Paschal Donohoe, the Minister for Public Expenditure, has dismissed a threat by officials in the City of London that Britain may “flex its muscles” to damage Ireland’s fund administration industry unless the European Union does a post-Brexit deal to allow UK financial firms easy market access.
Speaking to The Irish Times after he toured the London Irish Centre in Camden on Friday, Mr Donohoe said the Government would back the Irish industry in the face of threats from London.
“In any circumstance, I believe the Irish funds industry has a very positive future in advance of it,” said the Minister. “It will continue to be a really important priority for support from the Irish Government.”
The threat that Britain might change its regulations to encourage UK funds to be administered away from Ireland has been made publicly by Nicholas Lyons, the Irish-born mayor of the City of London, the UK’s main financial centre. It was also repeated privately to Irish and EU officials.
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The Irish funds industry employs about 17,000 in Dublin and about 35,000 across Ireland. Many of those employed in the capital work on the administration of funds for UK firms. In an interview with The Irish Times last month, Mr Lyons said the UK side wants to keep good relations with Ireland but “there is always another way” to get a post-Brexit deal.
“The funds business in Dublin could be curtailed with some relatively small regulatory changes [in the UK],” said Mr Lyons.
“There is definitely a desire in the [UK] government to help the City be as competitive as it can. We want to do that in a sensible and thoughtful way that enables us to rebuild relationships with the EU. But there is always another way to do things. We have not really flexed our muscles [yet] on regulatory change.”
Some Irish officials privately insisted last month that the UK doesn’t have as much leverage over the Irish industry as it may believe. Others suggested that the EU has plenty of leverage of its own over the City of London, should the British side try to damage the Irish sector to force a deal.
Separately, Mr Donohoe also said the Government was considering boosting capital expenditure on housing in coming years due to the huge surpluses being projected via large windfalls in corporation tax.
The Government has upped its projections to a €10 billion surplus this year, with corporation tax up €12 billion annually since 2019 on the back of huge profitability of foreign firms based here. The surplus could rise to more than €20 billion by 2026 under current spending rules.
Mr Donohoe said “of course there is a case” to use some of the surplus cash to meet social challenges such as the lack of housing. But he also warned that the building industry may not have the capacity to take on extra spending, while the Government will also be careful not to make spending commitments on the back of windfall taxes.
“How many times in life have you come across a windfall that keeps on occurring? Never,” he said.
He said himself and the Minister for Finance, Michael McGrath, along with the leaders of the three Government parties would consider the matter in advance of the summer economic statement, while being “careful”.
Mr Donohoe also said the Government would consider providing financial support to diaspora projects such as the London Irish Centre, which plans to start a £20 million (€22.7 million) revamp in the next 12 months.
