GERARD BRADY

Accelerating regional growth in uncertain times Gerard Brady, Head of Tax and Fiscal Policy

Sustaining growth in a time of uncertainty 60th anniversary of 1st programme in November. For those 60 years Ireland’s industrial policy has been ‘horizontal’ – focused on national level objectives Three certainties – globalisation, education, FDI – we caught the crest of the 2nd wave of globalisation However, the global certainties we have grown used to are contingent, not fixed. For a small open economy the environment is now governed by uncertainty How regions adapt to change will determine success

The immediate The long-term Brexit Tax environment ‘Good’ trade wars Sources of uncertainty for Irish regions Brexit Tax environment Demographic change (ageing/urbanisation) Job polarisation Growth of E-commerce/ Future of towns Technological change ‘Good’ trade wars Investment, planning, policy change The immediate The long-term

Uncertainty & business (1) - Brexit

(2) Globalisation is contingent rather than fixed (2) Globalisation is contingent rather than fixed. How will Ireland fare in ‘the Asian century’?

CCCTB OECD BEPS UK CT rate US tax reform Public CbCR Coffey report (3) We have weathered threats to our tax model well but change has shifted type of FDI (more services, R&D) – how does the region compete for those jobs? Tax reform CCCTB OECD BEPS UK CT rate US tax reform Public CbCR Coffey report Digital taxation

How can policy help business adapt in uncertain times? Ireland is particularly open to global forces, it is core to our business model However, we can control some things: Long-timelines for investment - Ireland 2040, implementation key. Certainty in planning. Mitigate risk through supports - EIIS, Brexit supports, R&D tax credit all help firms manage risk Coherence across policy and place based policies - Irish industrial policy, primarily concentrated on the ‘horizontal’ across all of the country. National policy must be coherent with regional objectives. Upskilling - Pretty successful at upskilling in the face of polarisation thus far but can that hold in the face of automation, longer-working lives etc Adapting to technological change – E-commerce + digitisation all impacting on the functions of regions for good (more remote working opportunities) and ill (impact of online commerce on core function of ‘market towns’)

1. Ireland 2040. Implementation key 1. Ireland 2040. Implementation key. Do we have the capacity in construction and planning?

2. Indigenous firms have done much better in recent years but Brexit readiness key Treatment of indigenous firms needs a ‘big bang’ Local base ‘contestable’ for the first time in the way FDI has always been Not enough done so far from the policy side. ‘Diversification’ not the only strategy need support sooner rather than later

2. The regional risks from Brexit are more than just exports than about exports

3. Coherence across policy and place based policy More than infrastructure and planning policy will have to increasingly be place-based if Ireland 2040 is to work Summers & Glaeser Brookings paper ‘Saving the Heartland’ suggests targeting employment supports at weaker regions, for e.g. “Stronger tools, such as spatially targeted employment credits, may be needed more in West Virginia than in San Francisco” As economy comes to full capacity can Irish fiscal policy re-target resources at places where there is more economic slack and thus get better value for money

4. Growing the skills base in a tighter more polarised labour market (competitiveness threat) Skills about developing talent but also about being able to attract and retain. Growing demand for high skilled workers. OECD ‘better life’ index shows BMW has advantages in environment, health, civic engagement, housing and life satisfaction How do you translate advantages to greater skills retention to make up for accessibility, incomes and career development opportunities?

5. Adapting to technological change Role of towns will change dramatically with digitisation. It is estimated that about €1 out of every €5 spent by Irish households (excluding housing costs) will be spent online over the coming years. Lots talked about automation in future but e-commerce eating the lunch of Irish market towns as we speak. Traditional functions - music, books, film, clothing, travel, insurance and banking - all digitised. Relihan, 2017. US towns entry of online grocery retail to a market reduces spend in offline by 4.5% (18% for early adopters) but sees increased spend in coffee shops (+7.6%). Towns must re-think offer to consumers