I thank the Chairman for inviting me to address the committee. The views I would like to express are mine and not those of either the British Irish Chamber of Commerce or Dublin City University - as I go through some of my remarks, members may wonder why I said that. As I have this opportunity to talk to the members and to have heard what the three previous speakers said, nothing I say will contradict what they have done. The main point I want to get across is that things have changed significantly and that change is unlikely to be reversed.
I would like to start by quoting both George Osborne and Peter Spencer, the chief economist at Ernst and Young. George Osborne recently said:
My... goal is for Britain to become the most prosperous of any major economy by the 2030s...
It is within the power of my generation to achieve this ...
The ingredients are all here:
We now have the most competitive tax rates of any in the G20.
We've sharpened work incentives with tax cuts for the low paid, welfare reforms and a higher minimum wage ...
[We have also invested significantly in research and development and] We've secured the number one place in the world index for investing in infrastructure.
We're attracting more Chinese inward investment than Germany, France and Italy put together.
By 2030 we're set to have the largest economy in Europe.
These remarks have been covered by Peter Spencer, who said:
However it's not all good news. The global economy has slowed and prospects for the Eurozone appear to be going from bad to worse. The euro has fallen to an all-time low against the dollar, which will help combat deflation and stimulate Eurozone exports at the expense of UK producers. [However] Investors face the uncertainty of the UK General Election, followed by the possibility of a referendum on UK membership of the EU. Overall, the prospects have brightened - but remain ... risky.
These two statements point to several of the significant factors running through current UK political and economic thinking in the lead up to the election. These are that the UK economy is doing well, as is our own, and despite a significant debt burden, the UK's growth is outstripping that of Europe but the UK has more flexibility with its finance and economic policy than the eurozone. That raises a question of the UK's involvement within Europe.
A second issue, as seen from an increasingly sceptical UK audience, is that the problems of the eurozone may not have been arrested and may be getting worse. In the UK this is coupled with a subtext that the EU's attempts at stabilising and reflating the eurozone may no longer be a benign influence on the UK economy, but may be undermining attempts to achieve further growth in the UK.
There is a growing sense - I stress this is currently a minority opinion - in the city of London and several large corporations that I have had the opportunity to talk to that the comparative advantage for the UK of being part of the EU is being eroded. Eurosceptisim, which until fairly recently was largely absent from major UK companies but which was getting a significant hearing within the SME community, is getting a much wider audience. Mr. John Longworth, director of British Chamber of Commerce, at last week's British Chamber of Commerce Conference stated:
Chamber members fundamentally support the Prime Minister's objective: Britain in a reformed Europe. The next government must set out what it will do to protect the United Kingdom against the prospect of being in a club where all the decisions are made by, and for, the Eurozone.
More than any repatriation of powers, businesses want to know that the UK has safeguards against being drawn closer to the Eurozone
...Economic pragmatism - what's best for Britain, for British business, for our national growth ambitions - must win the day.
Before I talk about the impact it is likely to have on us, there are some disruptive factors, as already alluded to by Mr. Dáithí Ó Ceallaigh. The first of those is with regard to the UK election. There is an uncertain outcome both in the likely composition of government and in the role of parties such as the SNP, DUP, UKIP and the Greens. As a subsidiary point, it may be postulated that some form of EU referendum, regardless of the composition of the government, may be on the agenda.
It is also noteworthy that the themes of this referendum will focus not on economic issues but on emotive issues such as sovereignty in certain decision-making processes and, in particular, migration and the free movement of people across the EU.
The second disruptive factor is the effect the success and stability of the eurozone will have on the EU, sentiment in the UK media and the markets.
While not an immediate impact, the nature of the UK and its relationships within these islands is changing and will change significantly. An all-island corporation tax rate of 12.5%, similar arrangements for Scotland, and other regional attempts to gain competitive advantages to counter what is seen as the overwhelming influence of the south east will have an impact on us. We will be measured against Northern Ireland, Scotland and other regions in the UK.
A more fundamental point is that, when the UK thinks of Europe, it looks east. Even though we have a contiguous land border with the UK, in the vast majority of British thinking the EU is 25 miles away across the English Channel. Ireland is not part of the equation in any significant or fundamental way. This will have a considerable impact on us when we examine trade issues, particularly with our largest markets.
In terms of goods, services and trade policy, we must consider where the UK sees itself. For example, the patent box, research and development investment, reducing corporation tax, investment in infrastructure and investment in education are key in its estimation of how to make itself as competitive as possible. Given our success levels, we seek to take the same types of measure. Increasingly, we may be seen to be in competition not just with the UK but also with its individual regions.
The question of the possible imposition of tariffs and border controls has been raised by many informed debaters in Ireland, including myself and Mr. O'Ceallaigh. The implications of border controls and their political impact are recognised by those who are listening in the UK, but they are a relatively small group. When people discuss the EU, they do not think about the wider relationship on this island. It is not a significant calculation when dealing with the pro- and anti-EU lobbies.
The Transatlantic Trade and Investment Partnership, TTIP, is another area of significant impact. I am surprised that I have not heard it mentioned so far. For Ireland and the UK, TTIP is one of the most important areas that we would like to see grow and develop. The relationship with the US is particularly important, as both Britain and Ireland are Atlanticists in their outlook. Seeking a greater relationship with the US that links the world's two largest trade zones is a key consideration.
We have already discussed the UK's competitive edge, but it will undoubtedly seek further competitive advantage. A loosening of EU regulation will form part of that. However, one of the main points that is constantly mentioned is the UK's access to the Single Market.
Taking all of this as the backdrop, what will happen to us and what will the difficulties be for us? I had the opportunity to brief this committee two years ago, when I was asked directly whether I expected to see a "Brexit". I stated that it would be unlikely, for many reasons; the situation is now uncertain. For Ireland, it would impact on trade, agriculture, services, energy policy and so on. In the widest strategic sense as well as an economic and trading sense, a vast variety of activity in Ireland's relationship with the UK is likely to be affected severely. Regardless of the next UK general election and the referendum that will happen, though, the game has changed. We are in a new dynamic.