Draft Briefing Material

Economic Challenges \ Policy Issues

Tab 1 Macroeconomic policy

Tab 2 Jobs \ Enterprise

Tab 3 Competitiveness

Tab 4 Innovation

Tab 5 Labour Market

Tab 6 Europe 2020

Tab 7 Communications \ International Reputation

Tab 8 Climate Change

Tab 9 Housing

Tab 10 Central Statistics Office

1. Macroeconomic Policy

SummaryThe macroeconomic challenges facing the economy as a result of the high fiscal deficit, rapidly increased level of debt, fall in output and entry into IMF\EU programme are well-known. Major challenges in the immediate period ahead include:

● EU-level negotiations in March in relation to reforms of EFSF\ESM and proposed Competitiveness Pact

● need to engage with IMF\EU in relation to changes proposed on foot of Programme for Government

● Text withheld under section 31 - Economic and Financial Interests of the State

● meeting 2011 fiscal targets, which will pose major delivery challenges

● need to prepare for further adjustments over 2012-14 period, including possible comprehensive expenditure review

● introducing new budget advisory council (as per IMF\EU programme)

Priority IssuesThe IMF\EU Programme and Budget 2010 are based on the following:

Growth projections are as follows:2010* 2011 2012 2013 2014

GDP 0.3 1.7 3.2 3.0 2.8GNP -2.0 1.0 2.6 2.4 2.4* 2010 growth figures will be published by CSO on 24 March

Reduction in the General Government Deficit over the period to 2014 as follows:2011 2012 2013 2014

GGD (% of GDP)

-9.4 -7.3 -5.8 -2.8

Adjustments are proposed as follows:2012 2013 2014

Total €3.6bn €3.1bn €3.1bnTax €1.5bn €1.1bn €1.1bnExpenditure- Current- Capital

€2.1bn - €1.7 - €0.4

€2bn - €1.6 - €0.4

€2bn - €1.6 - €0.4

There are however serious risks including:

● lower levels of growth (most independent forecasts, including Cion, have projected lower levels of growth)

● higher than projected costs from financial sector restructuring, including worsening mortgage arrears problems

● sustainability of public debt levels, of which it has not been possible to convince the markets

● further economic shocks, including Exchange rate movements

Immediate issues for attention include:

EU-level negotiations in March in relation to EFSF\ESM and proposed Competitiveness Pact: separate briefing will be provided on this fast-changing negotiations leading-up to the Summits on 11 and 24 March

Need to engage with IMF\EU in relation to changes proposed on foot of Programme for Government: will be necessary to agree on strategy for engagement with IMF\EU in relation to bilateral renegotiation; a review mission is due to visit Ireland in April;

Text withheld under section 31 - Economic and Financial Interests of the State

Meeting 2011 fiscal targets, which will pose major delivery challenges: delivery of 2011 expenditure targets will pose major challenges, particularly in terms of efficiency savings in the public service; tax returns will also be dependent on growth outcome; any slippage on expenditure side will require further discussions with IMF and possible corrective measures

Need to prepare for further adjustments over 2012-14 period, including expenditure review: a comprehensive expenditure review is an opportunity to reflect Programme for Government priorities in revised spending estimates for 2011-14, while providing certainty about expenditure for those years; however it is a major undertaking

with many other concurrent pressures and will need to be structured carefully

Introducing new budget advisory council: this is a commitment in the IMF\EU programme (for delivery by end quarter 2) and will require legislation; related budget rule measures, including possible EU requirements, also require legislation

These issues are the responsibility of the Department of Finance, but the Economic policy Division provides briefing\speaking material as required, including on (i) significant statistical or economic releases\reports and (ii) weekly summary of economic news.

2. Jobs / Enterprise

SummaryGiven the challenge of reducing unemployment from its current level of 13.5%, the priority is a coherent approach across Government Departments to creating and protecting jobs and supporting enterprise by ensuring that:

● commitments in the Programme for Government relating to enterprise and jobs are delivered

● existing enterprise and sectoral strategies (e.g. Trade Strategy, Food Harvest 2020, Innovation Taskforce, Green Enterprise Action Plan – see below), where consistent with the PfG, are implemented

● new and emerging challenges\opportunities are addressed by relevant Departments\Agencies

Priority IssuesA range of job creation and enterprise strategies which require implementation across Departments\Agencies:

● Trading and Investing in a Smart Economy: A Strategy and Action Plan for Irish Trade, Tourism and Investment to 2015: sets ambitious targets for trade, tourism and investment which have the potential to create 150,000 direct jobs to 2015, as well as assist the creation of a further 150,000 indirect jobs. A Foreign Trade Council has been established

● Food Harvest 2020: a strategy for agri-food, forestry and fisheries for the next decade. It contains recommendations to ensure the industry’s central contribution to export-led economic recovery. FH 2020 sets ambitious targets to be achieved by 2020, including increasing the value of primary output by 33% and raising the value of value-added and exports by around 40% from a 2007-2009 average baseline figure.

● Innovation Taskforce: which recommends actions to position Ireland as a Global Innovation Hub (see Tab 4 for more information)

● Green Enterprise Action Plan: identifying 55 recommendations to support ‘green jobs’ in areas such as enhancing the energy grid, water services investment, introducing electric cars, introducing regulations promoting biological waste recycling, supports for bioenergy and retrofitting of buildings.

● Ireland’s International Education Strategy 2010-15 “Investing in Global Relationships” has the objective of increasing international student numbers in higher education by 50% and in English language schools by 25% by 2015. It is estimated that by 2015 full implementation of the strategy will be worth €1.2bn per year to the economy (current estimated worth is €900m annually).

Other specific cross-departmental initiatives which require attention include:

● proposals emerging from the ‘Your Country, Your Call’ initiative for an International Content Services Centre and Ireland as a Cloud Computing Centre

● business plan to be submitted shortly for implementation of the ‘Green IFSC’ initiative

● an initiative with Google to help Irish SMEs develop an online presence

● extending the 15 day ‘prompt payment rule’ outside of central Government Departments

● developing Ireland as an International Construction Services Centre

Cabinet Committee on Economic Renewal and JobsThe Division supports the Cabinet Committee on Economic Renewal and Jobs, chaired by the Taoiseach, which aims to ensure a co-ordinated cross-Government approach on these issues.

Most of the work at official level is carried out by a Senior Officials Group which brings together all relevant Departments and Forfás.

3. Competitiveness

SummaryWhile Ireland has regained competitiveness in the past two years, significant further improvements are required to support export-led growth.

A sustained, cross-departmental approach will therefore be required to ensure further improvements by:

● delivery of the competitiveness measures set out in the Programme for Government, National Recovery Plan and IMF\EU programme

● responding to recommendations and analysis from the National Competitiveness Council and other appropriate bodies

Priority IssuesThe Irish economy experienced substantial losses in price and labour cost competitiveness during the past decade due to rising prices and production costs relative to our trading partners, an appreciation of the effective exchange rate and weaker productivity growth.

However since 2008, Ireland has regained some cost competitiveness.

The price level has fallen relative to our EU competitors: during 2009 and 2010 HICP inflation was -3.3% in Ireland, 5% below the euro zone average and over 6% below the average for the EU as a whole.

European Commission data show that, following a 0.6% decline in 2009, Irish unit labour costs are estimated to have contracted by a substantial 5.6% in 2010. Ireland is the only country in the euro area in which unit labour costs are expected to fall over the period 2009 to 2012.

Specific measures to support further competitiveness improvements, included in the EU/IMF Programme of Support and the National Recovery Programme include:

● reduction in the National Minimum Wage by €1 an hour (effective from 1 February 2011) and an independent review of the REA and ERO arrangements which is due to report shortly

● a Legal Costs Bill to implement the recommendations of the Legal Costs Working Group, outstanding Competition Authority recommendations and establish an independent regulator fort eh profession; related measures to increase use of arbitration\mediation and increase use of tendering for legal services by the State

● a study is to be conducted on the economic impact of eliminating the cap on the size of retail premises

● Commission on Energy Regulation to impose rigorous efficiency targets on the ESB, Bord Gáis and Eirgrid

● competition in the professions to be overseen by an independent figure reporting regularly to Government; specific measures to be taken in medical and pharmacy profession under IMF\EU programme

● further ways to tackle increases in insurance costs to be identified, building on work of the PIAB

● target of achieving 25% reduction in regulatory burdens on business in 2011 (instead of 2012)

● proposals for legislation to be developed to overhaul and streamline the property valuation service

● the Working Group on Transparency in Commercial Rent Reviews prepared a voluntary rent review arbitration code. The Property Services Regulatory Authority is to develop a public database with details of letting arrangements and rent reviews in the commercial property market

● local authorities to improve efficiency and reduce, where possible, charges to business; full information on 2011 Annual Rates of Valuation (ARV) will be available in the near future – in 2010, 31 of 88 local authorities decreased their ARV, while the majority (55) kept the same rate as 2009.

The National Competitiveness Council (NCC) has expressed concern that price falls are a cyclical response to the Irish and international recession rather than a response to structural reform in the Irish economy.

The NCC produces annual reports (i) benchmarking Ireland’s international competitiveness performance (ii) recommending actions to reduce costs and improve productivity across all sectors. It is also currently working on reports on commercial property costs and the cost of professional and business services.

The Division is represented on the National Competitiveness Council and its recommendations, and other competitiveness issues are considered by the Senior Officials Group and Cabinet Committee on Economic Renewal and Jobs.

4. Innovation

SummaryDespite our ambitions in this area, and recent progess, Ireland remains an ‘innovation-follower’ ranked 9th out of 27 on the EU’s Innovation Socrecard.

The Innovation Taskforce set out recommendations to make Ireland a Global Innovation Hub including increased commercialisation of research, better access to IP, more focused R&D, funding and assistance for start-ups, better use of public procurement, and attracting overseas entrepreneurs and fast-growing companies to Ireland.

Significant momentum has been achieved– in particular through Innovation Fund Ireland, major MNC investments here and some high profile international coverage.

The key challenge is to ensure continued delivery of the recommendations and other initiatives, to sustain this momentum and perceptions.

Priority IssuesInvestment under the Strategy for Science, Technology and Innovation (2006) has delivered significant results:

● Total Expenditure on Research and Development has risen from €972 million in 1998 to €2.68 billion in 2009

● Business Expenditure on R&D (BERD) rose to €1.7 billion in 2009 (from €900m in 2001)

● Higher Education R&D investment has almost quadrupled in current terms over 10 years and is now at the EU and OECD average levels

● In 2008 EI assisted 794 companies to perform R&D. ● EI commercialisation activity in 2009 facilitated:

- the creation of 35 spin out companies (up from 5 in 2005)- 421 invention disclosures (up from 135 in 2005)- 144 priority patent applications- 95 licenses/options/assignments

● 49% of IDA investments in 2009 were in RD&I with approx. €500m of investment. Currently there are about 170 IDA supported companies with a significant R&D mandate with a combined spend of approx €1.7 billion.

The Innovation Taskforce recommended how to increase the impact of this investment based on the concept of making Ireland a ‘Global Innovation Hub’. Recommendations which should be focus of efforts in short-term include:

● the IDA is developing a new Programme to attract fast-growing companies to locate their European Headquarters in Ireland;

● Enterprise Ireland is introducing enhanced seed and angel funding arrangements for innovative start-ups;

● an expert group will shortly finalise reforms of our Intellectual Property system, including development of a national protocol for ownership and access to State-supported IP;

● Enterprise Ireland is launching a campaign to attract overseas entrepreneurs to locate in Ireland;

● improved visa arrangements are to be considered by Department of Justice;

● an exercise is underway, chaired by Jim O'Hara (ex-Intel), to ensure that research funding is more targeted on strategic areas of national importance;

● industry experts on working on ideas for making Ireland an International Innovation Services Centre (IISC)

● a pilot Flagship procurement initiative in the Silvertech area is included in the National Recovery Plan.

In addition, Innovation Fund Ireland was established in July 2010 to incentivise top-tier international Venture Capital firms establish their European operations in Ireland.

The Fund has up to €250m available: €125m pool of Exchequer funds provided by the Exchequer and managed by EI, combined with the potential for the NPRF to make a similar level of commercial investments assuming its criteria are met.

So far NPRF have made 3 commercial investments under the Fund with leading international venture capital companies:

● DFJ Esprit has opened an international office in Dublin with a Dublin-based partner.

● DFJ (parent company) - which is based in Silicon Valley – has agreed to work with the IDA to help bring fast-growing venture backed companies to Ireland

● Polaris Venture Partners has chosen Dublin as the location for its first Dogpatch Labs business accelerator facility outside the United

States. This is a coup for Ireland and should help bring people from across Europe to start their companies in Dublin.

In addition, Enterprise Ireland has received 32 responses to its call for expressions of interest which are currently being evaluated. Text withheld under section 20 - Deliberative Process, and section 21(1) Negotiation of Public Bodies

An Advisory Board (chaired by Damien Callaghan of Intel Capital) is in place to advise on the strategic direction, progress and performance of the Fund. It is assisting Enterprise Ireland with the branding and marketing of the Fund as part of wider Innovation agenda.

Secretariat to Innovation Fund Advisory Board (members participate pro bono) is provided by the Division.

5. Labour Market Issues

Context

The latest Live Register figures for February 2011 show a standardised unemployment rate of 13.5%,. The Department of Social Protection expect that if recent trends continue the Live Register could be lower on average in 2011 than it was in 2010.

The long-term unemployment rate was 6.5% compared with 3.2% in the third quarter of 2009 (140,400 people; QNHS figures). As of Q3 2010, long-term unemployment accounted for almost 47.0% of total unemployment compared with 25.5% a year earlier. Long-term unemployment constitutes a larger proportion of total unemployment among males than females (52.5% compared with 35.6%)

A key part of the challenge is to develop labour market activation policies to assist and to encourage jobseekers to return to the workforce. A wide range of measures are in place including guidance and placement services, education and training provision, supports for self-employment, employer incentives, additional employee tax credits and partial retention of secondary benefits, and work placement/internship programmes.

Key issues

1. Commitments under the EU/IMF Financial Support PackageThe Memorandum of Understanding (MOU) agreed with the EU/IMF contains a number of commitments in relation to labour market activation.

The MOU outlines that progress on the Activation measures must be delivered on reported to the EU/IMF for the first quarter 2011. The MOU also states that any legislative measures must come into effect by May 2011. In addition, it should be noted that at each subsequent quarterly review the Government are to submit an assessment, including quantitative indicators, of the management of activation policies and the outcome of job seekers search activities and participation in labour market programmes.

2. Departmental Restructuring Implementation of the Government decision in 2010 restructuring responsibility for labour market issues continues. Additional

functions transferred to the Department of Social Protection are as follows:

● The Community Services programme and Rural Social Scheme previously managed by the Department of Community, Equality and Gaeltacht Affairs transferred on 1 September 2010

● The staff of the Community Welfare Service have now been seconded from 1 January 2011 to the Department from the HSE. It is intended to complete the transfer by end September 2011.

● From 1 January 2011 policy and funding responsibility for FÁS functions in relation to Employment and Community Services transferred to the Department. A Framework Agreement is in place to govern the provision of services by FÁS on behalf of the Department from 1st January 2011 until such time as operational responsibility is transferred to the Department.

● The next phase in the transfer of FÁS functions is to transfer the relevant staff and facilities from FÁS in order to allow the Department to take direct operational control of employment and community services. An inter-departmental Programme Board chaired by the Secretary General of the Department has been established for the purpose of implementing this transfer.

3. Revised National Employment Action Plan measuresAt the core of policy is enhanced activation of social welfare recpients to keep people “close to the labour market” and therefore better positioned to take-up employment when it becomes available. This approach reflects best international practice and advice.

D/SP have progressed work in conjunction with Fás on specific measures to support the introduction of customer profiling, selection, referral and case management based on profile data for jobseeker customers.

From 19 October 2010, a group engagement process has been rolled out on a trial basis in 3 areas. Under this initiative, jobseekers are initially referred in groups to a single location, facilitated by a joint D/SP-Fás team.  An evaluation of the group engagement process has been initiated and will inform the roll-out of the process.

A new case management system has been introduced by D/SP. This provides for the automatic scheduling and case management of appointments for D/SP Facilitators in dealing with jobseekers. A new IT system is now developed by the D/SP which will replace the existing National Employment Action Plan selection and referral

system. This will include the facility to schedule individual or group appointments with Fás, Local Employment Services etc. This facility will be rolled out on an incremental basis to all Social Welfare Local Offices over 2011.

An IT solution has been developed to avoid the duplication of those who self-present to Fás (‘walk-ins’ or voluntary engagers) also automatically being referred to Fás under the Employment Action Plan (EAP) system when they reach 3 months on the live register. This will rolled out to all SWLOs in tandem with the roll-out of the new IT EAP system during 2011. A prototype web-service giving access to FÁS case management information (screens) on individual customers has been developed by a joint FÁS/DSP team. D/SP is testing this service with a range of staff roles in one SWLO.

4. Changes arising from Budget 2011 and related decisionsThe Work Placement Programme, launched in May 2009 with 2,000 places, has been expanded with a targeed additional 5,000 public sector places and 500 private sector places. The Programme is designed to bring employers and unemployed people together for a work experience placement for a maximum duration of up to nine months.

On 18 November the Government approved the creation of a new temporary Skills Development and Internship Programme, aimed at those who are at least 3 months unemployed. Support will be provided for up to 5,000 places to be created in the private sector. The programme consists of a training/education element and an internship in a host organisation. It is intended that the programme will be operational by the end of the first quarter of 2011.

The Government agreed to extend the Employer Job (PRSI) Incentive Scheme to end 2011 in the context of the Budget and National Recovery Plan.

Tús, a new community work placement initiative for up to 5,000 persons announced in Budget 2011 was launched on 21 December 2010.

In December 2010 a new €20m multi-annual higher education labour market fund was established to enable unemployed people access innovative part-time higher education opportunities from certificate to post graduate levels (Levels 6 to 9 on NQF). The Fund will be

allocated by means of a number of Calls for Proposals, the first of which for €5m issued on 26 January.

Implementation

Policy in this cross cutting area is coordinated by the Cabinet Committee on Economic Renewal and Jobs. In relation to labour market policy it is supported by a Senior Officials Group on Labour Market Issues chaired by the Department of the Taoiseach .

The Senior Officials Group comprises representatives of the Departments of Finance, Social Protection, Enterprise, Trade and Innovation, Education and Skills, and Tourism, Culture and Sport.

6. Europe 2020 Strategy

SummaryIreland is required to submit a National Reform Programme (NRP) under the Europe 2020 Strategy to the European Commission in April as part of the new ‘European Semester’. (An initial draft was submitted in December).

The NRP must include a commitment to national target outcomes for 2020 in five areas (Education, Employment, R&D, Climate Change, Poverty), as well as measures to help deliver those targets. Stakeholders, including social partners, must be consulted on its contents.

Priority IssuesBefore submitting the National Reform Programme in April, Ireland will need to finalise targets for 2020 in the following areas:

Employment: EU wide target is to raise to 75% the employment rate for men and women aged 20 – 64 by 2020. Consultation is ongoing on an appropriate target for Ireland, where the rate is currently 65.5%.

Research and Development: EU wide target is to raise the combined public and private investment levels to 3% of GDP. In 2010 Ireland’s research intensity is estimated to have reached 1.73% GDP (2.17% of GNP). Focus will also be on measures to increase outcomes from investment.

Climate Change: EU wide target is threefold: to reduce greenhouse gas emissions by 20% compared to 1990 levels; to increase the share of renewables in final energy consumption to 20%; and to move towards a 20% increase in energy efficiency. Ireland already has binding targets agreed at EU level in relation to emission and renewables.

Education: EU wide target aims to (i) reduce school drop-out rates to less that 10% and Ireland’s proposed target is 8%, and (ii) to increase the share of 30-34 year olds having completed tertiary education or equivalent to 40%, where Ireland’s proposed target is 60%. These proposed national targets are based on the existing National Skills Strategy.

Poverty: EU Target is to promote social inclusion, in particular through the reduction of poverty, by aiming to lift at least 20 million people out of the risk of poverty and exclusion. Ireland’s approach has yet to be

finalised, but is likely to be based on the existing National Action Plan for Social Inclusion which has a target is to reduce consistent poverty to between 2-4 per cent by 2012 and to eliminate it by 2016. (In 2008, 4.2% of the Irish population was in consistent poverty). Further work to finalise the target is required.

A further round of Consultation with stakeholders, including social partners, will be required before submission of the final NRP in April.

BackgroundThe June 2010 the European Council adopted Europe 2020 as the new strategy for jobs and for sustainable and inclusive growth –replacing the Lisbon Strategy. The overall framework covers a number of elements:

● outline of macro-economic scenarios and bottlenecks;● five EU headline targets in the areas of employment, R&D,

climate change, education and poverty;● the setting by Member States of national targets in pursuit of

those EU-wide targets;● at EU level, seven flagship initiatives in key areas which will

contribute to the overall effort by the Member States; ● the preparation of a National Reform Programme by each

Member State, outlining the policies and measures to be taken in pursuit of the objectives of the strategy, including the headline targets

This is an integral part of the European Semester, starting in 2011, during which the member states' budgetary and structural policies will be reviewed to detect any inconsistencies and emerging imbalances. The aim is to reinforce coordination while major budgetary decisions are still under preparation.

The Department of the Taoiseach is responsible for coordinating preparation of Ireland’s NRP, and ongoing reporting on progress under the Europe 2020 Strategy. Relevant Departments remain responsible for targets and measures in each area. This includes required consultation with stakeholders, including social partners on the NRP.

7. Communications

Over the last two years, Ireland’s international reputation has been significantly damaged as a result of the fiscal and banking crisis. The quantity of sustained, negative international media commentary covering such a broad global geographic spread is in many ways unprecedented.

Given that Ireland is a small open economy, critically dependant on international trade, this ongoing negative narrative has the potential to inflict considerable economic damage. Already we have seen the impacts that the deterioration in international and domestic confidence has had on the financial markets and Ireland’s cost of borrowing.

Feedback from our missions abroad, overseas offices of agencies and the internationally trading business community indicates that there could be further damage to FDI, export markets and tourism if this negative coverage continues unchallenged.

At the same time, Ireland’s economic recovery and growth is heavily dependant on our export and investment successes. Nothing is more critical to the economic prospects of the country in the years ahead. It is vital that all necessary efforts are undertaken to support and underpin our overall economic strategy and policies including through harnessing to maximum effect our cultural strengths and heritage.

The Department of the Taoiseach has convened group of officials and communications experts from key Government Departments and Agencies in recent months to consider the potential for a more strategic and co-ordinated approach to addressing these image and reputational issues.

This Group is close to finalising a proposal for consideration by the new Government for embarking on an integrated international marketing strategy including a business case.

While there will be some costs associated with implementing this strategy it should be noted that industry and Government experts suggest that the cost of doing nothing to challenge Ireland’s current negative image is likely to be a significant multiple of this and could include a loss of FDI opportunities, damage to the credibility of our indigenous companies and continued decline in our tourism industry.

The detailed Report will be available for consideration by Government shortly.

8. Climate Change

SummaryIreland faces challenging EU targets for reducing Greenhouse Gas emissions and increasing renewable energy output by 2020. Even more ambitious reductions will be required in the longer term, posing a particular problem for the agriculture sector.

Immediate priorities are:● preparing an updated plan with measures to meet our

greenhouse gas reduction target for 2020● negotiating at EU and international level for a new way to

address emissions from agriculture● ensuring renewable energy policies are consistent with

competitiveness goals

ContextFor the purposes of the Kyoto Protocol, Ireland is committed under EU law to limit the growth in national greenhouse gas (GHG) emissions to 13% above 1990 levels in the five-year commitment period of 2008-2012.

Latest projections suggest that Ireland will meet its Kyoto target on the basis set out in the National Climate Change Strategy 2007-2012, reflecting both the impact of policy initiatives implemented and in more recent times the impact of the economic crisis.

EU Obligations (2013-2020)Beyond the Kyoto Protocol commitment period (2008-2012), Ireland has a number of distinct and legally-binding obligations under the EU Climate and Energy package agreed in December 2008. These relate to (i) the Emissions Trading Scheme (ii) Effort-sharing by member states in relation to GHG emissions not covered by the Emissions Trading Scheme; (iii) Renewable Energy.

Under the Effort-Sharing decision, Ireland’s emissions reduction target for the sectors concerned (primarily agriculture and transport) is at the top of the range set for Member States, i.e. a reduction of 20% by 2020, compared to 2005 emissions.

This target must be achieved on foot of domestic actions and the use of the flexibilities provided for in the decision. The relative size of our transport and agriculture sectors (approx. 69% of total non-ETS

emissions) means that our binding emission reduction target of 20% by 2020 is very challenging.

The latest draft emissions projections show that Ireland will not reach its 2020 non-ETS emissions reduction targets without an appropriate mix of additional policy measures and/or use of carbon credits. While the headline target relates to 2020, it is important to note that Ireland will have an individual target in each year from 2013 to 2020, i.e. emission reductions must follow a strict trajectory.

Priority Issues

(i) New\Updated Climate Change Action Plan There is a need to prepare a comprehensive strategy/plan to map out a greenhouse gas emission reduction pathway to 2020 which will ensure cost-effective achievement of our 2020 target under the effort-sharing decision.

This will require development and assessment of policy options (in the areas of transport, agriculture, waste, commercial, low carbon-intensity industry and residential) for meeting our 2020 target, to allow for decisions based on the cost\benefits of each option, including the option of using international carbon credits.

Assuming a new Government may wish to implement national Climate Change Legislation, it would be important that this underpin and support, rather than supplant, the development of necessary policy measures for the period up to 2020 and beyond.

(ii) Energy PolicyIreland’s binding EU energy targets are ambitious. The main policy frameworks in place are the National Renewable Energy Action Plan and the National Energy Efficiency Action Plan (NEEAP). Ireland’s second NEEAP is due for submission to the Commission in summer 2011.

Ireland’s energy policy will continue to need careful consideration given the tight fiscal constraints, cost competitiveness concerns, and a positive but challenging outlook on energy demand in the period to 2020 (latest SEAI energy forecasts).

Renewable energy policies, particularly involving offshore renewable energy, need detailed evaluation given the large associated infrastructural investment costs.

(iii) Possible Future EU Step-upThe EU has signalled a willingness to step up to a 30% GHG emissions reduction commitment for 2020 (compared to 1990 levels) as part of an internationally negotiated agreement. The EU has also recently published a possible emissions reduction roadmap/pathway to 2050, which maintains the focus on the need for further reductions in the period to 2020 and beyond.

Text withheld under section 24 - International Negotiations

(iv) Emissions reduction targets in AgricultureAs detailed above, the scale of emissions from the agriculture sector (relative to the overall economy) presents a unique challenge for Ireland. This is particularly acute given that the Food Harvest 2020 report contains ambitious growth targets for the agricultural sector as an important part of Ireland’s economic recovery strategy.

Scientific evidence suggests that there is only limited scope for increasing carbon efficiency given the extensive, grass-based nature of Irish agriculture. There is a strong case that reductions in Irish agricultural output would be replaced by increased production in South America and elsewhere with higher levels of carbon-intensity.

Text withheld under section 24 - International Negotiations

(v) Land Use, Land Use Change, and Forestry (LULUCF)An immediate issue at EU level is the possible inclusion of LULUCF emissions and removals in the EU’s targets for GHG reduction.

There are obvious interconnections between the emissions from agriculture livestock, the level of afforestation in Ireland and our other lands dealt with under LULUCF, i.e. croplands and grassland. Understanding the implications of these interconnections is complex and is a highly specialised area; research is ongoing.

Text withheld under section 24 - International Negotiations

Current Co-ordination StructuresResponsibility for Climate policy rests with the Department of the Environment, Heritage and Local Government.

The Cabinet Committee on Climate Change and Energy Security, is chaired by the Taoiseach, and oversees cross departmental work in this area. The Cabinet Committee is supported by a Senior Officials Group (SOG) which is chaired by D/Taoiseach.

9. Housing Market

SummaryChallenges arising from the collapse of the housing market include:

● current level of mortgage arrears and economic\social impacts● responding to the problem of so-called ‘Ghost Estates’● stimulating activity in the construction sector

Priority IssuesHousing completions have collapsed a high of over 93,000 in 2006 to estimated 14,600 in 2010. The ESRI is forecasting a further fall to 10,000 in 2011 and the same again in 2012.

The total number of vacant units either completed or nearly completed has been estimated as roughly equal to 18 months’ construction output of new housing at 2009 levels. Migration and credit shortages will continue to constrain short-term demand and recovery of activity.

Apart from the wider economic impact in terms of lost output, employment and tax revenue, the collapse in the housing market gives rise to some specific problems.

Latest data from the Financial Regulator shows that in Q4 2010 nearly 80,000 mortgages were either 90 days in arrears or have been restrucrured.

The Expert Group on Mortgage Arrears issued its final report last November. Its main recommendations included:

- a Deferred Interest Scheme for borrowers who can pay at least 66% of the interest. This would give borrowers up to 5 years to get back on their feet. Lenders representing more than half of the market agreed to take part in a scheme along the lines of the Group proposal;

- lenders should consider facilitating borrowers in negative equity who wish to trade down to a more affordable home;

- where a mortgage is unsustainable, assessment for social housing should be done before repossession takes place;

- a mechanism should be put in place to allow repossessed borrowers to remain in their homes for a time, allowing the housing authority time to source appropriate accommodation;

- new bankruptcy legislation should be introduced (also in IMF\EU programme); a statutory non-judicial debt settlement system should be established and the time limit for discharge of debt should vary in line with the total value of debt.

The Group did not recommend debt forgiveness, nor a State funded Mortgage to rent scheme.

These recommendations, and those of the Group’s earlier report, are primarily focused on managing the problem through a structured and fair process which gives people time to stabilise their situation. This is reflected in the very low level of repossessions to date.

Completing implementation of these recommendations is the current priority, but it seems likely that further measures will be required in the next couple of years, as interest rates rise while there is unlikely to be any rebound in house prices.

A recent survey of so-called ‘Ghost Estates’ found over 2,800 housing developments where construction had commenced but had not been completed, translating into over 180,000 housing units for which planning permission is granted.

Of these 33,000 homes are either completed and vacant (23,000) or nearly complete (requiring, for example, final fit-out and connection to services (10,000)). This equates to the total amount of “real” overhang of new un-occupied houses. A remaining 10,000 dwellings are at various earlier stages of construction, from preliminary site clearance to foundations up to wall plate level.

A high-level Advisory Group is in place and recently published an interim report focusing on the immediate issues of public safety and the living conditions of residents in unfinished developments. There are approximately 400 housing developments, which are particularly problematic and will be the focus for initial action. €5m is being made available to Local Authorities to help deal with immediate safety issues.

The longer-term focus is on getting stakeholders to work together on practical steps to complete unfinished developments – and the group intends to complete a comprehensive code of practice with buy-in from developers, the financial institutions and local authorities in managing and resolving unfinished housing developments.

The National Recovery Plan and Budget contain a number of measures to help stimulate short-term activity in the sector, including the move to a single rate of Stamp Duty of 1%.

However the main initiative is the national retrofit scheme. A new programme will be ready to launch in the next few months following extensive negotiations with energy suppliers. The programme will entail the transition of the existing energy efficiency and renewable energy programmes, such as the Homes Energy Saving scheme, Greener Homes scheme and the Warmer Homes scheme, into a single framework that is partly delivered by energy suppliers. The programme’s objective is to achieve 500GWh of energy savings in 2011.

Budget 2011 also introduced a tax credit for energy efficiency measures. It is anticipated that given the reduced budget allocation for the Retrofit Programme, some measures in the existing Home Energy Saving scheme will need to transition to the tax relief. Discussions are ongoing between the Department of Communication, Energy and Natural Resources and the Department of Finance to finalise the programme prior to its launch.

10. Central Statistics Office (CSO)

SummaryThe Central Statistics Office (CSO) is a statutory independent organisation under the Department of the Taoiseach. Day-to-day political responsibility (primarily PQs) is normally delegated to the Chief Whip and Minister of State.

The main challenge facing the CSO is delviering and improving its services, including the 2011 Census, given resource constraints.

Priority IssuesThe most significant issue facing the CSO at the moment is preparations for the Census of Population which will take place on Sunday, 10 April, 2011. Launch of the Census is planned for 10 March and will involve an extensive promotional campaign to encourage returns. A separate briefing note on the Census is provided at Appendix XX.

The fundamental challenge currently facing the CSO is increasing demand for statistics while resources are contracting. The ability of the CSO to reduce its programme is constrained by the fact that around 90% of statistical outputs are required by the EU. A major focus is therefore on organisational efficiency improvements.

The CSO has committed to the target of reducing the administrative burden on business by 25% by 2012. The CSO annually measures the statistical burden it imposes on business through its questionnaires. While comparable data are not available for burden imposed by other public authorities in Ireland, results are in line with findings in other countries with statistics accounting for approximately 1% to 3% of the overall administrative burden. CSO believes that the perceived burden imposed by statistics is far higher than the actual burden.

During 2010 the CSO/Revenue Liaison Group established a sub-group to examine the feasibility of introducing a common business identifier to operate between the two organisations. The sub-group has identified an existing Revenue identifier that could operate as a common business identifier. This development reflects recognition from both sides of the value/benefits of having a common business identifier in place between the two organisations. It is hoped that this project could give momentum to the creation of a unique business identifier across the public sector.

The decision by the previous Government to develop a system of postcodes for Ireland would facilitate further reduction in the statistical administrative burden and give rise to further efficiencies in data collection and reuse.

[More detailed briefing on CSO activities will be provided separately by the CSO]

BackgroundThe CSO performs its functions in accordance with the Statistics Act 1993 which provides that the Director General has sole responsibility for and be independent in the exercise of the functions of deciding:

a. the statistical methodology and professional statistical standards used by the Office;

b. the content of statistical releases and publications issued by the office; and

c. the timing and methods of dissemination of statistics compiled by the Office.

The principal role of the Taoiseach (or Minister of State) is political accountability on matters of public interest relating to the work of the CSO including, in particular Parliamentary Questions. The Division liaises with the CSO for this purpose, as well as providing replies to representations, media queries etc. The Division also acts as contact point between the CSO and other Departments for the purposes of advance briefing on statistical releases etc.

The Minister is also responsible under Section 19 of the Act for reaching agreement with the National Statistics Board (NSB) on guiding the strategic direction of the CSO.