DÁIL ÉIREANN

AN ROGHCHOISTE UM FHORMHAOIRSIÚ BUISÉID

COMMITTEE ON BUDGETARY OVERSIGHT

Dé Máirt, 3 Iúil 2018

Tuesday, 3 July 2018

Tháinig an Roghchoiste le chéile ag 4 p.m.

The Select Committee met at 4 p.m.

Comhaltaí a bhí i láthair / Members present:

Teachtaí Dála / Deputies Richard Boyd Barrett, Declan Breathnach, Thomas P. Broughan, Pearse Doherty, John Lahart, Michael McGrath.

I láthair / In attendance: Deputy Danny Healy-Rae.

Seanadóir / Senator Colm Burke; sa Chathaoir / in the Chair.

1 SBO Business of Select Committee

Chairman: Apologies have been received from Deputy Maria Bailey. Today we will meet representatives from the Irish Road Haulage Association in our first session and representatives from IBEC in our second session. Before we do this I propose to go into private session to deal with some matters.

The select committee went into private session at 4.14 p.m. and resumed in public session at 4.27 p.m.

Environmental Impact of Fiscal Instruments: Discussion (Resumed)

Chairman: I remind members and witnesses to turn their mobile telephones off, as they interfere with recording and transmission. I welcome Ms Verona Murphy, president, and Mr. Tony Goodwin, general secretary, Irish Road Haulage Association, IRHA. I thank them for making themselves available to the committee. I particularly acknowledge their facilitation of us in respect of the change of date, which we appreciate.

On 8 May, the committee met with Professor Edgar Morgenroth to consider some research carried out by the Economic and Social Research Institute, ESRI, on the environmental impact of taxes in Ireland, including examining the gap between excise duties on petrol and diesel. We will the views of our the IRHA on the equalisation of petrol and diesel excise rates.

I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defama- tion Act 2009, they are protected by absolute privilege in respect of their evidence to the com- mittee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject mat- ter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an of- ficial either by name or in such a way as to make him or her identifiable.

Ms Verona Murphy: I thank the Chairman and members for the invitation to appear before them for what I believe is the first presentation by the Irish Road Haulage Association, IRHA, before the committee. The association is the representative body for the licensed haulage sector in Ireland. We estimate that 47,200 people are employed in the road freight, distribution and logistics sectors in Ireland, accounting for 2.5% of total national employment. Our members play a key role in the sector.

I will outline the economic context for the road haulage sector. Merchandise trade is a very important component of the economy. Exports and imports of goods are key to the functioning of the economy, both from a consumer and a business perspective. In 2017 Ireland’s merchan- dise exports totalled €122 billion, while its merchandise imports totalled €79 billion. When combined, total merchandise trade was equivalent to 68% of gross domestic product, GDP, in 2017. The road haulage sector is central to this two-way trade in goods and, consequently,

2 3 JULY 2018 the proper functioning of the economy. As such, it is essential for Ireland’s future growth and prosperity that the sector be as efficient and effective as possible. IRHA members are a key cog in the efficient functioning of a vibrant and dynamic economy. In a very real sense, we can be described as the wheels of Irish trade and commerce.

The operating environment for road hauliers is very challenging and the sector is also facing many pressures and uncertainties in the coming years. Our challenges include increasing costs, especially fuel costs, but also high insurance premia and new daily levies being imposed in the United Kingdom on Irish trucks which do not apply to UK trucks operating here. Very high levels of competition are driving down margins to unsustainably low levels. New regulatory impositions are leading to a tougher and costlier operating environment. One change resulted in some members’ loading capacity being reduced by 7%. There is a labour shortage which is really stretching our members’ capacity to recruit drivers. Currency fluctuations, in particular, recent movements in the value of sterling, are having a negative impact on many operators. The difficulties exporters are facing are being directly visited on hauliers who are having to deal with lower business volumes.

Future challenges are even more concerning, including Brexit which poses enormous poten- tial challenges for the sector. Ireland is the only EU country that shares a land border with the United Kingdom. Each week there is €1.2 billion worth of trade in goods and services between Ireland and the United Kingdom. In addition, more than 80% of road freight to continental Europe travels through the United Kingdom. Anything that might act to disrupt this trade such as adverse currency movements or border controls would be damaging to Irish road haulage activities and, consequently, the Irish economy.

The risks to the economy from a hard Brexit are very clear. The road haulage sector is the one that is most exposed to Brexit and already feeling its impact through increased currency differentials, a loss of business confidence and declining credit for future investment in rolling stock and support services. The road haulage industry is at the forefront of the economic re- lationship between the United Kingdom and Ireland; hence, it looks to be the most vulnerable and exposed sector in the event that there is a negative Brexit outcome. Policy makers need to ensure this vital component of Irish economic life is supported to the greatest extent pos- sible. One way of supporting the sector is to ensure we will not introduce new domestically conceived charges, taxes or rules which would add to the challenges we face as a sector. We cannot deal fully with the uncertainties that are emerging from what increasingly looks like a chaotic Brexit, but we can ensure we do not make the economic position of exposed sectors any worse through misdirected or inappropriate new rules or charges.

Fuel costs are a very significant overhead for licensed hauliers, representing up to 35% of the operating cost of a vehicle. Licensed hauliers have no alternative but to use diesel. They do not have alternative fuel sources which they can choose as prices fluctuate. Diesel is the most cost effective carbon and energy efficient fuel for use in heavy road transport. It offers the best combination of power, torque and cost efficiency. Other fuels require more space such as gas or weight such as batteries, reducing payload and increasing the number of journeys. Even in the USA where cars and light commercial vehicles are predominately run on gasoline, heavy duty trucks run on diesel. Furthermore, as a fuel, diesel has slower combustion characteristics compared to petrol. Diesel vehicles produce higher torque at lower speeds, the primary require- ment of a heavy goods vehicle. High torque is needed to move heavy loads. The diesel engine remains the only viable option for hauliers. In simple terms, diesel is the only readily available fuel source for hauliers and any increase in its cost represents a direct and immediate charge

3 SBO on the cost of business for a haulier. A proposal to equalise the excise duty between diesel and petrol would lead to an immediate 10% increase in fuel costs for our members.

Regrettably many of the public policy debates on this issue are conducted with a very poor understanding of the complex issues underpinning the use of diesel by the haulage sector. One particularly poor piece of analysis was conducted by the ESRI which was published in Febru- ary. The report suggests a worryingly misinformed point of view in favour of the recent narra- tive that sees diesel as a bad fuel type, no matter what the circumstances. The IRHA contends that the significant analytical flaws and lack of objectivity demonstrated in the report should preclude its use to inform Government taxation policy on fuel excise levels. It is certainly not fit for that purpose. The report completely misses the point that the road haulage industry has no alternative but to use diesel and that modern trucks are leading the way in slashing air quality pollution levels. It also ignores the vast investment made by truck manufacturers in designing highly efficient diesel engines in line with Euro 6 emission standards.

I will now address sustainable transport modes.

Chairman: As there are only a couple of minutes left to make the remaining points in the opening statement, will Ms Murphy paraphrase one or two points?

Ms Verona Murphy: I thank the Chairman for that guidance.

There have been huge investments made by truck manufacturers to reduce air quality pol- lutant levels to near zero. For instance, new Euro 6 engines which have been fitted in com- mercial vehicles constructed since 2014 actually deliver an exhaust particle content which is comparable and, at times, cleaner than ambient air. In the real world the testing and compliance of heavy good vehicles have proved to be far better than for cars for which emissions cheating devices were discovered. It is partly due to heavy good vehicles being more expensive and requiring more physical space that manufacturers were enabled to fit the best technological solutions to meet the standards required. Only 10% of Euro 6 cars meet emissions limits in real world driving conditions. Therefore, in short, a simplistic analysis which proposes that excise duty on petrol and diesel be equalised in order that the price of diesel would increase would do nothing for the environmental sustainability of the national road haulage fleet, other than tak- ing trucks off the road as haulage businesses failed owing to excessive fuel costs. Fuel price equalisation between diesel and petrol would not produce any positive environmental benefit from the national road haulage fleet but would inflict grievous financial damage on a sector that is already facing huge costs and massive uncertainty.

The revised diesel rebate scheme was introduced in 2013 by the then Minister for Finance, Deputy Michael Noonan. The intention behind the scheme was to sustain operators through fluctuating oil prices and bring certainty to the cost base for haulage operators when contract- ing to provide haulage services. This certainty, in turn, benefits exporters by helping to control transport costs and reduce at least one aspect of the variable component of costs. Under the scheme, the Revenue Commissioners repay a portion of the mineral oil tax on fuel provided that the purchaser is a qualifying road transport operator who meets specific requirements. The scheme has not worked effectively since it was introduced, as the applicable floor for diesel rebates was set too high at €1 per litre. The IRHA believes that for the scheme to make a sub- stantial difference in current conditions, the floor should be reduced to 85 cent per litre. -Ad ditionally, we believe that the maximum rebate available under the scheme should be increased from 7.5 cent to 15 cent per litre, with a maximum rebate of 15 cent per litre once the price of diesel reaches €1. Such a move would alleviate cost pressures on the sector, benefit the Irish 4 3 JULY 2018 Exchequer by reducing fuel tourism and bring certainty for Irish exporters by helping to control and predict stable transport costs. This proposal is based on current conditions. Should equali- sation of the excise duty between diesel and petrol be contemplated, the diesel rebate scheme must be introduced to recompense the haulage industry in full for that increase.

The IRHA believes that rather than demonising diesel engines in a non-thinking and fad- driven fashion, the ESRI and the environmental lobby should call on the State and the European Union to make the most of the solutions brought to market by Euro 6 emission standards, by encouraging the acceleration of fleet renewal and-or fleet retrofitting. Retrofitting to Euro 6 standards was undertaken on a grand scale by Transport for London and proved to be extremely successful.

The IRHA hopes that in budget 2019, the Government, when determining appropriate bud- getary measures, will take account of the strategic importance of the licensed road haulage sector and note the precarious operating environment applying at present and the threats com- ing at the sector from Brexit. In particular, we believe the current economic context requires no increase in fuel costs for hauliers by way of taxation and necessitates a recalibration of the diesel rebate scheme to levels that are applicable in other EU countries and which will assist licensed hauliers to plan for the extremely challenging period ahead.

I will be pleased to answer any questions members may wish to raise.

Chairman: I thank Ms Murphy for her opening statement.

Deputy John Lahart: I thank Ms Murphy for her opening statement. This is not the first time we have discussed this issue. Ms Murphy noted the work of Professor Morgenroth and the issue was also discussed with the Minister last week in a breakaway forum at the national economic dialogue.

Ms Murphy has highlighted the concerns of IRHA members about the impact of Brexit. What percentage of additional costs could a hard Brexit impose on the typical road haulage business? Does the IRHA have estimates for that?

Ms Verona Murphy: The average haulage company in Ireland has three or four articulated trucks. Each truck contributes roughly €250,000 to the economy every year. Approximately 50% of the haulage fleet operates on the Continent. We estimate that the cost of Brexit to the 50% of the industry that operates on the Continent will be €180 million in the first year as a result of delays. This estimate is calculated on the basis of customs agency checks, waiting time at borders and so on. In the event of a hard Brexit, it is anticipated the cost to hauliers will be approximately €40 per hour.

Deputy John Lahart: Has that been costed scientifically?

Ms Verona Murphy: I should have said €40 per hour per truck.

Deputy John Lahart: What would be the likely reduction in total merchandise imports as a result of a hard Brexit?

Ms Verona Murphy: It is estimated that it will be 20%.

Deputy John Lahart: Who did the estimates?

Ms Verona Murphy: All the different groupings did estimates. I do not want to name any-

5 SBO body but it is well known in the sector. We have never missed a Brexit forum and the estimate is that the reduction would be 20% in the event of a hard Brexit.

What I am here to discuss today is the combined effect of excise equalisation on diesel and petrol and Brexit. European Union countries such as Belgium and France already have a fuel rebate scheme in place. This is known as an essential user rebate. The essential user is some- body such as a haulier who does not have an alternative. I receive texts every day about this. In Belgium, for example, which has a similar if not identical excise regime to Ireland, the rebate to a haulier on the price of diesel is 22 cent per litre. If one equalises the system, the rebate in Ireland is approximately 0.05 cent, less than 1 cent. Already a Belgian haulier, operating in the European mainland has an advantage of 22 cent per litre of fuel over us. If one adds diesel equalisation, it contributes another 12 cent on top of that.

Our environment will become absolutely untenable. It is not sustainable. Without equalisa- tion we need the fuel rebate in the next budget. With equalisation, that must also be catered for within the realm of the fuel rebate because the essential user does not have an alternative. En- prova, the body charged with implementing obligations under Article 7 of the energy efficiency directive of 2012, has stated that diesel is the cleanest and most efficient fuel for long distance trucks and trucks of 40 tonnes capacity. This is the expert body saying this. The IRHA is saying that hauliers are under significant pressure, none of which we can do anything about. Brexit is driving much of this pressure through currency fluctuation. The environment in which IRHA members are operating is very stressful.

Deputy John Lahart: People want predictability and diesel car drivers thought they had predictability in 2008. We then found out there was a whole new science around pollutants, which has led to the current discussion about a change in policy to change purchasers’ behav- iour.

Ms Murphy criticised the study carried out by the ESRI on environmental and fiscal taxes. Professor Morgenroth of the ESRI provided an outline of the study in an earlier contribution to the joint committee. What evidence does the IRHA have to support its claim? This will be vital in developing tax policy. In hindsight, the science was probably was not available in 2008. However, for the past eight to ten years, right up to this year, people bought diesel cars in good faith, believing they were doing their best for the environment. Having invested in these cars, they find that is not the case and tax policy on diesel may change in the budget. Can the IRHA point to any errors in the data presented in the ESRI study? Does it have empirical evidence that contradicts the research published by the ESRI?

Ms Verona Murphy: I will ask my colleague, Mr. Tony Goodwin, to answer the Deputy’s questions.

Mr. Tony Goodwin: It is important to point out that our criticism of Professor Morgenroth’s report is in respect of his account of the diesel rebate scheme, an issue that directly affects the Irish road haulage industry. The report referred to 140 fiscal measures that would have an envi- ronmental impact. Our concern relates to two pages of the report that deal with the diesel rebate scheme. It is important, therefore, to ensure no one misunderstands our position as one of criti- cism of the general tenor of the report. Our criticism is of the account the report gives of the diesel rebate scheme only. Professor Morgenroth’s conclusion on the diesel rebate scheme is that, somehow, giving the scheme to Irish haulage operators resulted in them driving more and using more diesel. That is a fundamentally misconceived notion. Haulage operators drive the minimum required distance needed to deliver and collect goods. Common sense would suggest 6 3 JULY 2018 that is the case. A large part of dealing with a haulage operation is to ensure fuel efficiency at all times, because burning fuel is a cost.

Professor Morgenroth explained in the report how he came to his conclusion on this mat- ter. He stated he applied a price elasticity factor taken from the National Roads Authority to suggest that an increase in the cost of diesel would change behaviour and that hauliers would switch to another type of fuel. Those two factors do not apply to an Irish road haulage opera- tor for the simple reason that the haulier will not drive any more or any less and he will not be able to switch his truck to another fuel type because it does not exist or is not a viable option. Therefore price elasticity does not apply. It does apply absolutely to-----

Deputy John Lahart: The motor car.

Mr. Tony Goodwin: -----the general discussion the committee is having today, but not to road haulage, which is the critical point. The diesel rebate scheme that exists in a number of countries throughout Europe is in recognition that diesel is the appropriate fuel for that type of activity. Our concern is that it has been mixed up in the fad-driven concept that diesel is the wrong fuel in all circumstances, which it is not. As Ms Murphy has pointed out the Euro 6 standard diesel engine emits air that is in some cases cleaner than the ambient air. It has a 90% reduction in the nitrogen oxides. It is a far better and cleaner system than the equivalent Euro 6 standard car, which was subject to the emissions scandal. That emissions scandal did not apply to the heavy-duty vehicles. That relates to buses and not just trucks.

Deputy John Lahart: We are familiar with that.

Mr. Tony Goodwin: It is all heavy-duty vehicles.

Deputy Richard Boyd Barrett: I thank all our contributors. What they have said is very interesting and it never occurred to me. We have just come from a discussion on setting up a special committee on climate change. Irrespective of whether we like it, we have no choice but to accelerate our efforts to reduce CO2 emissions and the country will incur very significant fines starting in 2020 if we do not succeed and we are well behind. Transport is one of the big areas that is contributing to increases in CO2 emissions, which have increased by 7% in the past two years. I believe the Government has pledged that by 2030 all CO2 emission vehicles will be off the road. What do the representatives of the Irish Road Haulage Association say to that? I understand their difficulty. It never particularly occurred to me but-----

Ms Verona Murphy: Our difficulty is that we are not the people creating the CO2 emis- sions. With the Euro 6 standard there can be actually no emissions. We are spending a mini- mum 35 cent a litre for AdBlue for that Euro 6 standard truck on top of the price of diesel. We are not responsible. An incentive is certainly needed for the many cars on the road to change. We do not have an alternative. Doing this will not decrease the amount of trucks; it will make them more expensive. If an alternative of hydro, battery-powered or even compressed natural gas, CNG, comes in place, they are less efficient and will actually mean more trucks on the road. This is where we have to stress what we do; we know what we do.

Deputy Richard Boyd Barrett: I understand Ms Murphy’s point that there is a new grade of diesel engine for heavy goods vehicles. Is she saying they are producing no emissions?

Ms Verona Murphy: From a Euro 6 standard vehicle, virtually none are produced. We are asking the Government to recalibrate the fuel rebate scheme to allow us all to come to the stan- dard of Euro 6. There has to be an incentive as there is not an alternative. We need to build the 7 SBO fleet just as Transport for London did; its new fleet of buses all meet the Euro 6 standard. They have virtually cured the problem, particularly in the public transport sector of the London area. We aspire to everyone evolving to meet the Euro 6 standard but it is not possible in the current environment. Our transport costs are too great at the moment without equalisation and, with equalisation, it will make it even worse and will slow down the process even further.

Deputy Richard Boyd Barrett: I understand the point Ms Murphy makes about the costs imposed on road haulage operators and the difficulties that would create. I am somewhat sur- prised to hear that some diesel engines have zero emissions.

Chairman: May I interject? I could be wrong on this, but this is my understanding. The policy to change from petrol to diesel in cars was to reduce CO2 emissions. Effectively whether it is based on the Euro 6 standard or whatever, diesel is effectively low on CO2 emissions. How- ever, having switched over a vast quantity of cars, the particulate pollution, which is the particu- lates in the exhaust emissions that cause problems particularly to big European cities with very little air movement during warm summer periods of summer, massively mushroomed. It is two different forms of pollution. I am not sure diesel engines are a main contributor to particulate pollution. If we shift completely away from diesel engines back to cars, we will reduce particu- lates pollution so we will purify the air in the immediate city, probably Dublin only, but we will actually run the risk of driving up CO2 emissions unless the shift was done to electric vehicles. Even going back to petrol vehicles would run the risk for us. That is my understanding of the evidence we were previously given on that. That seems to tie in with what has been said.

Mr. Tony Goodwin: At a previous meeting, Professor Morgenroth accepted that in many cases diesel vehicles were more suited to the longer-distance journeys. It needs to be gener- ally understood that no one is saying that diesel is a bad option in every circumstance. Unfor- tunately the policy is driving in that direction when there is no evidence to suggest that. The Chairman is right that there is a difference between the urban and rural environments. When he was here the last time, Professor Morgenroth said that Ireland does not have the air particulate problem that other countries have because it is windy here and because our urban areas are not so built up. The ban on diesel cars in an urban environment is a very different concept for the long-distance haulage operator.

Deputy Thomas P. Broughan: Is Mr. Goodwin saying that the Euro 6 standard does not have particulate emissions?

Mr. Tony Goodwin: Virtually zero.

Deputy Thomas P. Broughan: Mr. Goodwin knows they are carcinogens. We all knew in 2008 and we knew in 1998. Volvo, Saab and a few other companies tried to move away from diesel at the time when we were moving into it. They will still be emitting carcinogen particu- lates.

Ms Verona Murphy: They are virtually emissionless. There is an AdBlue aspect whereby it is cleaned before it ever comes out of the exhaust but it is costing us more money. It is 35 cent per litre on top of fuel. That is our contribution; that is what we do. It has also increased the cost of trucks by about €20,000 meaning it is very difficult for someone to purchase to that stan- dard in the current environment. The incentive that is required here is to do like the European model, which is to have an essential-user rebate that works. In Belgium it is 22 cent a litre. In Ireland with the same excise regime it is less than 1 cent. Does that sound right? It is not right. It is why Belgium is running predominantly on a Euro 6 standard fleet.

8 3 JULY 2018 Deputy Pearse Doherty: The Irish Road Haulage Association is probably not so concerned with the equalisation of excise duty but if it happens, it wants its members to get rebates.

Ms Verona Murphy: That is correct.

Deputy Pearse Doherty: If we park the idea that a rebate would happen for the haulage sector, does the Irish Road Haulage Association believe that equalisation of diesel and petrol is a good idea?

Ms Verona Murphy: We understand the science behind it but we certainly could not enter- tain it without a rebate scheme in place. We just would not be able to afford it.

Deputy Pearse Doherty: I understand that, based on the figures the Irish Road Haulage Association has provided. Ms Murphy mentioned that the baseline was €1; is that correct?

Ms Verona Murphy: Currently, yes.

Deputy Pearse Doherty: That is set down in legislation through a Finance Act a number of years ago.

Ms Verona Murphy: That is correct.

Deputy Pearse Doherty: What does that mean? If road hauliers are charged more than €1-----

Ms Verona Murphy: If it goes above €1 plus VAT, which would be €1.23 at the pumps, then the rebate kicks in.

Deputy Pearse Doherty: Is there an upper limit on that?

Ms Verona Murphy: On that it is 7.5 cent, meaning that a haulier would be paying about €1.50.

Deputy Pearse Doherty: As Ms Murphy has mentioned, the benefit is minimal.

Ms Verona Murphy: There is no doubt hauliers are well known for reinvesting their funds into their own businesses. That is from where a new fleet of trucks could be generated, without a shadow of a doubt, if there was such an incentive and our members knew that it would not be removed. At a time when we have many destabilising and chaotic Brexit forums and when there is fluctuation in the price of a barrel of oil, there needs to be stability for Ireland. The impact of such an incentive would be twofold for the sector.

Deputy Pearse Doherty: Currently the sector is able to benefit from the rebate but the ben- efit is very small. As Ms Murphy said, it is less than 1 cent per litre. If there was equalisation, the cost of diesel would increase. That would mean the benefit to the sector would increase also.

Mr. Tony Goodwin: Only up to a maximum of 7.5 cent per litre.

Deputy Pearse Doherty: I was about to make that point. There would be no requirement to reduce the baseline. All that would be needed would be to increase the limit to which the sector could benefit.

Ms Verona Murphy: No. The Deputy is talking about a scenario where equalisation would

9 SBO be introduced.

Deputy Pearse Doherty: Yes.

Ms Verona Murphy: No. From our perspective, there is a requirement to reduce the base- line, even now without equalisation.

Deputy Pearse Doherty: Parking that to one side, if there was no upper limit of 7.5 cent and if equalisation was introduced, the association’s members would not be adversely affected because they would simply get a larger rebate. Would that be the case?

Ms Verona Murphy: No.

Deputy Pearse Doherty: Explain that to me.

Mr. Tony Goodwin: Currently, the base level is €1 plus VAT. The sliding rate brings it from zero cent up to 7.5 cent and 7.5 cent is repayable when diesel is priced at €1.25 per litre plus VAT. It is not that our members get back the increases, they only get the smallest portion back on a sliding scale. I can read out the detail if the Deputy wishes. If the price is €1.25 per litre plus VAT, which would be €1.54 per litre at the pumps, the rebate would be 7.5 cent. If, for example, the price were lower, say, €1.10 per litre plus VAT, which would be €1.35 per litre at the pumps, the rebate would be 3 cent. It is not the case that our members would get a rebate of any increases.

Deputy Pearse Doherty: I am not sure if the association provided us with that detail. It would be helpful if we had it.

Mr. Tony Goodwin: Sure.

Deputy Pearse Doherty: Has the association done calculations on the basis of a base rate for the rebate being set at 85 cent per litre given that it is the level that would neutralise any impact of equalisation or would that create an additional incentive?

Mr. Tony Goodwin: Our pre-budget submission will be to the effect that, without the in- troduction of equalisation, we want to tackle all the other cost issues Ms Murphy mentioned, and to bring the rate to somewhere near the ballpark of the rate in other European countries, although it will fall very short of that. We want to bring the floor for the rebate down to 85 cent and to increase the maximum rebate allowable from 7.5 cent to 15 cent and for that 15 cent to be payable once the price reaches €1 per litre. That costing would be €22 million and that is in circumstances where there would be no reduction in fuel tourism. Currently, our international hauliers buy all of their fuel on the Continent simply because they can avail of a much better rebate.

Deputy Pearse Doherty: I am well aware of that. I have extended family members in- volved in the sector and I am well aware of the challenges.

Chairman: The witnesses are talking about reducing the floor for the rebate from €1 to 85 cent while increasing the maximum rebate rate from 7.5 cent to 15 cent and that the maximum rebate payable would kick in at the current minimum level for the rebate.

Ms Verona Murphy: That is correct.

Chairman: That is a very substantial increase in the scheme.

10 3 JULY 2018 Ms Verona Murphy: We have had substantial cost increases. The Chairman will have heard me say previously that we do not have a buffer for Brexit. The cost to the sector in the first year of a hard Brexit would be €180 million. Effectively, our proposal means there will be an increase in the fuel rebate but it will only be in line with other EU countries and it will be paid more quickly but not necessarily in excess. Our sector contributes more than €5 bil- lion to the economy and percentage-wise our proposal would cost very little to keep the sector viable. Foreign direct investment requires the best possible transport structure, particularly on an island. We are advising the committee that if this proposal is not implemented, we will not have a viable road haulage sector.

Deputy Pearse Doherty: The €22 million cost is based on having the lower base for the rebate and increasing the rebate rate to 15 cent. That is not taking on board the benefits that could accrue to the State from hauliers purchasing their fuel-----

Mr. Tony Goodwin: Purchasing more fuel at home.

Deputy Pearse Doherty: -----at home.

We also need the sector to move from using a diesel engine to a more sustainable type of engine. I appreciate what the witnesses said about Brexit. I come from a Border community and I hear about all the challenges, and God knows how it will end up. We need to move to having a far more sustainable system. Where does Ms Murphy see the road haulage sector in ten or 15 years’ time? Will it still be relying on a diesel engine? We have read of an electric roads model. Scania was involved in a partnership in Sweden incorporating a hybrid. Does that represent the future? People in Donegal who might be listening in would say we cannot even get the potholes in the roads repaired, never mind talking about having electric roads. Is that the type of model for which we need to plan or where does Ms Murphy envisage the sector will be in ten, 15 or 20 years’ time?

Ms Verona Murphy: From our point of view, any study for replacing the diesel engine that we have considered would involve either a hydro or a gas engine. There are two issues in that respect. The hydro engine is much heavier and it would reduce the payload by about 10 tonnes. Our capital carrying capacity is between 22 tonnes and 26 tonnes depending on the type of trailer being pulled. If 10 tonnes has to be taken off that, the Deputy can see the problem that would arise. Regarding gas, we are an island and when it comes to certain types of gas - our sector ships from the country - the vehicle cannot be on an enclosed deck and must be on an open deck. That is not the case for all types of vehicles, but with certain types of vehicles with a gas engine, the engine must be dismantled before the vehicle can board the ship. This would currently apply more to imports because we do not see these trucks much here. Vehicles with a compressed natural gas, CNG, engine can travel, but there is not enough space if we were to change over in the morning to that type of engine. The necessary infrastructure is not in place. As to the direction in which I see the sector going, we have been told for years that we will run out of diesel and other fossil fuels. I have no idea about that, all I know is that the technology has to be viable if the sector is to change.

Deputy Pearse Doherty: Is the proposal in which Scania was involved in Sweden in 2016- ----

Ms Verona Murphy: I read about it. We must bear in mind this is a very small country. The Deputy will have read about driverless trucks and platooning. That would be suitable for journeys from Cork to Dublin but it is certainly not suitable for delivering a load to Cahirciveen,

11 SBO in which case a driver is still needed in the truck. At all times a driver would need to be in the truck. Even though people talk about driverless trucks, these trucks would not be unmanned.

Deputy Pearse Doherty: I appreciate that. I was referring to a 2 km stretch of motorway.

Ms Verona Murphy: Those are electric vehicles and essentially that model may be on a motorway.

Deputy Pearse Doherty: That is correct.

My final point is on the issue of Brexit. There is increasing talk about a potential hard Brexit with the UK crashing out of the European Union if there is a no-deal scenario.

Ms Verona Murphy: Yes.

Deputy Pearse Doherty: If that happens, and even if there is not that type of crash, there could still be implications for the association’s members where trucks would have to be checked in terms of the carriage of different types of products and so on. That would have to happen at Dublin Port and possibly at Rosslare Europort. What discussions has the association had with the port authorities? There is not the physical space in Dublin Port to carry out the types of checks that would be needed in that type of scenario.

Chairman: I ask Ms Murphy for a brief answer to that question because we are off the topic under discussion. Three other Deputies are waiting to contribute and there is also a second ses- sion.

Ms Verona Murphy: Spatial considerations are currently under way at Dublin Port. It has bought land and it is making provisions. The same is not happening at Rosslare Europort but it should be. It will take a minimum of €40 million to prepare Rosslare Europort for a hard Brexit scenario, but it can be done and it should be done now. Five Government agencies will operate in the port, namely, those dealing with emigration, agriculture, immigration, customs, the Health and Safety Authority, HSA, and the HSE. They need to be catered for and that can be done now. The financial input for that can only come from Government.

Chairman: Thank you. Deputy Broughan is the next speaker.

Deputy Thomas P. Broughan: Many of the questions I intended to ask have already been asked. As well as the environmental factor, some of us on the committee became interested in broadening the tax base because of the dangers to our corporation tax among other factors. The UK, including Northern Ireland, went down this route before us. How did they manage an equalisation which was fair to the haulage industry as well as beneficial to the Exchequer?

Ms Verona Murphy: I can tell the Deputy this much. We have several members who are both UK haulage operators and Irish. About 13 haulage companies a day are going out of busi- ness in the UK.

Deputy Thomas P. Broughan: Would Ms Murphy ascribe that to the equalisation of the excise duty applied to petrol and diesel?

Ms Verona Murphy: I would, certainly. That is why most of the Northern Ireland opera- tors’ fuel is bought in southern Ireland.

Deputy Thomas P. Broughan: Did they not equalise a few years ago?

12 3 JULY 2018 Ms Verona Murphy: I am not aware, but their fuel is bought in southern Ireland. All Northern Ireland haulage operators buy their fuel in the South.

Deputy Thomas P. Broughan: What is the usual regime in France or Belgium?

Ms Verona Murphy: The French tried to equalise the duty and they were very unsuccess- ful. They have been trying for nigh on 12 years and it has not happened yet, but they also have a rebate scheme that gives 17 cent a litre back to the haulier. Both Belgium and France operate very significant essential user rebates, and it is only to a licensed haulage operator, but from any country within the EU.

Deputy Thomas P. Broughan: Does Ms Murphy feel that if we went the equalisation route, be it phased over a number of years or just as quickly as possible, and we opted for the rebate scheme the association wants, the Exchequer would be better or worse off?

Ms Verona Murphy: I would say it would be better off because I very much believe that although the initial cost, which we have to cost, is €22 million, it would go straight back in through wages, truck manufacture, sales and other areas. Deputy Broughan must remember that when one talks about equalisation, somebody who drives a petrol car or a diesel car has an alternative but we do not so it is a penalisation for us. It is not as if we can say “Go ahead” because we can do this. We cannot. It is a very serious imposition on a sector that is under a lot of pressure and it will do more harm than good to that sector

Deputy Thomas P. Broughan: I thank Ms Murphy.

Deputy Declan Breathnach: I compliment the Irish Road Haulage Association under the stewardship of Ms Murphy both for her lobbying and her proactivity on behalf of truck drivers everywhere. I do not just refer to truck drivers in my constituency because, as a Border con- stituency, we know the dependency, in particular in the Cooley Peninsula area. We are all aware of the traditional issues that arose when the Border existed previously. I hope we will not get back to seeing Customs and Excise clearance become a reality again.

I am concerned about the analysis of the ESRI report and what Ms Murphy has said about it. My question is for both the Chairman and the witnesses. Other speakers have touched on it. There is clarity on the issue that there is no solution in the truck business for replacing diesel. Is there a need for us as a committee to request the ESRI to look at this? The obvious question then is to ask if the ESRI did not consult the association while carrying out its research. That surprises me greatly. Should we refer the document and ask that it would be analysed?

I am new to the committee but I believe the rule is that we do not come back in. I would prefer to ask all the questions in the one act. The association has discussed the shortage of driv- ers with me. Will the witnesses quantify that as I did not hear a number mentioned?

We are all aware of fuel tourism. Has a costing been done in terms of what the savings could be to the Exchequer if that were not happening and if there was an ability to purchase the prod- uct at the right price here? Others have referred to the fact that we are an island country. The same is true for Britain but it has clear access to Europe through the Channel tunnel link. Has a costing been done in terms of the extra cost to road hauliers of getting off the island compared with someone who is connected to the mainland, and is any assistance provided in that regard?

Ms Murphy mentioned AdBlue. It is available in all new cars. Is she saying they are as effective as well? They would be looking for parity of esteem should concessions be made to

13 SBO road hauliers because they also have the costs of having bought that type of vehicle.

In terms of trying to be more inventive, I recently discussed congestion with Ms Murphy. Is there some quid pro quo that could be offered to road hauliers in return for what they want to free up movement into cities in particular? I do not have a solution but I am sure the association has thought about this. Congestion has gone beyond a joke.

Ms Verona Murphy: I thank Deputy Breathnach. I will answer his questions in succes- sion. No, we were not consulted by the ESRI and we were taken aback by the report. As far as I am aware, it was commissioned by the Environmental Protection Agency, EPA. Mr. Goodwin explained about its assertion on the basis that we had a fuel rebate. I might add that at the time in which the report and study were undertaken, we were not in receipt of the fuel rebate. It only kicks in at a certain level so we had not been in receipt of it. That was the reason for the disgruntlement about the report.

I was asked about Euro 6 cars. I cannot comment on that for obvious reasons. The point I made about AdBlue is that this is what we are doing and it makes us more green. It does little for efficiency but it certainly helps with emissions. Trucks have cost a lot more at the manu- facturing stage in the process of developing this system. One is looking at about €27,000 of an increase as well as an exhaust system that does not last as long and has to be replenished after four to five years at a huge cost - somewhere between €5,000 and €8,000, if one purchased a truck with a Euro 6 engine. Again, in relation to the French, the cost of getting off the island of Ireland for a haulage operator is about 30% of the general cost. It equates to the fuel costs. If one is going to the UK, that can be reduced to 20%, as the costs increase when one goes further afield to mainland Europe.

I am conscious that we are not here to discuss congestion, which was Deputy Breathnach’s last question, but I did speak to him about it at a recent forum in Drogheda. One initiative that could improve the entire situation, in particular emissions, is having a dedicated truck lane without barriers. The cost of a truck stopping at a barrier is a litre of fuel. Today’s cost is ap- proximately €1.12. We have put that to Transport Infrastructure Ireland, TII, which does not often listen to what we have to say. That is a huge cost both to the operator and from a CO2 perspective. The M1 in particular has barrier tolling. We do not need or want to sit on the M50 burning fuel when it is 35% of our business outlay. There are solutions but because of the pub- lic private partnership and the 30 year contract that is in place, nobody is prepared to spend the money, but if we want a holistic approach, as Deputy Pearse Doherty said, and we want to cure something once and for all, then we have to spend money. Unfortunately, we no longer have it to spend because of all of the regulatory impositions that have been put on us in recent years and with Brexit coming down the line.

Deputy Declan Breathnach: What about fuel tourism?

Mr. Tony Goodwin: In response to Deputy Breathnach’s question about trucks versus the equivalent Euro 6 car, I will refer to the following information. The International Council of Clean Transportation, ICCT, which is the team that exposed Volkswagen’s cheating on emis- sions testing, found that testing and compliance for heavy vehicles to be far better than cars where emissions cheating devices were commonplace. That is partly due to HGVs being more expensive and having more physical space to enable manufacturers fit the best technological solutions to meet the standards required. ICCT test results confirmed that only 10% of Euro 6 cars meet emissions limits in real world driving test conditions. In real world testing of nitro- gen oxides, NOx, as a percentage of CO2 in Euro 6 trucks versus Euro 6 cars, the cars showed 14 3 JULY 2018 ten times the level of nitrogen oxide shown by trucks for the same amount of CO2 emissions. Unfortunately, what has happened with the emissions scandal has affected Euro 6 trucks despite the fact that they are on a completely different plane.

Deputy Declan Breathnach: Fuel tourism results in losses to the Exchequer. Have those losses been quantified?

Ms Verona Murphy: They have been quantified. It is an unexpected question. I do not have the figure in my head but 50% of the fleet abroad buys abroad because of therebate scheme. The figures are in our budgetary submission.

Chairman: If the witnesses do not have the figures with them, we would appreciate if they would send them in writing.

Ms Verona Murphy: Yes.

Deputy Danny Healy-Rae: I am sorry I was not here for the start of the presentations. I am delighted to welcome the witnesses. I have to declare that I have a small haulage business. I understand the problems and the regulations by which hauliers have to abide. I am glad to hear the witnesses putting to bed the idea of equalisation and having diesel at the same price as petrol in the absence of a proper rebate system. As Ms Murphy stated, hauliers are operating on very slim margins and only barely keep going. They have to be complimented because there are many new trucks on the roads and they are very effective in keeping down emissions. Older trucks did not have AdBlue and were not as effective. Most trucks are operating in Third World countries. We are all in the same world. Whatever good or bad is in them, they will operate for a long time because they have massive engines. What I know about these new engines is that they are great. AdBlue costs a lot of money. If something happens to these engines, they are way more expensive to repair. Fellows have told me that they are not repairable. They have also stated that the engines have to be replaced if something goes wrong because it is so costly to repair them.

I am glad we have been given the presentation. Some Deputies seemed to exit very fast when they realised the lorries of today hardly create any emissions or any damage to the coun- try. I know some Deputies would like us to go back to using horses and carts-----

Chairman: We will not draw any inferences on why Deputies, who are present or not-----

Deputy Danny Healy-Rae: I did not mention any names.

Chairman: Unless Deputy Danny Healy-Rae can read minds, he has no idea why Deputies left the room. In order to be fair to everybody, we will just say that the Deputies contributed and asked their questions.

Deputy Danny Healy-Rae: I would like to see-----

Deputy Thomas P. Broughan: On a point of information, the Minister for Finance is in the Dáil Chamber.

Chairman: A number of Deputies have gone to ask questions.

Deputy Danny Healy-Rae: I would like to see them coming in here more because I am afraid that they will do something to the haulage industry without realising the harm they are doing or that they may do. The witnesses have explained it simply.

15 SBO The amount the haulage industry contributes to the Exchequer should be mentioned. It is vital for bringing our goods to places as far away as Cahersiveen and Castletownbere, as the witnesses stated. It is a different thing when one goes down there because the roads are not as good and one uses way more diesel on that type of road. People in those rural places need to get their goods and supplies just as much as their counterparts it in the cities of Dublin, Cork or Limerick. I am amazed by the way Governments and Ministers change their advice. In 2007, we were advised to buy diesel cars and there was an incentive introduced which reduced the amount of motor tax to be paid. Now in the way one flicks a switch, we are being told that we must change and opt for electric cars. People who do not know what they are talking about are even suggesting it for lorries. How ridiculous can they be? They need to wake up and join the real world because in the context of delivering a load from Dublin to Cahersiveen or from Dublin to Castletownbere, there is nothing that will replace a lorry with a diesel engine. They had better just shut up until they have something to offer because they are only wasting people’s time and upsetting road hauliers who-----

Chairman: We have the gist of the Deputy’s point.

Deputy Danny Healy-Rae: -----have to abide by every rule and regulation of the RSA and others.

I am glad to see the witnesses here. I welcome them back. There are fellows around this place who need to hear the witnesses talking. The witnesses should continue the wonderful job they are doing. They have all the facts. That is what we need to tell the people who want to change the world and who think they can run everything on electricity when there is nowhere to plug anything in to charge. I thank the witnesses for their presentation.

Chairman: I appreciate that there was no question in the Deputy’s contribution. I thank the witnesses for their contributions and for attending. It was a very informative session. On the issues the witnesses raised regarding the ESRI report, we will raise them with the institute.

The select committee went into private session at 5.27 p.m. and resumed in public session at 5.29 p.m.

Priorities for Budget 2019: Discussion

Deputy John Lahart took the Chair.

Vice Chairman: Before we begin, I remind members and witnesses to turn off their mobile phones. The interference from mobile phones affects the sound quality and transmission of the meeting.

I welcome Mr. Fergal O’Brien, director of policy and chief economist with IBEC. He is accompanied by Mr. Gerard Brady, senior economist. I thank the witnesses for making them- selves available to meet the committee. Meetings with a range of national stakeholders will be held in advance of budget 2019 to discuss their budget priorities and challenges.

Before we hear the opening statement, I will draw the attention of witnesses to the position on privilege.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by abso-

16 3 JULY 2018 lute privilege in respect of the evidence they are to give to the committee. If, however, they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable.

I remind members of the long-standing parliamentary practice to the effect that they should not criticise or make charges against a person outside the Houses, or an official, either by name or in such a way as to make him or her identifiable.

I invite Mr. O’Brien to make his opening statement.

Mr. Fergal O’Brien: I thank the Vice Chairman and members for the invitation. We are delighted to present the views of IBEC members in advance of budget 2019. Before I address some of the specific priorities from a broad business perspective, I would like to share the in- sights into how we regard the Irish economy to be performing, as relayed to us by our members from over 40 sectors of the economy. We continue to experience very good trading conditions in the economy. If we consider the main drivers of economic growth, we note the consumer economy is performing very strongly. Our export markets are doing very well, with the excep- tion of the United Kingdom. Pretty much every other developed market is performing very strongly. We estimate that the growth rate of the UK economy is probably about two percent- age points below what it should be currently given the strength of the overall global economy. Notwithstanding that, export demand is very good. The third main driver of the economy is investment. We see a strong increase in investment both from the business sector in terms of capital deepening that is occurring across industry and in respect of a much-needed recovery in construction activity.

When we consider the economy in the context of the latest observable data, we note it is performing strongly. It is, however, very much a rear-view perspective on the economy, to a significant degree. When we look ahead we are quite concerned about the external pressures we now see emerging. We see real risks to our global trading system, as we have known it for so many decades. It has been a bedrock of the Irish economy and has helped us prosper in re- spect of international trade and internationalisation. The economy has not yet felt the impacts of Brexit, whatever they will be. We see a significant risk on the horizon. The third risk, and perhaps the most significant, is that we are now witnessing the most rapid decline in our com- petitive position that we have seen in a decade and a half. The cost base for Irish business is increasing very rapidly. We are experiencing severe capacity constraints in the economy in the context of labour and other resources. Irish business is rapidly losing competitiveness. That is the context in which we approach budget 2019.

I will mention five specific priorities we would like to set before the committee this after- noon. We may discuss other issues during questions and answers.

First, we believe this is a budget that should deliver a step change in the supports for in- digenous business. We urgently need some brave and bold moves to achieve a better balanced economy to really bolster the SME and indigenous sectors. That will help to protect us against some of the international threats to the Irish economic model that we see emerging. Specifi- cally, we are proposing that capital gains tax for entrepreneurs be set at a flat rate of 12.5%, and we would move beyond the current restrictive regime we have. Also for indigenous business 17 SBO and entrepreneurs, we propose that Ireland follow the lead of Sweden by introducing a much more meaningful share-based remuneration scheme for start-up and SME firms to help them to attract and retain talent. That is a real pressure point for the indigenous sector, particularly the start-up sector. We should adjust the stamp duty regime on equity to have a more diversified range of funding options for the indigenous sector. We should move with a much more ambi- tious programme of capital allowances to encourage indigenous businesses to invest more in capital and improve automation and to help them to be better prepared for Brexit. That is the platform for the indigenous sector.

Second, let me make some remarks on the international traded sector, particularly the in- ward investment sector. This has long been the bedrock of the Irish economy. Notwithstanding our objectives to achieve better economic growth, we must recognise how important the foreign direct investment sector is. We also need to be realistic about the challenges we now face as a result of US tax reform. The US tax reform of the past year has been highly significant in terms of the Irish business model. We no longer enjoy the type of competitive advantage we had in the past in terms of being able to win and retain mobile investment projects.

Specifically in the upcoming budget, we will be looking for certainty on our corporation tax regime. We probably regard that as the most important element of the regime in order that busi- ness can be given certainty that allows it to plan. While many US tax reforms have been very attractive, there are some questions remaining over the long-term certainty of the US corporate tax reform regime. In particular, we point out the need to have the administration and function- ing of our research and development tax credit scheme, which supports research and develop- ment activity in both indigenous and multinational business and which is really a key pillar of Ireland’s international attractiveness, streamlined and improved and to make it as accessible as possible for all businesses. There is a very significant opportunity now for Ireland to be a world leader in robotics and increased automation in industry. We would like to see some dedicated schemes to help us accelerate in that domain.

The third priority, which is associated with a key challenge we see across all our sectors, concerns the ability of business to attract and retain talent. We are now approaching an unem- ployment rate of just 5%. We have a very tight talent and labour market at the moment. Prob- ably the most significant challenge facing businesses is that they are struggling to get and keep the right type of staff to meet strong demand. With regard to what we believe we can do in budget 2019, we think some income tax reform needs to be delivered. In particular, workers on average earnings should not be taxed at the higher rate. That would be our primary income tax reform priority for the budget. We really need to do more to help all businesses, large and small, to attract and retain talent through a meaningful share-based remuneration model. Ireland sim- ply does not compare well with other jurisdictions in terms of the taxation of share benefits. This needs to be radically reformed. A key factor, which is driving quality-of-life concerns we have in the context of the Irish labour market, relates to housing. In recent weeks, IBEC has published a major report on the housing challenges we face. Specifically in budget 2019, we will be favouring a move towards a new site valuation tax encompassing the existing residential property tax, the vacant site levy and other development charges on business. That would lead to a much more efficient use of land. It really is the high cost of land in the Irish economy that is driving our uncompetitive position in respect of housing, affordability and availability.

Fourth, we believe sustainability and our environmental challenges will become a much higher priority for our members. Business is very keen to embrace the opportunities provided by the circular economy, in particular. Some specifics we believe can be achieved in budget

18 3 JULY 2018 2019 include long-term certainty on the tax treatment of electric vehicles and much more ef- fective planning for low-emission and zero-emission vehicles for bus and rail transport. We want to see much more effective funding provided for renewable heat technology. The funding available to the Sustainable Energy Authority of Ireland for retrofitting existing building stock should be doubled.

On the broad fiscal position for the budget, as I said in my opening remarks, Ireland’s com- petitive position is being eroded rapidly. It is time to be cautious on the economy. We favour a prudent budgetary stance. It would be right not to add to any overheating pressure which might appear to be emerging in the economy. However, we do not support the principle of the rainy day fund; rather, we support a prudent budget that is not excessively expansionary. When it comes to the rainy day fund, there are existing pressures elsewhere on public expenditure, spe- cifically in the higher education sector, through which there is a storm ripping. The university rankings are falling significantly and we are experiencing reputational damage internationally. This is leaving us ill-prepared to face a future downturn in the economy. The best way to pro- tect its sustainability is to invest now in infrastructure and the education system. We have a plan in place for infrastructure under the national development plan and the ten-year capital plan. However, we have no plan in place to address the crisis in funding in the higher education sec- tor. We urge the committee to support our position that we take a prudent budgetary stance but instead of putting the money into a rainy day fund, it should be ring-fenced to tackle the crisis in the higher education sector which we are experiencing.

This afternoon we saw corporation tax receipts in the first half of the year come in at €335 million more than expected. Over five years corporation tax receipts will most likely have jumped from €4 billion to €9 billion. We need to ask ourselves what we are doing with the additional resources coming into the Exchequer and how we can continue to allow the level of under-investment we are seeing, in particular in the higher education sector.

Vice Chairman: The issue of the tax treatment of electric vehicles came up at one of the branch-out sessions last week at the national economic dialogue. There are significant incen- tives for the purchase of electric vehicles such as tax-free concessions, the return of VAT and so forth. The cost is practically zero to run an electric vehicle. Why then is there no major take-up of electric vehicles?

Mr. Fergal O’Brien: It goes to the core of our point that we would like to see the regime ex- tended to give certainty that there will be a regime in place for a certain period. The absence of certainty on what the tax treatment will be in the future and the fact that it has been introduced for a limited period means that it is struggling to gain traction

Deputy Thomas P. Broughan: I welcome the delegates and thank them for their thought provoking presentation. A few members probably agree with IBEC about the rainy day fund. When we prepare submissions, we usually cost them. What would be the total cost to the Ex- chequer of a proposal similar to the Swedish scheme?

Mr. Fergal O’Brien: We also have costed all of our suggestions and recommendations. We have not yet made a full submission on all of our ideas to the committee. We will do so within the next week and it will include all of the costings.

Mr. Gerard Brady: On the Swedish scheme, it would cost nothing in the first year because one would be deferring payment of the tax for future years. It would probably cost €5 million a year in future years. It would really just be for small firms and start-ups where there is probably

19 SBO not a huge amount of activity, but it would cost as activity picked up.

Deputy Thomas P. Broughan: Are the Swedes finding that it is bringing forward more entrepreneurs?

Mr. Gerard Brady: If one looks at the European countries which offer good incentives to their indigenous companies, Sweden is high on the list, as one can see in the companies coming out of that country, particularly text-based companies such as Spotify.

Deputy Thomas P. Broughan: However, Sweden seems to be privatising many services which used to be publicly funded such as childcare, eldercare and so forth. It is moving away from the social democratic approach. Perhaps that has something to do with the numbers of companies coming forward.

Mr. Gerard Brady: It probably has had an effect in Sweden. When we talk to Swedish col- leagues in BusinessEurope, one sees the impact of the regime, particularly for small companies. We have done it very well for multinationals in that we have an attractive regime in place for them. However, when one looks at the tax regime for indigenous companies, we have the third highest capital gains tax rate in the OECD and the highest rate of stamp duty on shares for in- digenous companies listed on the Stock Exchange. It is the highest in the world and double the second highest rate. We have a high share options tax rate, particularly for smaller firms. Last year the Government introduced the key employee engagement programme, KEEP. However, the feedback from members suggests there has been no take-up of it because of the restrictions. The Swedish scheme has the advantage of being state-aid approved, meaning that one will not have to go through a two-year process of asking the Commission for permission. As it is work- ing in Sweden, there is no real reason it could not work here.

Deputy Thomas P. Broughan: IBEC puts a good deal of stress on competitiveness, which is everything in economics. The summer economic statement also emphasised the growing feeling competitiveness was slipping a little and that we were not developing as fast as we could. Does IBEC have precise proposals for how it would develop it?

When the Irish Fiscal Advisory Council reported to the committee, Mr. Seamus Coffey said there could be some scope for revenue savings with the research and development tax credit. What does IBEC think about that suggestion?

Mr. Fergal O’Brien: When we talk about competitiveness from a business perspective, we always focus on both the cost side and the productivity side. Very often the focus is excessively on the cost agenda. Costs obviously matter. We need to keep our labour costs in line with what our competitors are doing. We need wage increases in the economy, but they need to be moder- ate, sustainable and in line with those of our competitors. By and large, that is what we have seen to date as the economy is recovering. However, we are concerned that the labour market is getting so tight that we need to be cautious in imposing any other cost, either regulation or other costs, that will impact on payroll.

The cost of insurance is a source of significant concern for business. Listening to the previ- ous session, the cost of transport and getting goods off the island, particularly in the context of Brexit, is a concern.

From a productivity perspective, we would like to see more being done to support the indig- enous sector in the context of its talent and management capacity. We mentioned trying to help companies to take advantage of the new technology in automation and robotics. Very often it is 20 3 JULY 2018 much more complex than just buying the latest high-tech kit. It can be a management capacity challenge which can require extensive upgrading and investment across the technology systems of a business. It might be about generating awareness, particularly in the indigenous SME sec- tor, of the available new technologies.

On making much better use of the research and development tax credit, one of our specific recommendations to help more SMEs to use it is to have a more streamlined pro forma approach to it. We also recommend reducing the administration involved for companies below a certain size to make it more accessible and reduce professional services costs in availing of the credit.

On the broader issue of the value of the credit to the economy and the tax forgone, we point to the additionality in research and development activity. Extensive research with our mem- bers has shown a substantial return to the Exchequer from the cost benefit of the research and development tax credit. We have estimates for that economic return. The Government also continues to see this surge in corporate tax revenue. That is indicative of continuing higher quality business activity in the Irish economy and much of that goes back to us growing our in- novation capacity and our research and development activity. There is a tax forgone element of the research and development tax credit but it is creating a significant amount of additionality for the economy. That is evident in respect of-----

Deputy Thomas P. Broughan: Does Mr. O’Brien have hard figures so he can show us that?

Mr. Fergal O’Brien: We have indeed and Mr. Brady conducted much of our research. He may want to comment.

Mr. Gerard Brady: We did work on this in 2014. More recently, the Department of Fi- nance did work on it last year which showed that about 40% of all the research and development that takes place in the economy is supported by the credit. It supports about €2 of research and development for every €1 we are spending on the tax credit itself, or a little more than that. That is really high when we compare our credit to those in the UK or other countries where a similar kind of analysis has been done. It is about €1.50 for every €1 spent there, so ours is much more efficient. It does not just help bring more research and development here. It is also becoming a more important part of bringing FDI - and high quality FDI - here in the first place.

Mr. O’Brien mentioned changes in the US tax reform. The headline rate of 12.5% is still important but it is becoming less important as competitors in the UK, the US and elsewhere close in on that 12.5%. To bring the high value jobs now, the next step up in the food chain of FDI, we need those research and development supports in place. Companies are looking to get smart people and those kinds of research and development in the State as well as more invest- ment in third level. They want to have the capacity to push out those skills and to work together on research and development.

On the cost of the research and development changes we are suggesting, many of them are administrative changes particularly aimed at SMEs. Many of the changes would not have a huge cost. It is partly about administration, partly about how scientific advisers - who are under the research and development tax credit - are appointed, and who takes part in that, and also the consistency and certainty of the credit. It does not have to cost a huge amount of money to make the credit better because the credit as a tax incentive is pretty good and attractive. Its operation, however, may not be. Making that easier, particularly for smaller companies, would not cost much but it could have a big impact. Getting the people working in those small com- panies into higher productivity jobs means higher wages and better living standards.

21 SBO Deputy Thomas P. Broughan: I thank Mr. Brady.

Deputy Pearse Doherty: Is Mr. O’Brien concerned about rail and the impact it has on busi- nesses? I refer in particular to the cost of rail. My understanding is that the regulator applies a cost to the usage of rail and maintenance of the tracks and that cost impacts on businesses using rail to transport their goods. Ireland is an underachiever in this and in trying to future proof our economy. Has IBEC looked at this in the past or is it an area of concern?

Mr. Fergal O’Brien: We have not received extensive feedback on this from our members. In the context of the sustainability challenges we face as an economy, we do support the greater use of rail transport where possible but we have not received specific feedback to say we are out of line from a cost base perspective. Our focus centres on investing in the infrastructure, pro- viding good access to our ports and being strategic in how we are planning long term for some of the challenges Brexit is going to throw at us. As a general theme, we have seen substantial under-investment in our transport and physical infrastructure over the past decade. In addition to the road projects, we would like to see rail investment prioritised, particularly for the export sector.

Deputy Pearse Doherty: On small and medium enterprises and corporation tax, the wit- nesses mentioned the bumper receipts we have had in recent years. I will come back to that in a minute. Sometimes when we talk about our economy we tend to focus on the FDI. Indeed, when we deal with finance Bills there are changes which support FDI. FDI is hugely important as are the tax receipts and how we use them, as Mr. O’Brien mentioned. If we stripped that away though and looked at the economy and how businesses are operating excluding FDI, the picture is not as rosy. It is actually quite concerning and this budget needs to get to grips with all of this because there is volatility. We can talk about what we do with corporation tax receipts but we need to look at profitability in respect of SMEs. IBEC has a number of proposals. I am not sure if they are the right proposals or if they are enough but we need an action plan for small businesses. That was said at the national economic forum. FDI performance is masking what is a problem. Does IBEC see that as a concern and a future risk? Why are our small and medium enterprises underperforming compared to their peers and why are they less profitable in this State than they should be?

Mr. Fergal O’Brien: I will make some initial comments and my colleague Mr. Brady might also comment. It is a concern for us. We have a great foreign direct investment sector but we spoke about some of the risks it faces including international tax pressures and other volatility in the global economy. Looking at the productivity index of the indigenous sector, some parts are quite average in a European context. We are not achieving the type of research, develop- ment and innovation performance that we need to be achieving. Our businesses and our public system are not spending enough on research and development. Research and development performance, particularly at the indigenous level, is well below the northern European high performing economy average seen in Germany, Denmark, Sweden and economies like that. That is one particular area.

Talent is a significant challenge. The labour market is very tight and it is difficult for small businesses to attract and retain talent. It is difficult for SMEs to give a good proposition com- pared to the other employment opportunities in the economy. That is why we point to a mean- ingful share option scheme. It would really benefit the indigenous and SME sector to help companies to bring that talent in and tie them to the success of the business.

Deputy Pearse Doherty: Will Mr. O’Brien talk me through the share option scheme and 22 3 JULY 2018 give a practical example of how that would work in helping to retain talent?

Mr. Fergal O’Brien: The practical realities often mean an SME cannot afford to pay the salary and other benefits that skilled employees are going to get in another sector of the econo- my. We have a scheme at the moment - the key employee engagement programme, KEEP - but it is incredibly restrictive in how it can be applied. Mr. Brady might want to comment on some of the things we have looked at internationally in how we see that working, the success it looks like it is bringing and how we can replicate some of it here.

Mr. Gerard Brady: The advantage of a share option scheme is that where a company can- not pay more but does have some idea of the future growth of the company, the employee can buy into it. It is common in the tech sector, in particular, but it could probably be more common across many different areas. It is a problem in Ireland in particular because we have this huge sector - it is like the problem the League of Ireland faces keeping good footballers. There is a huge, very profitable and productive sector in Ireland and it is very difficult to keep good staff even if a company has them and trains them. Being able to give them shares in the company will help retain management talent and also overcome some of those issues around not being able to pay the same wages.

The London School of Economics has done comparative work on management skills in Irish indigenous companies versus companies elsewhere. We are down with Greece and Por- tugal in a European context and near India and Brazil in a global context. We are probably the third lowest in the EU in respect of management skills available. Our multinationals have really good skills. We are producing many skilled people but they are not going into the indigenous sector. That remains a major problem.

Profitability was also spoken about and Irish indigenous firms have very low margins in the grand scheme of things. They have a high labour share, about the second highest in the EU, and very low margins at the same time, so they pay quite a bit in wages compared to their profitabil- ity. Then they do not have room to invest after that. The role of the State to step in there is to help them to invest them by giving them some kind of incentive to invest through the tax system or direct grants in research and development where if one has low margins, it is very difficult to justify investment in areas like robotics that might be risky and might not work. They are also heavily reliant on short-term financing from banks and are different from other European firms. I mentioned Sweden where there is much greater access to equity investment. The schemes have helped traditionally in the past and equity investors get involved in companies.

Our stamp duty is twice that of the UK, which is second in the world and ten times the European average, which has a massive impact on mid-caps. The employment incentive and investment scheme, EIIS, was a good scheme for smaller companies a number of years ago, but state aid changes that had to be made in last year’s Finance Bill resulted in a 50% drop-off in the take-up of the scheme in the first quarter of this year compared to the first quarter of last year, which is a disaster for small companies, which are high potential and which could grow if they got that equity financing into them.

Deputy Pearse Doherty: Mr. Brady mentioned research and development and my col- leagues had questions on this. We have had discussions in this committee and indeed on the Finance Bill regarding research and development tax credit. It is coming to a point where we need to figure this out. This tax credit is likely to cost €1 billion at some stage. It was up to €708 million in 2015, and is likely to have increased in 2016 and 2017 again. A smaller number of companies are availing of it and we imagine that these companies are the larger multinational 23 SBO companies and not indigenous SMEs. How does one design something that is focused on mak- ing sure research and development is taking place, and that it is incentivised at local level?

Mr. Gerard Brady: We have gone through a huge amount of work on this with our smaller members, in particular, but the big problem is even if they are doing qualifying research and development and could apply for the scheme, and get the money back, they are not applying for it because the administration is too burdensome for them. If a person is working six days a week running a company, he or she is not going to spend half of Sunday doing tax reports, and he or she cannot afford to pay the huge amount that accountants would demand to do it, so they do not bother. We have got lots of examples of that in smaller companies. Pro forma templates could help. The UK has introduced this in recent years. It has online and offline pro forma templates that make it easy for SMEs to fill out what they need. Sometimes that means lower standards in terms of how much information they have to give to the Revenue Commissioners but that is the trade-off. They have to give less information in these templates. That means that they do not have to spend as much on administration and they will take it up, if that is the case. That has been the experience in the UK. It is just a time constraint; it does not work for them at the moment.

Deputy Pearse Doherty: I am told by SMEs that they are doing research and develop- ment but not availing of the tax credit. I have not discussed the complexity of it but it is not on their radar. Sometimes they do not see it as something for them. Are a significant proportion of indigenous SMEs missing out on research and development tax credits because of lack of awareness or the fact that they are just busy trying to keep the company afloat, or is it the ad- ministrative burden?

Mr. Gerard Brady: We have some survey data from 2014 which I can share with the com- mittee. Off the top of my head I cannot remember but it was a somewhat significant number. The number one issue was the administration of the regime, the volume of information that they had to give, and how complex it was. The second issue was the audit period, which is four years. If they were doing research and development and claimed the credit but were audited and the money was taken off them, they could not take that risk because they do not have the money to pay back, or they might not be able to so do in a bad year.

Those are the two main reasons from the survey and I am happy to share the data with the committee on this.

Deputy Pearse Doherty: I heard Mr. Danny McCoy’s comments at the national economic dialogue. Mr. Brady is a contrarian in respect of the rainy day fund and so am I. He has argued that the investment should be made in a specific area of education and it is important to outline that. Has he concerns regarding the operation of the rainy day fund, even if the money does not go into education? The State will not be able to draw down from this fund unless there is an un- foreseen event such as a natural disaster or an outbreak of disease. If the €500 million should be invested in education, which would I presume would support the SMEs and FDIs, does IBEC support the concept that €900 million of the available funding under the expenditure benchmark should not be utilised this year on capital or whatever other type of investment?

In that scenario the Minister would be left with about €800 million in uncommitted expen- diture, while we are hearing that the health budget has overrun because of demand by €600 mil- lion which will be carried into next year’s budget. Therefore there is little left for tax changes, not to mention dealing with other crises. What is IBEC’s position on this?

24 3 JULY 2018 Mr. Fergal O’Brien: Overheating pressures are beginning to emerge in the economy. The budgetary stance should not be excessively expansionary. We support the fiscal stance as set out in the summer economic statement. The main point of difference-----

Deputy Pearse Doherty: Can Mr. O’Brien elaborate on those pressures? Every agency that has come before us has told us that while there is no overheating, there is a medium-term risk of overheating whereas the risk in respect of housing is high, with a high impact. Even if there was overheating, they also say the impact would be medium.

Mr. Fergal O’Brien: It is very different from the kind of pressures that we have seen in the past. We are not seeing a credit bubble emerge that will infect the financial system like we witnessed a decade or more ago. It is a pressure around our competitiveness position. There is probably a significant lag in the data relating to the cost of doing business. The tightness in the labour market is something we are observing on a weekly basis in terms of the practical decisions that businesses now have to make in order to make their operations viable. Some businesses are reducing shifts, for example, while others are curtailing opening hours, because there is not the capacity in the economy on the supply side. We have a supply side problem which is leading to some overheating, though it is very different from what we experienced ten or 15 years ago, but it leads us to the same place - competitiveness is being eroded quite rapidly. We should not have an expansionary budget. The main issue of difference is how we would take some of that money out of the economy, and not use the full budgetary space available. Instead of putting it into a rainy day fund that will bring complexity, as the Deputy rightly said, in terms of how it will be utilised, it should be invested in a specific ring-fenced purpose in the short term, that is, to address this crisis in higher education funding. We see that as impacting on Ireland’s competitiveness at the moment, and our ability to attract labour and investment projects. The perceptions of those international university rankings become the reality. When our reputation is eroded, it will be hard to repair it.

We cannot wait another two or three years before we have a solution to the funding of higher education; we want that addressed immediately. We could buy something significant if we were to use the money that is being earmarked for the rainy day fund now for a ring-fenced fund for higher education. It would make a meaningful difference in the resourcing, staffing, quality and the ecosystem for indigenous business to engage with the Higher Education Research Centre.

Deputy Pearse Doherty: I agree 100% with Mr. O’Brien on the issue of competitiveness. I have made a couple of points about housing, health, education. The international rankings are a wake-up call for us all. The best way to support SMEs and other businesses is a highly skilled, educated workforce, which we need to invest in. I speak to many of IBEC’s members around the country who tell me the issue of competitiveness is real. We went through a period of austerity. There are very weary businesses out there. There is a big danger around competi- tiveness, wage inflation and all those issues. People need to survive in the real economy. They tell me about house prices and the cost of childcare. Is it not a catch-22 scenario? This year’s budget has earmarked an additional €200 million for social housing. Rents will continue to go up. We are still not even catching up, never mind dealing with the lag that is there. Will that not put more pressure on businesses, and the wage demands that will come from workers? If they are operating in Dublin or its environs, or Cork or other areas, rents and house prices are going up, and wages need to match that. The cost of childcare is the second highest in Europe for couples and the highest for single parents. Is the way to deal with competitiveness within the sector to ensure we make that investment, especially in childcare, which can help to grow the labour force, to ensure businesses can survive in a scenario where we may be close to full

25 SBO employment?

Mr. Fergal O’Brien: We are concerned to see a repeat of the wage-cost spiral that of 15 years ago that ultimately did not lead to an increase in people’s living standards, and put us in a precarious position when the global crisis hit. Housing is the most significant challenge we have around the pressures coming through. As I said in my opening remarks, the cost and availability of properly serviced and zoned land with full infrastructure is the key issue in the affordability of housing in the future. We have a lot of land in this country that is not zoned in the right places with the right infrastructure for the development industry to deliver the housing we need. We published a housing report in recent weeks, in which we made a number of com- prehensive recommendations about how we can address the housing affordability and supply issue, and we would be very happy to share it with the committee.

Mr. Gerard Brady: We support a strong increase in social housing. Rebuilding Ireland is too reliant on rental and leasing, as well as on the approved housing body, AHB, sector which possibly will not be able to deliver, given the CSO reclassification. We should increase funding to direct-build social housing, rather than rent allowance or the housing assistance payment, HAP, scheme. It is far too skewed towards HAP rather than direct build. A step change is needed in that regard but it will be difficult to do. We support it.

Deputy Pearse Doherty: Speaking to IBEC’s members, I hear that the marginal tax rate is no longer the issue. When we were discussing the matter at the finance committee, the Govern- ment’s argument for a reduction in taxes was that it would boost employment. We are now in a different scenario where there is almost full employment and there is a danger of overheating the economy. Mr. Brady made the point here that somebody on the average industrial wage, which the Taoiseach says is €44,000, should not pay the marginal tax rate. The cost of increas- ing that would be massive. The standard rate band would have to increase by €10,000 for a single earner, which would cost in the region of €2 billion. I am not sure if some of IBEC’s members are asking Mr. Brady to say that. How important does he think that is at this time? That is one way of dealing with the high cost of housing, childcare and so on, but the other way is increasing capacity. How serious is that? I am hearing otherwise from IBEC’s members, who say it is not the issue at this time.

Mr. Fergal O’Brien: We still believe it is a significant issue. Last year was the first since the start of the recovery that there were fewer Irish people coming home to work than the previ- ous year. There are a number reasons for that. Housing was probably number one. Other costs such as childcare are probably a part of it, but so is the marginal tax rate. People who are work- ing in the UK, Australia, Canada, be it on €50,000, €60,000 or €70,000 tell us that if they come back to Ireland they will have less take-home pay. The point of entry to the marginal rate is a big disincentive to taking up a promotion or taking an extra hour of overtime, when one knows that 50 cent of each extra euro earned in overtime goes to Revenue. We may not be able to get to a marginal tax rate of €44,000 in one budget, but over a period of years average earners must be taken out of the top rate of tax. We put forward proposals that would be affordable in the context of the budgetary space available this year. Over time, it must be targeted at the income tax system. At the moment, our income tax system is unbalanced.

Deputy Pearse Doherty: Is reaching full employment the priority at this time, or is it in- vestment in education or housing? At the end of the day, there is only so much money to go around.

Mr. Fergal O’Brien: Again, much of it comes to the capacity constraints that are in the 26 3 JULY 2018 labour market. A withdrawal of labour is probably happening. We mentioned some of the busi- nesses which are not able to operate at full capacity in respect of opening hours or production shifts. Having an income tax system that will-----

Deputy Pearse Doherty: Vacancy rates in Ireland are just 1%, compared with Sweden and other countries which are at 2% and 3%. We are not anywhere near where they are, in terms of vacancy rates and jobs.

Mr. Fergal O’Brien: The feedback that we have about what is happening in the labour mar- ket suggests we are at a point of capacity pressure. The entry to the marginal tax rate is a factor on that marginal contribution of labour, whether it is overtime, a promotion or an extra shift, and that impacts on businesses’ capacity at the moment. It also impacts significantly, however, on our ability to bring labour back into the country. There will be demand for between 80,000 and 100,000 construction workers to meet our housing and national development plan require- ments over the coming years but we are struggling to bring people home. The marginal tax rate is part of that challenge. It is not the only factor, but it is part of it.

Mr. Gerard Brady: The average industrial wage is just one part of the economy. Currently, it is €36,000 and it would probably cost €130 million to increase the standard rate tax band by €1,000 this year.

Deputy Pearse Doherty: It costs €198 million for every €1,000 that the band is increased.

Mr. Gerard Brady: In full year or first year?

Deputy Pearse Doherty: Full year, if the rates are applied. I appreciate the clarification on the average industrial wage being €36,000, as opposed to the €44,000.

Vice Chairman: I appreciate all the additional time the Deputy was given as well. He is welcome and the Chair is happy to oblige.

Deputy Pearse Doherty: Seeing as it is only ourselves.

Vice Chairman: Absolutely.

Where is IBEC’s position on the VAT rate for the hospitality industry?

Mr. Gerard Brady: It is a difficult question. It gets more difficult. If one talks to people in Dublin, one will see the recovery in tourism. If one talks to our members in much of the rest of the country, however, particularly in the north west where approximately 40% of the tourists come from the UK, and UK tourism has dropped by 7% year on year, one will see a very differ- ent story. VAT rates cannot be varied by region. The Greeks and the Austrians have some kind of opt-outs from the VAT directives but we do not. Our view is that it should be kept because of the significant Brexit threat to the regions, particularly for areas of the country that are non- traditional for tourism. The south west and Dublin are traditionally strong, but in the north west and midlands some 40% of tourists come from the UK, where tourism numbers are dropping off. On balance, it should be kept for that reason.

Vice Chairman: The witnesses were obviously aware of this, but the penny did not drop for me until Ms Patricia King appeared before the committee that all the industrial-scale fast food outlets have benefitted from this relief during the four or five years that it has been in place.

Mr. Gerard Brady: Newspapers are covered by it as well. It is part of the state aid implica-

27 SBO tions. There is a technical reason connected with VAT that a certain number of sectors have to come under it. That is the reason for it and the one we have been given. Only about €150 mil- lion goes directly to hotels. Restaurants and everything else are included. One of the issues is that hotels have restaurants and bars which cannot be separated out because they are all part of the same complex. In some cases, they also have a hairdressers. It makes it very complicated to split the different sectors from each other. It is one of the reasons it affects more than hotels and that it has a broader reach.

Vice Chairman: I thank the delegates for their attendance.

Deputy Pearse Doherty: May I ask one last question?

Vice Chairman: Yes.

Deputy Pearse Doherty: I am very interested in this issue. Of the figure of €500 million, €300 million relates to hotel beds, while the other €200 million relates to the other sectors. Given the comments the delegates made on the regions which are very true and that there is no rationale for having a tax such as this in Dublin or many other urban areas, does IBEC support the introduction of a hotel bedroom tax, as operated in many European cities? It would have to be brought forward by local authorities as opposed to the State. It would be an additional tax to recoup some of the money.

Mr. Gerard Brady: As it is not something we have discussed or thought about in depth, I cannot give the Deputy an answer. My thought is that probably most of our members would be against it which I do not think would come as a surprise to the Deputy.

Deputy Pearse Doherty: I forgot for one moment to whom I was speaking.

Mr. Gerard Brady: It is not something for which we will be advocating.

Vice Chairman: As there is no further business to be conducted, that brings our proceed- ings to a conclusion for today.

The select committee adjourned at 6.25 p.m. until 3.30 p.m. on Wednesday, 11 July 2018.

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