Clock is ticking on Brexit talks as Varadkar meets May
Business Week: also in the news were warnings on the economy and property
Taoiseach Leo Varadkar meeting British prime minister Theresa May on May 17th on the sidelines of an EU and Western Balkan heads-of-state summit in Sofia, Bulgaria. Photograph: AP Photo
We’re just over a month away now from a key European Council summit at which the UK must present a way to avoid a hard border between the Republic and Northern Ireland for the talks to progress.
Taoiseach Leo Varadkar has been criticised in recent weeks for a lack of communication with British prime minister Theresa May, but the pair finally sat down on Thursday to thrash things out after some frosty rhetoric between Dublin and London.
May is understood to have set out a broad outline to Varadkar of the new British proposals on post-Brexit customs arrangements, although the details haven’t been made public yet. Asked afterwards if May understood Irish concerns about regulatory alignment, Varadkar replied: “She does, yes. Certainly after today...”
One proposal that keeps cropping up is that technological solutions known as “maximum facilitation” – might be used at the Border, but Northern Secretary Karen Bradley more or less ruled this out.
She told MPs her government wanted to ensure there was no change to the lives of people living in the Border regions. “We have said there will be no ANPR [automatic number plate recognition] cameras, no new cameras ... no new physical infrastructure.”
Bradley said a proposed customs partnership which would see Britain collect tariffs on behalf of the EU had advantages.
Nonetheless, the threat of a disorderly “no deal” exit continues to loom, and Dublin is working to diversify Irish exports from the UK market to soften that blow should it land. The recent lifting of a ban on Irish beef exports to China comes at a good time.
Three Irish beef plants and one pork plant had access to the Chinese market confirmed during a trade mission to China led by Minister for Agriculture Michael Creed. Beef had been banned in China since the BSE crisis in 2001.
Brexit isn’t the only uncertainty facing Irish exporters, with more than €143 million worth of our produce to Iran under threat from US president Donald Trump’s decision to pull out of the international nuclear deal and to reimpose sanctions on Iran.
However, EU leaders are pushing back against Trump, seeking to activate a law that bans European companies and courts from complying with US sanctions against the Gulf state.
Whether it’s Brexit, Trump, or EU corporate tax reform, the State’s economy is not without its challenges, and there were two separate warnings this week that we shouldn’t getting carried away with ourselves.
Klaus Regling, the managing director of the European Stability Mechanism, the euro zone’s financial rescue fund, said the Government needed to be careful not to overheat the economy by boosting investment spending too quickly in October’s budget.
Regling suggested the Government’s plan to establish a rainy-day fund could use a few more bob, but also gushed that the employment creation was “just amazing – the highest employment rate ever”.
Separately, the International Monetary Fund (IMF) urged the Government not to cut taxes in the budget, warning it risked “over-stimulating” Ireland’s fast-growing economy.
In its regular report on Ireland,it said “fiscal policy should be tightened to build buffers” against future shocks which loom in the form of a hard Brexit and the possibility of greater trade protection internationally.
The IMF also warned against using temporary windfalls from multinationals to fund permanent measures. “Tax windfalls emanating from the activities of multinationals should be used to reduce public debt or to increase the forthcoming rainy-day fund,” it said.
Economist Seamus Coffey, the chairman of the Irish Fiscal Advisory Council, said a shock to the State’s corporation tax base, which generated a record €8 billion last year, was more or less inevitable.
About 40 per cent of the revenue generated from corporation tax in the State comes from just 10 companies, the bulk of which are US multinationals. Coffey said these receipts were “inherently” volatile.
Another source of revenue for the State is inheritance tax, with figures this week showing inheritances and gifts worth some €1.4 billion were subject to the tax last year as the recovery and an increase in asset prices pulled the figure up by €144 million on the previous year.
In case anyone needed reminding, it was property that threw the fuel on the fire during the economic crisis, and the Central Bank of Ireland is keen to avoid a repeat.
New mortgage lending jumped by 29 per cent last year to nearly €7.3 billion, and the regulator warned this week that the current growth in mortgage lending, if it persists, could pose a systemic risk to the economy.
Despite that, there is still a housing crisis. A report by the National Economic and Social Council said the State should look to land it already owns, such as former docks and rail depots, as it seeks to deal with the crisis.
Meanwhile, builder Cairn Homes is in the final round of talks to sell a block of 120 apartments on Dublin’s Hanover Quay in a single deal that could be worth more than €100 million, rather than selling the properties individually.
Then there are those in long-term mortgage arrears. Some 10,000 of them should have their homes repossessed, according to consumer advocate Brendan Burgess.
He told the Oireachtas Finance Committee that the customers in question had not paid their mortgages for five years or more and, in many cases had not engaged with their lenders in a meaningful way.
Recent figures show there are currently 24,000 borrowers in mortgage arrears of more than two years, and 10,000 who are behind with their payments for more than over five years. “This would not be tolerated anywhere else,” Burgess said. “It’s an extraordinary high level of arrears.”
In the rental sector the housing crisis is not being helped by a proliferation of short-term tourist lets. New figures from Daft.ie estimate that more than half of the available rental properties in Dublin are being listed as such.