in key economic and vulnerable sectors.

Brexit, in whatever form, is an historic challenge for Ireland, and the implications for our economy will be disproportionate relative to those for the rest of the EU.

We are facing the challenge of Brexit in a robust economic position, with the highest GDP growth in Europe, and record employment levels.

Our export and job creation indicators are positive.

We expect growth of 4.2% this year, if we are not blown off track by Brexit.

We have reduced our unemployment levels to 5.6% today.

We are on track to reduce our debt ratio to 60% GDP.

For the first time in almost a decade, we operated a budget surplus last year and intend to do so this year. We have the capacity to operate a deficit if we need to.

We have set aside €1.5 billion in a Rainy Day Fund.

Over the next decade, we will invest €116 billion - more than a third of our GDP - in long-term critical infrastructure – housing, transport, education and healthcare - while keeping current expenditure in line with growth.

But let me be clear: we do not wish for a no-deal outcome. Nor do I underestimate the challenges and hardship it would mean for our economy and our society.

That is why we are doing all in our power to prepare.

A Global Ireland

Ultimately our EU membership and our commitment to openness are our greatest protections from the challenges that Brexit will bring.

We are able to rely on the support and solidarity of our EU partners.

Our companies will continue to benefit from the opportunities of the Single Market and the EU’s global network of free trade agreements.

As one of the world’s most open economies, a key part of our success has been our commitment to trade liberalisation.

I believe that open markets and a rules-based global trade system is an essential component to ensuring global economic growth.

International companies with global ambitions will always need access to the Single Market.

We will continue to attract investment with a pro-business environment, underpinned by a tax code which is not only competitive in rate, but - more importantly - stable, simple and transparent in function.

We have Europe’s youngest population and one of its best educated, encouraged to think and create.

Our doors remain open, not just to investment, but to people and ideas.

In the space of less than a generation, Ireland has become a diverse and inclusive society.

Today, more than one in six of us is born elsewhere. Our workforce is the third most international in Europe.

While we are an island people, we are the very opposite of insular.

Far from being on the periphery of Europe, we are at its core, one of the founding members of the Euro, with an economy and a people that have demonstrated their resilience in the face of crisis.

Let me say to you also, that the openness that characterises the Irish economy today – to Europe and the wider world, to the opportunities of global trade and investment, to the exchange of capital, goods and services, and of people and ideas, to the very ideals on which the European Union was built, will stand to us tomorrow.

Our economy will continue to grow, even if the scale of that growth would be lesser than with an agreed Brexit.

The value of openness

At a time when attitudes to globalisation, free trade and multilateralism are hardening elsewhere, Ireland remains firmly committed to the political and economic value of openness.

A common thread is appearing across many democracies, one of insecurity, uncertainty and an apprehension about the future, whether that is caused by economic decline, immigration or a general perception among citizens about a lack agency or ability to influence the shape of their society.

For many, the pace of social mobility has slowed. This is combined with a heightened awareness of great wealth.

These are challenges that all of our societies are grappling with.

I have recently been reading Middle England by the wonderful British writer, Jonathan Coe. And I was struck by how he captures this sense of the different realities in which many of us now live,

‘cheek-by-jowl…’ as he puts it, ‘… but also in different universes, and these universes were separated by a wall, infinitely high, impermeable, a wall built out of fear and suspicion… and even shame and embarrassment…’

These walls can be about many things. About different experiences of life, differing levels of access to education and employment, different levels of equality and opportunity, or no opportunity at all.

We cannot ignore these differences, or pretend they do not matter.

If left unaddressed, they will corrode our sense of community and the fundamental values on which our societies, and our democracies, are built.

The public expects modern governments to provide consistent progress and improvements in living standards. Questions are inevitably asked when the outcome is different.

It becomes easier to understand why some of our citizens feel decisions taken in other places are shaping their lives in ways they do not understand or feel they cannot control.

As we have seen right around the world, there has been a push back against the centre, with openly populist governments now in office in both developed and developing countries.

We need to challenge this way of seeing the world.

The nations that have best managed and mitigated these social, economic and political dislocations are those that have actually taken control by investing wisely in developing economic opportunity for their citizens.

They have understood the paradox that in an era of enormous change, the role of the State as both a guarantor of social and economic security and provider of opportunity has become ever more important for those nations – like Ireland - that are most exposed to globalisation.

I say this as a politician who supports the political centre, who believes that the centre is not static but an ongoing process of adaptation and renewal that incorporates ideas from both the left and the right of the political spectrum.

The centre cannot be the status quo.

In renewing the centre we must seek to reform both the State and the market in the interests of the common good. A large part of this work involves making markets function better in the public interest.

Rather than to minimise government intervention in the market, we should instead optimise the manner in which we craft markets to work in the public interest.

Equally we must have the intellectual honesty to recognise where markets do not work and a clear and robust understanding of their limits.

As politicians of the centre, we must continuously make the case why this political and economic model offers the best means to deliver the greatest security, opportunity and well-being - for us as individuals and as societies.

We need to make the case why interdependence is not a weakness, but a strength.

I participated in the monthly Eurogroup and Ecofin meetings earlier this week, as a peer of other Finance Ministers. This is not a weakening of sovereignty.

I am sharing sovereignty to strengthen it.

I am clear in my mind that the European Union represents a vision of cooperation among states for the common betterment of our societies and our citizens.

It is the best framework for renewing our political centre.

This is a vision I am firmly committed to advancing.

It is a vision which, I believe, is all the more important in these uncertain times, when we hear voices challenging the political centre and all that it stands for.

Conclusion

Ladies and gentlemen,

In politics, as in life, I am an optimist but, to subvert a Marxist thinker; we need optimism of the intellect and optimism of the will.

The political centre will continue to offer the best opportunity, security and prospect for well-being for our citizens.

We can make this case, and bring our citizens with us.

We can make the changes that will ensure the liberal international model continues to provide these common goods.

We need to realise this vision in a changed relationship between the United Kingdom, Ireland and the European Union.

And we will, through the European Union, listen to our better angels, resist division and build a new centre for our European and Irish citizens in an ever changing world.

ENDS