COMMITTEE OF PUBLIC ACCOUNTS debate -
Wednesday, 18 Dec 2002

Vol. 1 No. 4

2001 Annual Report of the Comptroller and Auditor General and Appropriation Accounts.

Vote 34 - Department of Enterprise, Trade and Employment.

Chairman

I bring to the witnesses' attention the terms of privilege. Members' and witnesses' attention is drawn to the fact that as of and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997 grants certain rights to persons who are identified in the course of the committee's proceedings. These rights include the right to give evidence, the right to produce or send documents to the committee, the right to appear before the committee either in person or through a representative, the right to make a written and oral submission, the right to request a committee to direct the attendance of witnesses and of the production of documents, and the right to cross-examine witnesses. For the most part these rights may only be exercised with the consent of the committee.

Persons invited before the committee have to be made aware of these rights and any persons identified in the course of proceedings who are not present may have to be made aware of these rights and provided with a transcript of the relevant part of the committee's proceedings, if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in the legislation, I remind members of the longstanding parliamentary practice that members should not comment on, criticise or make charges against a person outside of the House or an official, either by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions in Standing Order 156 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome everybody to the committee and ask Mr. Paul Haran, the Secretary General of the Department of Enterprise, Trade and Employment, to introduce his officials.

Mr. Paul Haran

I am accompanied by Mr. Michael McKenna, Assistant Secretary in charge of corporate services; Ms Patricia Lynch of the finance unit, Mr. Ronnie Sheehan, the finance officer responsible for managing the brief on my behalf and managing the accounts of the Department, and Mr. Tony Daly, also of the finance unit.

Chairman

I ask the witnesses from the Department of Finance to introduce themselves.

Mr. Jim O’Brien

I am Assistant Secretary in the public expenditure division.

Mr. Howard

I am Paddy Howard.

Mr. Purcell

There were no issues arising from the 2001 audit of the Department's accounts that, in my opinion, would require public accountability on the part of the accounting officer. In considering the account the committee may wish to obtain up-to-date information on two issues that were referred to in my report on the 2000 accounts, which were examined by the previous committee. One matter was the tying up of loose ends in regard to our participation in Expo 2000 in Hannover. The second matter was the shortfall recorded in the IDA capital receipts as a result of poor sales of high capacity bandwidth, which comes under appropriations-in-aid - 15 on page 299. The explanation for this is on the following page.

On page 301 there is a reference to a claim for the repayment of EU moneys to a value of over €20 million. As is noted, the claim is being vigorously contested by the Department, but nevertheless it must be classified as a major contingent liability for accounting purposes and for that reason it figures in the accounts. That is all I want to say at this stage.

Chairman

Would Mr. Haran like to make a brief statement?

Mr. Haran

I am not sure if it is in order to speak about the former Deputy, Jim Mitchell. I attended his removal a few weeks ago, and I wish to acknowledge what an extraordinarily good parliamentarian he was, as well as a great chairman of this committee. Nobody in my job likes to come before this committee but I witnessed him do his work with great strength. At one point during the DIRT inquiry I saw him adjourn a meeting when he felt unwell but he came back to continue the work. I extend my sympathy to his wife Patsy and his family and friends.

If the Chairman wishes me to respond to the Comptroller's comments I can do so.

Chairman

Yes.

Mr. Haran

One of the issues raised was in regard to how much Expo will ultimately cost. The net figure is £7.145 million, taking into account the VAT repayments we secured. We are no longer paying any storage costs for the building. The building has not been sold; it is basically being sold as materials. The sale is under the control of the Office of Public Works but there is no cost being expended on it at this stage. The net cost of the project was £7.145 million, which is under the £9 million eventually agreed for it but more than the original estimate of £6 million when participation was first discussed.

There are bills outstanding in regard to Global Crossing. The IDA is managing this on behalf of the Department of Communications, Marine and Natural Resources. It has issued invoices to a number of suppliers for a total of some €28 million and is awaiting payment. Global Crossing has been in examinership for a period of time. It is hoped it might come out of examinership next year. The ultimate solution and the resolution of its examinership is material. The Department does not have any direct line function in the management of the Global Crossing project, which was done through another Department. It was done by the IDA because of its technical capacity to enter into the contracts as they stood at that time. Sale of the additional STM-1s, which is basically a piece of bandwidth on the fat pipes as they are delivered through Global Crossing has been very slow, which reflects the global downturn in the value of such activity. This follows from the problems of dot.com companies and those of many of the telcos in regard to 3G licences and so on.

Deputy B. O’Keeffe

The last time we discussed the issue of Expo, there was reference to storage costs, the estimate of £6 million and the possible outturn in terms of cost of £9 million. At that time a decision had not been taken as to what would be done with the materials; whether it would be brought back or be set up as a permanent display. Mr. Haran said we are not carrying any storage costs. Will he give an update on where the equipment and materials are and how we propose to dispose of them?

Mr. Haran

We anticipate the expenditure to come out at £7.145 million net. The estimated cost of participation was some £6 million. When it came closer to a decision on allocations a budget line of £9 million was provided. It has come in under the budget line. That would have been a gross budget line so it might compare best to £8 million before the VAT refund.

As I said at the last meeting, we had higher than anticipated participation rates at Expo. The event itself actually under-performed in terms of participation levels. While visitor numbers were a lot less than anticipated, we got more visitors than we expected. It was a well-managed and well-handled project. I am not speaking from the departmental point of view, but of the people who were hired to run it and the performers who were involved. Our interactivity and cultural events were very well received. Our building had a lot of appeal and there was a question mark about its functionality when it came back home. The Dún Laoghaire Institute of Art, Design and Technology applied to be given rights to it on its return. It discussed the costs with the Department of Education and Science in regard to bringing it back and re-building it. It was decided that it would be too expensive to bring it back and re-build it.

Deputy B. O’Keeffe

What was the estimated cost?

Mr. Haran

The estimated costs of rebuilding it was over £2 million. It was then offered to the underbidder, which was UCC. However, the university also considered it too expensive. This reflects the professional view of the Office of Public Works. It had to be taken down to comply with the contract, at which point it was put into storage. This was managed for us by an agent who tried to sell it as materials. We paid £1,500 per month for storage for a period of time.

Deputy B. O’Keeffe

What was the period of time?

Mr. Haran

Some 12 months. I am told that we are no longer carrying costs but it is still in storage and available for sale.

Deputy B. O’Keeffe

What is meant by saying that we are no longer carrying costs? Were the costs of storage transferred to the Office of Public Works?

Mr. Haran

No. I believe the Office of Public Works was carrying costs earlier. I made two inquiries in regard to this and was assured that no further charge is being made. This must relate to a contract clause that no charge would be made beyond October.

Deputy B. O’Keeffe

Will Mr. Haran report back on that point?

Mr. Haran

I will do that.

Deputy B. O’Keeffe

It is obvious that we are not going to bring it back, but is there anything that can be sold off?

Mr. Haran

There was a considerable number of works of art that were designed for the project, which went back into the State's ownership. They were assets of the Office of Public Works and it is my understanding that they have come back.

The underlying theme of Expo was sustainability and man's relationship with the environment. One of the walls was of soft rubble put up between two screens of wire netting. Connemara stone formed a big, long facade. Much of the building was built using the concept of sustainability so there would not have been a high drain on the environment. When it was dismantled, it was reduced to very simple products. It would have been nice to see the building come here. However, the overall cost was quite low compared to that of many of the comparable pavilions at the Expo.

Much of our expenditure was on the performing arts. We had many different groups performing in front of audiences. The Revised Estimate for re-erecting the building was £3.5 million.

Deputy B. O’Keeffe

Did it have any sale value in Germany?

Mr. Haran

The sale value would have been in the order of thousands or tens of thousands of pounds, and it would have been sold as base material.

Deputy B. O’Keeffe

What is the point in having the building in storage even if we are not paying anything for it? Should we not realise some value from it and sell it off?

Mr. Haran

It was in storage pending sale. The Office of Public Works and its agents in the field were trying to sell it for any price they could get and we were not trying to sell it in the hope that we would get a good price. It is for sale to anybody who wants it. The issue of dumping also arose.

Deputy B. O’Keeffe

When Mr. Haran is reporting back, he might indicate what efforts have been made to sell it and advise us of the current position.

Under the heading "Miscellaneous Expenses", the only serious issue seems to be that a claim has been lodged by the European Commission that may result in a request for repayment of amounts under certain operational programmes of the Community Support Framework 1994-99. The amount under consideration is massive, amounting to €20,560,287. The Comptroller and Auditor General indicates that this case will be fought aggressively, but how did we get into this position? As the Comptroller and Auditor General says, it is a very distinct and serious liability for the Department.

Mr. Haran

I accept that and I also share the concern of the Deputy and Comptroller and Auditor General. This claim is related to the last operational programme, drawn through the European Social Fund. We would have claimed about £1.6 billion. That was approximately the level of the social fund expenditure at the time. The overall operational programme figure would have been £5 billion.

Deputy B. O’Keeffe

Is that £5 billion overall?

Mr. Haran

The operational programme figure would have been about £5.1 billion. It is the Human Resource Development Operational Programme, 1994-99, under which about £1.65 billion would have been drawn through the European Social Fund. Our Department is the national authority for the European Social Fund, whereas the Department of Finance is the national authority for the other funds. A lot of the money is distributed through a variety of Departments, agencies and other bodies that are not necessarily departmental.

There are two outstanding items. We are finalising the claim. In an ESF audit by the European Commission related to a separate matter, issues were raised regarding two elements of our claim. One concerned how the national authority adjusted claims to take into consideration variations in the value of the ECU. Claims were submitted in ECU and related back to Irish pounds, the currency at the time. The second element concerns the realisable expenditure by the National Training and Development Institute.

Around 1997 the Commission adjusted its auditing and management rules. It felt that some of the claims of the NTDI were not backed up adequately by documentation. The NTDI, under the National Rehabilitation Board, was apportioning certain costs in its programme related to the number of participants on courses, and the Commission queried this.

We brought in a group of accountants and did considerable work in reformulating the claim and backing it up. Also, in respect of the exchange rate, the national authority adjusted claims because the currency might have fallen so people could claim more by using more eligible expenditure. If FÁS, for example, had made a claim and the exchange rates it was using were incorrect, the authority would have fixed the rate and found that there was a shortfall in drawdown and used more of the valid expenditure by FÁS to claim that drawdown. The Commission claimed that the authority should not have done that and FÁS should have done so instead. Its argument in this regard drew attention to a sum of £7 million. A sum of £13 million pertained to the NRB-NTDI issue.

This process is carried out through Commission officials, both at audit and management levels. They asked us to submit a claim and reformulate a claim. This was done and was backed up by considerable documentation. I understand that the Commission has agreed that the expenditure was reasonable. It agreed that it was deductible and claimable, but it is objecting to the resubmission of the claim. We seriously contest these objections. We claim precedence, as it has been done in respect of other programmes. We have briefed the Office of the Attorney General and we might have to take legal action, depending on how the Commission responds to our latest position paper.

The Commission has said verbally that it does not agree with the way we have done our business. We are looking for this in writing. We assert strongly that what we did was reasonable. The Commission is not contesting that expenditure was reasonably incurred and in line with the regulations; it is a question of the technicality of the code. The Commission's figures and ours show that, at all stages, more than sufficient expenditure took place to facilitate and justify the drawdown. We redid all the claims as the Commission would have wanted them to have been done originally, but its problem still is that those claims should not have been redone.

Deputy B. O’Keeffe

In respect of the NTDI, it is strange the Commission has accepted the expenditure as reasonable, feasible and above board. It is not questioning the number of people on courses or that those numbers have been interfered with——

Mr. Haran

In both cases, the Commission is not questioning any of our numbers. It is not questioning the substance of what we did, but the technicality. It is claiming that its regulations do not support the resubmission of the claim although the Department carried out an exhaustive exercise. Our Department took over the NRB - the NRB had been dissolved. We brought in people to go through all of the old books and files. We reviewed every single piece of paper.

Deputy B. O’Keeffe

Does Mr. Haran accept that if they are not going to re-admit this submission, the way the claim was lodged was not in accordance with the rules?

Mr. Haran

No, we do not accept that. We strongly contest what the commission is doing. We went through the exercise in good faith with the commission from March to August, only to be told that what they asked us to do in the first instance was requesting whether it was a viable option.

Deputy B. O’Keeffe

Various schemes, such as county enterprise boards, Leader, FÁS, partnership programmes and community initiatives, are currently in operation. I remember a time when unemployment was at 17% but we are spending more money on job creation now, when unemployment is at 3.5%. FÁS gets more money for its initiatives now than it got back then. We seem to be constantly cutting back on people on the ground. Have we ever looked at the need to rationalise these schemes? The work overlaps and no one is responsible for co-ordinating it.

Mr. Haran

In the year under examination one of our schemes, Jobstart, was closed. Workplace exposure, where people spent six weeks in a workplace, was also rowed back. This committee examined the VFM report on the loss of the local initiatives such as Leader, CEBs and area partnerships, and made recommendations. The CEBs are the lead agencies for enterprise development - except in Údarás areas - and sometimes do so in agreement with Leader.

Under the direction of the Tánaiste and Minister for Enterprise, Trade and Employment, there has been a dramatic reduction in overall expenditure of FÁS and numbers supported by the CE scheme. Community employment schemes are being cut back and this reflects the changed labour market. About 25,000 will be on the scheme this year and next year it will be 22,000. The base figure from a couple of years ago was 40,000. The policy response has reflected developments in the labour market. The labour market has changed and a greater number of people now participate in apprenticeship schemes.

Deputy B. O’Keeffe

Mr. Haran answered the question about unemployment levels but has not answered the questions I put about co-ordination of schemes. The enterprise boards were established to evoke a response leading to employment at local level. Leader was set up in tandem with the EU. Things have moved on but bureaucracies have been established which cannot be touched. The people on the ground can be affected but we are not tackling the bureaucracies. If that were done, the schemes could be better co-ordinated and more funding could go to the coalface.

Deputy McGuinness

We tend to examine and reduce the numbers of the people involved in the various schemes. I am a member of the Kilkenny County Enterprise Board and I can see the large number of bodies that exist locally which have grown in terms of their bureaucracy. It is important for any organisation to review its structures and how it delivers its projects. While the bureaucracy of each of those bodies has grown substantially, the numbers they are dealing with are being reduced. Each of these bodies rent offices, have chief executive officers and secretariats, and create a huge amount of paperwork. When county enterprise boards were established, the agenda could be contained on one page. The essence of the agenda was the delivery of as much support as possible to those who made applications. Is it not time to review what is happening? I imagine a huge amount of money is being wasted in the local bureaucracy.

Mr. Haran

In response to the VFM report the comptroller brought to this committee, the county development officers are charged with co-ordinating enterprise activity at local level. It is agreed that the CEBs, of which there are 35, one per local authority, should be the unit of support for small businesses. I cannot answer for other forms of activity in this area other than to say the Department of the Environment and Local Government manages a task force, the Department of Agriculture and Food manages a task force and tries to ensure there is no overlap. The CEBs now issue fewer grants, provide more soft supports and concentrate on capability rather than capacity. Leader and other groups are moving away from them and now there is less of an overlap.

The CEBs generally do not address the client group, which, for example, Enterprise Ireland would. Our experience with Enterprise Ireland has come about through a rationalisation of a number of agencies; CGT and the Irish Goods Council were merged to form APT; the IIRS and NSP were merged to form Eolas; these then came together to form Forbairt and then Enterprise Ireland. Enterprise Ireland deals with large enterprises and the CEBs deal with small enterprises. Measures have been put in place to ensure groups like Leader do not move into that space. In the longer-term the relationship between the enterprise boards and the local authorities may be examined. The local authorities are well represented on the CEBs and the county development strategy takes this activity into consideration. In the area of community employment schemes and the bureaucracies supporting it, as the scheme has been cut back, so too has the number of CE supervisors associated with it.

Overall expenditure through IDA and Enterprise Ireland is on a downward slope, as is expenditure on FÁS. Measures have been put in place to reduce overlap and help prevent bureaucrats getting in the way of other bureaucrats to the detriment of the citizens they are supposed to be supporting and serving. Our goal should be no overlap or wasteful administration.

The county enterprise boards are small teams of four or five people. The reviews and the information we get on the ground is that they do provide valuable support to local enterprise and the small business community but they are under constant review and there are no absolutes. As part of an overall dynamic - we created Enterprise Ireland from many bodies and reduced the level of activity by FÁS in a number of areas - these entities are under constant review. The geometry at the moment is reasonable but that is not to say it cannot be improved upon.

Chairman

FÁS employs 2,000 people. Has that figure changed proportionately since unemployment levels were as high as 17%, when up to 40,000 people were on CE schemes as opposed to now when there are 25,000?

Mr. Haran

Direct employment has not changed significantly. I do not have the numbers to hand. As the system scaled up for the CE schemes, indirect staffing was used, so the CE supervisors were brought in under that scheme. That number has been reduced as they have retrenched the overall level of community employment.

Chairman

It has not been significantly reduced.

Mr. Haran

No, it has not.

Chairman

How successful has the shift to employment placement been, given that shift in emphasis?

Mr. Haran

A scheme is being employed whereby we work closely with the Department of Social and Family Affairs which refers people to FÁS after a particular period on the live register. The placement rates are over 60%, which is solid. The training support schemes for the unemployed also generate high placement rates. In 2001 FÁS travelled the world looking for workers but that scheme has now stopped because of the changed labour force environment. We believe that the work of FÁS placing people in employment is quite successful, particularly in relation to their work on the employment action plan and with the Department in addressing live register claimants. There is activity and we are trying to grow it. A high support framework is being developed to deal with people who are most excluded and disadvantaged. A particular group may have different input and output ratios and more effort may be required to help a fewer number of people. Relative productivity, therefore, might go down but one is dealing with a more difficult-to-place client set.

Our goal is that we do not have groups of people that are assumed to be unemployable. We try to find ways to get employment for everyone as best we can.

Chairman

Will Mr. Haran send us those supporting figures?

Mr. Haran

I will do so.

Deputy Boyle

The Comptroller and Auditor General has already indicated there are no issues of accountability attaching to this Vote but I have questions regarding the fact that £37 million was returned to the Exchequer. Figures were announced at the start of an accounting year and not subsequently used which has a bearing on the integrity of the Estimates process. There is a number of headings with significant underspends. Some have to do with agencies that are under the auspices of the Department and may need to be accounted for separately. Did policy decisions within the Department of Enterprise, Trade and Employment bring about these underspends in 2001?

I realise some depend on the take up of particular schemes and the Secretary General might highlight some of those. The most obvious is the IDA grant to industry which was down almost £30 million. Some £12.5 million was taken off in a Supplementary Estimate halfway through the year. A similar situation at Enterprise Ireland pertained which meant it spent £9 million less than originally estimated. I assume these are both to do with under-acceptance of schemes available to industries, both foreign and indigenous.

The science and technology development programme has an under expenditure of £11 million which will have large consequences for research and development work. Can Mr. Haran explain that? The under expenditure in relation to FÁS is particularly surprising in light of subsequent controversy. The community employment programme in 2001 had an under-expenditure of £18 million. I realise a Supplementary Estimate increased that by £22 million, but most of that was not subsequently used in that year. I wonder about the decision behind the reduction in the original Estimate in the social economy programme which was less than a third of what was intended at the start of the year. Can Mr. Haran explain the heading for employment opportunities for people with disabilities, which in the overall budget is a small heading but where £1.5 million less was spent than originally allocated?

In the disposal of IDA property, which perhaps the IDA itself can explain more fully, the difference between the estimated and realised property values was £12 million. Why is that? Does that indicate that property portfolios by all agencies under the Department's remit could be significantly undervalued?

Chairman

That is a large number of questions.

Deputy Boyle

I have asked a lot. Perhaps I can come back with more.

Chairman

In fairness to the Secretary General, we should allow him to respond to some of those questions.

Deputy Boyle

I will leave it at that for the time being.

Mr. Haran

There are a number of issues relating to IDA grants. They are based on expected draw-downs on project developments. Normally, one would expect a more robust figure for it. It is normally closer between what is expected and what is realised. 2001 was a difficult year in the start up of businesses and the IDA received an unexpected refund of £15 million for one project that did not go ahead. On Enterprise Ireland, the main issue is to do with the events of 11 September 2001, the dot.com failure and the expected activity in Enterprise Ireland was not at a level - not dissimilar to the IDA's——

Deputy Boyle

What do the events of 11 September 2001 have to do with Enterprise Ireland, given that it supports indigenous industry?

Mr. Haran

Irish companies sell into the US, particularly dot.coms. The IDA's work is mainly to support Irish companies which hope to grow and sell into export markets - it is export oriented. It aims to help Irish companies break into new market places. My understanding from Enterprise Ireland is that there has been a slowdown. Some £4 million in marketing grants were not drawn down. It also paid money through the Shannon Free Airport Development Company, so it drew less down from Enterprise Ireland. Enterprise Ireland also made considerable gains during the year on assets, namely companies and shares they sold on the markets or out of the markets. Some of the companies they supported were public companies and they got considerable receipts from selling their shares. I can get the——

Deputy Boyle

I found it surprising that international factors were affecting the take-up of marketing grants - Mr. Haran mentioned 11 September and the international situation. One of the grants available to companies to improve their visibility and marketability was not taken up to the value of €4 million.

Mr. Haran

I do not know the details of individual cases, but in an environment in which there was significant exposure to a reducing marketplace it is very probable that companies would have been reducing their own levels of activity and this is what ultimately dictates the amount of support they can get from EI. There was much uncertainty at that point in time and companies were probably slow to embark on new activities. Foot and mouth was also a factor at that time. There was a general reduced level of activity and marketing grants felt this more than some other supports.

The Deputy mentioned one of the extra receipts. Although the economy was doing badly, the property market was extraordinarily buoyant and the IDA realised a lot more than it expected in its portfolio management. That is how it explains the extra receipts.

Deputy Boyle

What kind of property?

Mr. Haran

Generally, land. However, it would sometimes sell properties it had been involved in supporting, particularly older properties. Sometimes it might have had a leasehold on a property and be selling it on to clients. Much of it is land.

Deputy Boyle

I presume that the land sold all had an industrial zoning. Was it sold to private enterprise?

Mr. Haran

It would generally sell in quite an open marketplace. Sometimes a company, such as a foreign multinational, might buy property directly from the IDA if it had been in a tenancy arrangement.

During that period the IDA had been buying and selling. I am told that total expenditure from the IDA in that period was about £45 million. Of this, £29 million or £30 million was related to the acquisition and development of property. Generally, the policy has evolved so that the IDA is not as involved as it was in property development and it has become more involved in accumulation and managing of parks and green-field areas. It develops a site and tries to convince the private sector to come and build on it. That is seen as a better contribution the IDA can make to the development of industry. So we see less and less IDA involvement in property directly and more in the development of high-potential sites around the country. It must manage as best it can on a commercial basis. When it has a windfall gain in disposals it sends it back to the Exchequer. Sometimes we negotiate with the Department of Finance, depending on the nature of activity. Sometimes the IDA may keep an additional amount of revenues that it has gained for particular forms of expenditure and this is discussed with the Department of Finance when cases emerge.

Deputy Boyle

Is there any statement of the property portfolio of the IDA, or would we need to get that directly from the IDA?

Chairman

I presume it has a portfolio.

Mr. Haran

Its portfolio and information on gains and disposal are public information and the IDA is separately accountable. I have no problem submitting to the committee, however, details of individual transactions, if they are available. I do not know of any that are commercially sensitive: generally, they are not.

A new operational programme was introduced in the science and technology sector and much of the money is related to that. There was a delay in getting State aid approval for the OP. We must go through a lot of procedure in order to apply for State aid approvals and that was slow. When that came through, there was a delay in having realised expenditure that can be claimed. I do not believe this money is lost to researchers; looking at the future of our Vote, particularly next year's expenditure and the excess expenditure in Science Foundation Ireland that was given back, one can see that we are moving forward and growing dramatically, but not in a way that is negligent of proper accounting or checks and balances. In 2003 we will see significantly higher expenditure on science and technology through our Department's Vote than has ever been seen before.

The strong view, from a policy point of view, is that this is an investment in the future of the country. A lot of resources are going into expanding not only the applied research in which we have always been involved and some basic grants for doctorates, but research teams across the third level sector who are trying to put Ireland Inc. on the map. SFI expenditure is going from €35 million to €70 million, according to the Estimate.

Deputy Boyle

Ireland has historically had low levels of R&D as a proportion of GDP. What is the current situation?

Mr. Haran

I do not have the actual numbers as I do not keep them all in my head. However, a number of elements are involved. First of all, as a proportion of our overall GNP both our Government expenditure and our business expenditure are lower than OECD best practice. Sometimes it is hard to judge us based purely on GNP because Ireland has been very successful at attracting the likes of Intel. These companies push up GNP, which is great because people can share in the benefits. All other things being equal, however, that pushes down the overall expenditure relative to GNP, so as GNP has gone up dramatically our expenditure on R&D, both by companies and by the State, has not kept pace.

In indigenous companies, in many sectors, research and development levels are below best practice. This is of serious concern to us. However, in some other sectors our expenditure is higher, such as technology. In the ICT sector I saw an Enterprise Ireland review some time back that showed that Irish companies are actually above many of the best in the world judged only on expenditure. Expenditure on its own is a dangerous measure because what we really want is outcomes. Our goal is not to spend more money but to get certain outcomes that reflect expenditure levels. We do have to spend more, however. What one sees in the area of changing policy is significant——

Chairman

As there is a vote in the Dáil, we will suspend until 12.20 p.m.

Deputy Boyle

The only other answer I wanted was about employment figures.

Sitting suspended at 12.10 p.m. and resumed at 12.45 p.m.

Chairman

Will Mr. Haran refer briefly to Deputy Boyle's question on K.4 and K.9?

Mr. Haran

I will. On K.4, clearly there was an excess on the estimate. It was complicated by the fact that there was a €13 million transfer taking place at that time from FÁS and the Department of Education and Science to the caretakers. We mainstreamed the people who were supporting the school system from CE workers to being workers who were associated directly with the schools and under the education Vote. The way it was done, the Supplementary Estimate was too large. We got it wrong and the Supplementary Estimate should have been less.

Subhead K.9 concerns the roll-out of the social economy programme. This has just been introduced. It was a function of valid applications coming in, being approved and generating the expenditure. It was to do with the "revving-up", to use an expression, of that programme at the time and was also slightly delayed by the foot and mouth disease problem, which reduced capacity to have as many public information fora to discuss it. I have the list of the IDA properties. Do you want me to read them out?

Chairman

You can circulate them.

Mr. Haran

I can do that.

Deputy Boyle

I also asked a question about K.10. It is a smaller amount but it seems a poor principle that support for people with disabilities was slashed.

Mr. Haran

The Department took over responsibility for this in the middle of 2000. In the 2001 budget we introduced a number of programmes. We were slow in getting those programmes up and running. There was a public awareness campaign to sell the programmes. With some of the programmes - the disability awareness training grant, the employee retention grant and workway initiative - there were delays. It was a bad year, there were public information campaigns and it was slow getting the scheme up and going. These were new initiatives to support the disabled in the workplace.

Chairman

Can you explain the €5.8 million refund in grants and indicate the source and the policy of recovering grants from companies who leave the country? It pertains to note 6, IDA grants.

Mr. Haran

That is a net figure. There was one huge repayment of €15 million in that year. Motorola was the company and they repaid €15 million.

Chairman

Is much outstanding in that section from other companies?

Mr. Haran

It is ongoing. Some companies do not go ahead as fast as we hoped they would. You can get money back if they close and have not provided jobs for as long as they were meant to provide jobs. In the context of estimates for the IDA, I wish to mention that the Intel Fab24 plant is going ahead, for which a €50 million grant was allocated this month. If it had been delayed there would have been an excess of €50 million under the estimate. It is really up to the company to have insured liability and the right to claim it.

Chairman

To clarify, the income from the disposal of property was €15 million but IDA grant refunds amounted €5,869,000, and this relates to note 6.

Mr. Haran

There was €15 million which came in through the extra Exchequer receipts. That was to do with the net position on their property expenditure and receipts, as I understand it.

Chairman

That is not shown on the balance sheet.

Mr. Haran

That is the net figure they had to give after all of their expenditure in this area. Are you referring to the grant refund of €5,689,000?

Chairman

Yes.

Mr. Haran

That is the net figure that was given back from receipts after allowing for other money that came into the IDA Vote.

Chairman

How much was the gross figure?

Mr. Haran

Expenditure was €67 million and €27.7 million was saved. The IDA also received €16.869 million in capital grant refunds, there was investment income of €142,000 and there was a training fund of €2 million. The total income, therefore, was €86.6 million and there was a total expenditure of €80.742 million. That is where the figure for the net refund comes from.

Deputy Connaughton

I want to express my great unhappiness with what is happening to CE schemes. Whoever is responsible for this is making a huge mistake. There is a training aspect to the CE schemes but the Department does not understand that a new regime has been built up throughout the State about the philosophy behind community employment schemes.

At one stage 40,000 people were employed through the scheme. Because of the recent Government cutbacks, however, places on the scheme have been reduced from 25,000 in 2002 to 20,000 in 2003. That means that 5,000 have been made redundant against their will and there is very little hope for many of them of finding alternative sustainable employment. If 5,000 people lost their jobs in the commercial world there would be more votes in the Dáil than there were today.

A stage has been reached as a result of the evolution of the schemes where they have taken on a different life than originally intended. In Counties Galway and Mayo, which had the greatest participation in FÁS schemes across the State, I can name people who have been told there is no position for them in the local community employment scheme because of the cutbacks. They had to go back onto the dole. The cohort that has been particularly badly hit are those who are 50 or older who, despite their training, see no job on the horizon, especially with the economic down-turn.

To complicate matters further, on the other side, no sponsoring organisation with plans for its area will now be able to find people to do the work. I was chairman of a development association and 25 years ago we did not have a shortage of ideas about what we would like to do for our areas but we had nobody to execute those plans so they were never carried out. Then people turned up for work at 9 a.m. on a Monday morning to carry out the jobs that were usually left to the voluntary sector. The voluntary sector has all but disappeared and health boards, the Department of Education and Science and the local authorities rely heavily on CE schemes.

We have removed people's dignity. We have told them their work was important but because someone got the idea that it was not training in the true sense of the word, they will be dumped. There will be an uprising about this and if I get the chance I will lead it. This is a monumental mistake. I have discussed this over and over with the senior people in FÁS and they tell me that I am shooting the wrong messenger because this is a training module and I should go after another Department. If the horses are switched now, by the time the new policy is in place the whole system will have collapsed. I was at a meeting of 600 people in Ballinasloe who were not all workers but also sponsors and community leaders. They cannot understand why a Department or Government would go down this road.

I do not know who thought up the social economy schemes. They were supposed to be the alternative to CE schemes, with a more business-oriented approach. A person would need to be an accountant and an engineer to put together the documentation needed. Most ordinary organisations cannot do it. The straw that broke the camel's back for me came this morning when a community in Ballygar in County Galway got a letter from the local FÁS scheme to tell it that because of the cutbacks, even the social economy schemes would be put on hold and there would be no new announcement on it in the foreseeable future.

The CE schemes were capped on 1 April 2000 by the Tánaiste, so that participants would only get three years in a lifetime. That insured that the schemes would peter out. Does the Secretary General see merit, however, in trying to do something for those workers who are over 50? Eventually the problem will solve itself because they will be gone and no one else will want to depend on those schemes.

Chairman

I appreciate how the Deputy feels about this issue but Mr. Haran is prevented from commenting on the merits or otherwise of any policy.

Mr. Haran

I will do my best. There are several related issues here. Deputy O'Keeffe asked why we had so many expenditures in these areas while unemployment is going down. This captures some of the challenges from a policy perspective. The Chairman asked about the level of voluntary support, about communities having plans for themselves and about the need for jobs for individuals.

There is a danger, from a governmental and departmental point of view, of trying to merge too many different challenges and policies under the one programme. If we are trying to provide a service for a community on the one hand, and trying to provide employment for a person on the other, which is the more important? If we are trying, through the health services, to help Meals on Wheels, can that be done by trying to help somebody who is severely unemployable? Should that type of person be going around the houses with meals? These are the real life challenges that occur.

Community employment emerged as a desire to provide employment in a high-unemployment environment. When it was introduced, we had long-term unemployment of over 12%, or close to 100,000 people unemployed for over three years. There were two or three unemployed persons per CE post. There are now more CEposts than there are long-term unemployed people——

Deputy Connaughton

We will come back to that.

Mr. Haran

Yes. These are the figures. Government policy is to ensure that the CE scheme, as it stands, is designed to support long-term unemployed people and as a labour market support measure. A lot of effort has been put in to protect particular important groupings, such as the drugs group and so on. There is a parallel scheme to CE called the jobs initiative, which gives three years experience to people who are five years unemployed. There is also an age issue. There has been much sensitivity in dealing with people who are at the end of the three-year experience of a 39-hour week, like a full-time job. This reflects the dignity of work for the individual.

There are attempts to introduce a high level support process because the objective must be to try to find non-sheltered jobs in the real economy for these people. That responds to the dignity requirement of citizens also. The policy is for the jobs initiative to have a particular programme centred around long-term unemployment that offers a full-time type job for a number of years. The CE scheme was designed to give people experience in work and the opportunity to make a contribution to their society and community. That has served a very useful purpose but it is not designed to supplement or displace other forms of employment.

The numbers on the scheme are coming down for a number of reasons, some of which are just cost issues and some of which are related to the ultimate requirements of the labour market. I hope FÁS will provide good measures to help people migrate from CE and the jobs initiative to real jobs. I remember back when we had enormous long-term unemployment and overall unemployment of 17%, and individuals were categorised as unemployable. Those people are working today in unexposed jobs in the mainstream economy. We want to see more people move into these jobs.

A social economy programme has been developed in parallel to this, and a lot of programmes have come through and been rewarded. The Deputy is right to say that our policy is not to open up to new programmes. We have had a number of programmes already and there is a fixed budget. Some 324 social economy enterprises have been approved for full support and 244 have already started. The reality is that we have to learn about the social economy. We do not know all the answers. We will have to watch how the programme develops, but it is not intended to be a total replacement for CE——

Deputy Connaughton

That is the main point.

Mr. Haran

It cannot be a total replacement because if you look at our budget lines, the growth of the social economy has not been equal to the reduction in CE. There is an issue here of voluntarism and the balance between what the State should do for the community and what the community should do for itself. It is up to politicians, ultimately, to make the calls about where those balances should lie.

People have said to me that in many ways CE has directly contributed to the reduction of voluntarism in society. I have lined football pitches voluntarily before, but people perhaps step back from this when CE workers are there to do it. Balances have to be struck. An inter-governmental group is looking at and trying to desegregate what we are trying to do. Perhaps the Department of Community, Rural and Gaeltacht Affairs might ultimately have more responsibility for meeting community needs as opposed to employment needs. Maybe that is the way we have to learn.

Deputy Connaughton

Mr. Haran said that the number of vacancies on the CE schemes were reducing.

Mr. Haran

Yes, as a result of Government policy.

Deputy Connaughton

One of the reasons - this is a huge problem - is that many people are deemed ineligible for the scheme because of the structures that have been put in place. These people are then actually deemed unemployed and draw unemployment benefit. They want to work but are regarded as being non-entities in terms of the scheme because they are not allowed to take part. The one thing I will never accept is that there are not enough people to fill places on the schemes. There are, but the structures are preventing people from taking part.

Mr. Haran

We have a lot of people coming from abroad on work permits, so the labour is still fairly tight. I know that there are places, particularly in non-urban areas, where it can be difficult to find work——

Deputy Connaughton

Very difficult.

Mr. Haran

I accept that, but the labour market is tight in other areas.

Chairman

I understand the tensions between the marketplace and the social economy. What evaluation is being carried out by the Department of the changes in the CE scheme at the moment? If there was an evaluation, was it published and distributed?

Mr. Haran

An evaluation is currently under way. A labour market group is looking at all the different employment schemes also under the PPF. An inter-departmental committee is looking at the relationships between Departments on these issues. The back to work allowance and so on are relevant in this area, along with some of the training schemes. A Cabinet committee is looking at this, and I know that FÁS is doing its own study.

Chairman

It surprises me that a major decision could have been made on the massive shift of emphasis in regard to CE schemes in the absence of an evaluation, if that was the case.

Mr. Haran

An evaluation was carried out a year or two ago, and that lead to some of the changes. The shift has been gradual over the years. We had a question earlier about the FÁS over-estimate of €13 million. In a way that highlights some of the tensions arising from really good supports being given to schools under a labour support programme. The policy change emphasised that the schools deserved these supports and they should be provided through mainstream or proper jobs - I am not denigrating the work done by people on CE schemes - as part of mainstream public sector employment. So there was a transfer of resources from the Department of Enterprise, Trade and Employment. These measures flowed from evaluations. The extraordinary success in collapsing long-term unemployment would in itself lead to a reduction in CE expenditure.

Chairman

Mr. Haran referred to work permits. What is the present position in regard to work permits? Does the Department evaluate on an ongoing basis the need for such programmes and the fact that it services industries, hotels, restaurants and supermarkets? The difficulty with these schemes is compatibility of employers as a partner with CE schemes, it is a way of getting people into work. On the issue of work permits, a training scheme was suspended recently due to ongoing abuse by several employers. How widespread is that abuse?

Mr. Haran

A number of issues have been raised. I can find out the actual number of work permits. They have increased from 6,000 in 1999, to 18,000 in 2000, to 36,000 in 2001 and 38,000 so far this year. Our Department puts much energy into trying to reduce the backlog. Because of the extraordinary increase in the numbers there was a reduction in the service quality given to clients. We are down to about three weeks processing which would be regarded as good. Of the 36,000 work permits issued in 2001, 14,000 were for the services industry, 9,000 were for catering, 6,000 for agriculture and fisheries, 3,000 for industry and 2,000 for medical and nursing.

We also have a scheme which is parallel with the working visa where people do not need to have an employer permanently to get a visa and they can move around to employers. That brings in a few thousand working visas for particular areas where there is a labour market shortage in the medical area, in health and social care and in the construction industry for architects and planners.

The work permit position is constantly under review. Two years ago everybody was shouting about the need to bring in workers. As employment increases there is a question mark about the distribution of work within society. Some of the workers who come here are highly productive and employers say they are the people they need and yet there is the social policy question about whether Irish people should be doing those jobs and should not the wage rates be adjusted to accommodate them. This interacts with the FÁS employment programme which is trying to encourage those on the live register to get into employment.

The Tánaiste has announced increases in the work permit fees in an effort to reflect the cost on society which the work permits entail. FÁS has been asked to give a certificate that the employer cannot find an employee from the community for the job. We are not fully happy with that because it is nearly automatic that employers say they cannot find anybody and want to bring in a foreign worker.

Chairman

Yes.

Mr. Haran

Overlaid on that is the issue of the European Union and how it is expanding. All members of the EU have an automatic right in this regard. As it expands so members will develop rights and it will be up to the Government to decide on the timing. Many of our workers come from the accession countries who in the future will have an automatic right to come and work here. It is useful to be able to bring in workers to augment the domestic labour force but we do not wish to see the domestic labour force effectively excluding itself from domestic jobs. Some of these jobs are low value added jobs but they are a step to other jobs, and employment is important for citizens. Perhaps Ireland will do something different from what Germany or the US did and try to integrate workers in a more societal way. There are other issues concerning asylum workers but they are not related directly to the work permits challenge.

Chairman

What is the position about the ongoing evaluation and the loophole that exists whereby an employer can bring in workers? How many people are in the country under that anomaly?

Mr. Haran

The scheme was not an anomaly. This was a good scheme to enable companies here to bring in workers from abroad without having to go through a long process. That was a reasonable scheme and its purpose was to limit the bureaucracy in a situation where, say, Intel needed to bring in an expert on a particular piece of equipment for a year or two to set it up. That was a reasonable process. However, companies started deliberately establishing an Irish name to bring people in and we had to cancel the scheme. The Tánaiste has suspended the scheme to prevent that type of abuse.

Deputy Boyle

I presume lap dancing is no longer considered a service industry. I wish to return to the point about community employment and its public expenditure implications. While understandably the 20% cut in numbers will reflect on the Department's figures, it results only in a marginal saving to the Exchequer in general because it is a cost that will be picked up elsewhere by other Departments. Has a cost benefit analysis been done on these decisions? The second question relates to ring-fencing of certain CE positions and its implications. It appears ring-fencing is allowing the sponsorship of CE schemes by State agencies which, in effect, is a cross-subsidisation of Government services and that the real effect of community employment cuts will be most markedly felt by community groups who have been using them as a community support measure. Mr. Haran mentioned the school janitor change earlier and referred to meals-on-wheels. In fact, meals-on-wheels is a grouping that would be affected by not being ring-fenced. It is in the child care area that a health board would find those positions protected. There appears to be a hierarchy of child care, RAPID areas and drug task force areas. Surprisingly, working with the elderly is not included as a priority area within health board related activities. A particular project in my constituency, the Westgate Foundation, a flagship project for working with the elderly, is entering a period of uncertainty because of the hierarchy imposed, presumably because of policy decisions within the Department. If one is going to make a decision and there are only 20,000 positions, as there has been a cut from the previous year, the priorities should be better weighted away from the type of cross-subsidisation that exists of other Government services because there are other funding headings in other Departments to allow those positions to be put in place.

Mr. Haran

On the first point, I accept the basic question that if we cut CE, it has a knock-on cost elsewhere so that our Department generates a saving of X but the overall Exchequer impact may be different. That relates to what one expects to happen to people and their opportunities for migrating into employment. We have reduced the number progressively from 39,000 to 25,000 and are now moving towards 20,000. Studies suggest that at the time when there were 39,000 on the scheme in a fairly robust labour market many went into employment. When people take up employment it eliminates the cost of going on to the live register. In other words, there is no transfer of a cost from one Department to another. Clearly it is not for our Department to determine the fiscal balances but an interdepartmental group and the Cabinet group look at policy development in this area.

The Deputy mentioned the cross-subsidisation inherent in service provision when it is used for labour force support. As mentioned the drugs strategy, child care and RAPID are priority areas. Ultimately care for the elderly is about service provision. In the longer term there is much to be said for service provision being funded in an explicit way rather than indirectly through a labour market support. I hope the Cabinet committee and the interdepartmental group will come to terms with that and establish good rules of business for the future in managing how we develop some of the elements of community employment from labour support to service provision, or community support, but we want a labour support structure as well to help migrate people from unemployability, as they might see it, to open employment.

Deputy Boyle

Does Mr. Haran not accept that the effect of ring-fencing is that community and voluntary groups have either little or no background resources in their own right and that the 20% headline cut in CE numbers is in reality a 40% and 50% cut for many of those groups?

Mr. Haran

The amount we are absolutely ring-fencing is something like 800 plus 450, so that is 2,250. I am told there are 4,000 places after that which have a priority but are not absolutely ring-fenced so there is a proportionate impact in that regard. Some of these groups are supporting activities in the communities we were talking about which are under pressure, such as communities which the national drugs strategy would address or those which some of the child care services are addressing. Some of those communities are also benefiting from the ring-fencing. Some of the individual projects, however, can be hurt more than projects not covered by these priority areas but that is the nature of prioritising something. It means that an area not prioritised does not do as well.

Deputy Boyle

In regard to the example I cited, the Westgate Foundation, if a decision is taken for absolute reduction in numbers, the ultimate cost to the State will be far higher because instead of a day care provision largely voluntarily provided, many of the elderly people being catered for would be paid for with a far higher subvention through the Department of Health and Children to spend their time in nursing homes. That is the type of logic we need to challenge.

Mr. Haran

I understand the point but I still question whether it is proper in terms of an understanding of the dynamics of public sector provision to have many services provided through a back door CE scheme rather than through the public sector if Government and the Oireachtas decides to support these things directly. By doing them through CE schemes we are mixing different attempts and challenges. The point is relevant, however, and they are the issues we are trying to discuss in the interdepartmental group to decide how best to develop CE in the future and provide a range of services in the context of limited resources - the limited resource context is an important element.

Chairman

Under note 14 concerning the ongoing commission and inquiries, I note there are 21 inquiries in progress. Can you indicate the extent of the legal fees paid to date in regard to these inquiries?

Mr. Haran

Under X.1, the area we are looking at——

Chairman

Note 14.

Mr. Haran

Note 14. As you can see, these are bodies we are supporting. You are probably referring to the company law inquires - is that the particular interest?

Chairman

Yes. I am talking of costs in terms of the Ansbacher and the——

Mr. Haran

Yes, Chairman. A number of reports have been finished. The report on Celtic Helicopters is very advanced. That section 19 report is being carried out by Gerry Ryan, whois a departmental official. The report onGuinness & Mahon Ireland is very advanced but not as advanced as the Celtic Helicopters report. The Celtic Helicopters and College Trustees reports are very close to delivery. The Guinness & Mahon and Hamilton Ross reports should be delivered early next year. That is my understanding from the officer.

Members will know we initiated an inquiry into Dunnes Stores ILAC centre. That has been to the Supreme Court twice and a few times to the High Court. There is currently a High Court appeal against the appointment by the Office of the Inspector of Corporate Enforcement of a new officer to undertake that investigation. That is currently before the courts.

There is an investigation under section 8 into National Irish Bank Limited and National Irish Financial Services by a court appointed group of inspectors. Our best knowledge is that they should report this coming year. As members will know, in the past year the Ansbacher inspectors reported - that is under section 8 - and their report was published.

The cost of investigations to date since 1997 is €9.6 million. We did Faxhill Homes and IIB, and there was a lot of money spent on the judicial review of Dunnes Stores. There was also the finishing off of the section 9 on Clonmahon retirement villages. There was also one done on Bula Resources. Another report was completed during the year on Kenford. That came in in November of this year and was done by the same officer, Gerry Ryan. That report has been referred to the Director of Corporate Enforcement. Certain judicial proceedings have stemmed from a number of the reports. On the Ansbacher report, I know the Director of Corporate Enforcement has made application for access to the inspector's papers, as has the Revenue, and that is currently stayed pending the Revenue report. Prosecutions have taken place in a number of other cases.

Chairman

What is your opinion on the future recovery of costs? Is there any possibility that the State can recover those costs?

Mr. Haran

Yes, Chairman. In regard to some of the costs, there is an application by the Minister for Justice, Equality and Law Reform in the Ansbacher case and I am told that the courts have ordered that the Central Bank should be joined as a party to recover costs in that case. The other section 8 has not reported. We will have to see what happens in that case in regard to when it reports. In regard to some of the other cases, other prosecutions have resulted in moneys being recovered from people. In the Dunnes Stores case, costs were ultimately awarded to the Minister after the last Supreme Court judgment but there is a new case extant in that proceeding given the change in the authorised officer. The section 19 procedure does not provide for a recovery of costs so it is the section 8 cases that are recovering costs.

Chairman

On an unrelated matter, there has been an increase in the number of deaths on work sites this year. Have you been able to measure the effectiveness of the mandatory site safety course?

Mr. Haran

While my colleagues get me the update on the numbers, my understanding is that the number of overall deaths in the current year is down on last year but people are dying on sites and there were three recent deaths——

Chairman

We have had deaths in the past ten days.

Mr. Haran

——one of which was in the Ballymun site with which the Health and Safety Authority had previously been very involved in terms of managing. If I recall correctly, it went before the courts to try to have work suspended on that site last year. Our rate of construction deaths per 100,000 has reduced in time but I do not want to give the impression that we are succeeding. Matters have improved but they are not nearly good enough and we have to continue our efforts. There is a new construction area partnership and a safety pass scheme and we hope these schemes will have a material impact on overall outcomes. The number of farm accidents is also fairly high, at 24. This is an area about which we are similarly concerned because farmers and their families are suffering. We have strengthened the resources of the HSA and have more inspectors, but the work is never finished in this area.

Chairman

It is a major issue. I would like to extend my deepest sympathy to the families on their loss in recent weeks. It will be a sad Christmas for them. Every possible measure should be re-emphasised in the new year to heighten the public's awareness of this issue.

Deputy Rabbitte

To return to No. 12, did anybody inquire about the likely fine under the last Community Support Framework? To what does that €20 million fine relate?

Chairman

We had a major debate on that, but if the Deputy wishes, he can refer briefly to it again.

Deputy Rabbitte

I will read the minutes. With regard to the underspend on technology foresight, why was it of that order?

Mr. Haran

The underspend on technology foresight was related to the introduction of the new scheme, the hiring of staff and responding to calls for proposals. The matured liabilities just did not rise to a sufficient level in that year. Through the Estimates process that provision was put in funding. A global call for proposals was issued. The director general and three chief people, Bill Harris, Alistair Glass and John Atkins, were recruited during the year. A high powered board was put in place, but we did not get enough projects approved and to expenditure stage during that period. It is being ramped up and it is a new programme. It will be close to, if it does not meet fully, its estimate for this year, which is €35 million. The expenditure estimate for next year is €70 million. It is an area of significant growth. It is exciting and critically important for the welfare of this country.

Deputy Rabbitte

I thank Mr. Haran for that and am glad to hear that answer.

Can I ask a seemingly naive question? If the man from Mars arrived down here, he would look at the spend, for example, by the industrial agencies as against the grants awarded. For example, Enterprise Ireland had administration costs of €67.8 million while the pay out to industry was €41.4 million. It seems it is costing us more to administer that agency than provide the grants it awards to industry.

Mr. Haran

There is Enterprise Ireland and the IDA. A number of dimensions is relevant. The new regional aid guidelines and general public policy is to reduce the overall level of grants we give. That public policy is imposed on us by Europe. The amount we pay per job we get is decreasing. IDA Ireland still has to travel the highways and byways of the USA, Asia, Germany or wherever to win projects for Ireland. The fact that the grant aid it is giving to projects is reducing does not imply there is any less need for it to promote Ireland and to engage with companies to try to attract them to Ireland.

Furthermore, the IDA has also been involved in the period in question and into this year in growing its staff in one area, but that is in the overall context of reducing it. It has moved head office functions from Dublin to Athlone, Sligo and Waterford as part of its policy to try to grow the regional impact of jobs coming into Ireland.

The Deputy's question is probably more focused on the Enterprise Ireland dimension. In that dimension there has been a reduction, especially in 2001, in the amount spent. That is not necessarily carried forward into the following year. Enterprise Ireland does not only give direct grants, it is also involved in support of the science and technology programmes. They would be accounted for under subhead F1. That applies to the current year, the RTDI and all the framework programmes. Nevertheless, it is the policy that the amount that its spends on direct grants should come down, especially the amount that it spends on grants that are non-refundable.

In the period in question we have introduced a review of EI activity. There was a VER scheme, of which 100 people availed. Therefore, we are reducing the size of the entity, which also reflects the sentiment of the Deputy's question. We are trying to move Enterprise Ireland out of a good deal of non-core activities to ensure it is more focused on its particular function.

There is a question as to whether we should fully judge EI as a grant giver or as an entity that is trying to support companies in achieving certain outcomes. When it organises a trade mission to Hungry or to Eastern Europe, there is little grant support involved, maybe some airline and hotel support, although I am not sure if that is the case. Such a mission is person intensive activity. The range of the services it provides is adjusting. We are cutting back on its numbers, which is proper. We are also trying to direct it more towards supporting such projects as venture capital funds. It has a western venture capital fund and a number of sectoral venture capital funds.

In the year in question, it realised considerable receipts through the sale of preferential shares and other shares in companies it had supported in the preceding years. I do not know if that answers the Deputy's question.

Deputy Rabbitte

It does. Has EI taken a hammering in the past year and a half or two years in terms of stockholdings it has in start up companies, new companies or existing companies?

Mr. Haran

Yes. The question as to whether EI has taken a hammering is a difficult one to answer in so far as some of the shareholdings it has have come down in value, but frequently the value to which they have fallen does not reflect the input costs to EI. For example, EI realised €27.5 million from the disposal of shares during 2001. I am told that such shares cost it €400,000 of an investment.

Deputy Rabbitte

It got out of those shares.

Mr. Haran

It got out of that much shares. They realised €65 million in the preceding year, but their overall valuation as at the end of 2001 was €39 million. Their valuation in the preceding year was €164 million. Subtracting the amount it took out which is €93 million, it has lost some value in the shareholdings of which it did not get out. It has agreements with companies about the nature of its exits so that it does not put too much strain on a company by exiting. It is in there not only to make money, but to help the company. Pulling money out of a company at a certain stage could damage it. The emphasis of the Deputy's question is realistic. As valuations have come down, especially of the dot.com type companies, their asset value will also have come down. EI has got a good deal of money out of what it invested in the past few years.

Deputy Rabbitte

Is the Department happy with the way the local employment service is functioning?

Mr. Haran

I am not fully briefed to answer that question in so far as the local employment service has now been integrated in a fashion into the overall FÁS structure. That was the correct policy. The staff have not been integrated but the function has been and there is a new overall management structure for this integration. It ensures that FÁS has the adequate resources and responses within its portfolio to cope with the challenges it meets rather than having separate agencies, perhaps on the same piece of turf working with the same client base. I have not seen any review of how well this new structure is working, but the challenge is to make it work rather than to question the design inherent in it.

Deputy Boyle

There is an entry for a £1 million cost for additional redundancy payments relating to Irish Ispat. Is the Department in a position to recover the additional costs from Irish Ispat, not only for this but for accruing costs that will result from the environmental clean up of Haulbowline island, given that it was the agreement the Department made with the Ispat company to sell Irish Steel for £1 that has resulted in these additional costs? Is the Department engaged in any exercise to discover what the ultimate closure costs are likely to be in relation to IFI Industries?

Mr. Haran

With regard to Irish Ispat, the money in question refers to a decision by the Department to provide a particular type of support to the workers in Irish Ispat who were there at the time. By doing this we facilitated drawing down matching funding under the European Coal and Steel Treaty. That helped the workers in Irish Ispat. It was a Government decision to provide that support and it did attract matching funding so it enabled the payment of €3,000 from the State and €3,000 from Europe to the 454 employees. Some contract workers would also have been able to avail of it. The State is involved in litigation regarding the clean up costs and that is currently under way.

We have a few numbers but there is no hard estimate of the ultimate realisable value of the three sites being used by IFI at Marino Point, Arklow and Richardsons in Belfast. There are environmental issues but there is also considerable developmental potential for these sites, particularly in Cork. There are exciting prospects for that area for the future. The view is that there is a net positive value after clean up on these locations. That is the view we were given by the liquidators and the assessors who went in at the time. The environmental work is hard to determine. I am not sure if the gas site will end up costing a lot more than people expected at one point but we are hopeful of seeing a net positive value emerge from the disposal of those sites.

Deputy Boyle

Before the closure decision by Ispat, the company was engaged in two land deals, one of which was with the then Department of the Marine and Natural Resources. The second was with a company, Indaver, for the proposal to create a national toxic waste incinerator in Ringaskiddy. This land was acquired under the £1 deal from the Department. Is the Department satisfied that the Ispat company has the capacity to engage in such land sales immediately prior to its closure decision?

Mr. Haran

We had an agreement with the company involved in the sale and the agreement had a termination date where certain controls and obligations were vested in the new buyer. We wanted to see Ispat succeed. The company bought certain debts as well. There was an agreement and the company met the rules of the agreement. Thereafter, it was not for us to interfere in the company, its assets and its liabilities after the ownership had transferred.

Deputy Boyle

Is this despite the fact there are accruing costs after it pulled out for which it is responsible?

Mr. Haran

We will have to pursue the clean up issues with the liquidator. There are real issues about cleaning up and, as I understand it, there are extant proceedings in this area.

Chairman

Thank you for the comprehensive manner in which you dealt with the many questions raised today. It is my intention to bring FÁS, Enterprise Ireland and the IDA before the committee. They, as well as the enterprise boards, are playing a critical role and doing exemplary work in the development of enterprise. If we are to consider the spatial development of the country, it is important that all the players are involved and if they come before the committee, we can continue the debate. From what we have gleaned today, they have been very effective. The Competition Authority also falls within the remit of your Department. It is important that the Competition Authority is effective given the high cost of living. The authority has been given increased funding. Perhaps you would like to comment briefly on it. If not, we can discuss it again.

Mr. Haran

The Competition Authority has an important role to play in combating inflation and in ensuring fair play in the marketplace for a variety of groups. Its powers have changed under the legislation passed last year. Two serving gardaí have been added to the capacity of the authority and more staff are being added as we speak. Unfortunately, we lost an able member of the authority. Isolde Goggin has now gone to the communications regulator's office and hopefully we will see the benefit of her transfer. It is an ably led and strong authority.

Thank you for your comments on the work of the agencies. I share your view that they make an extraordinarily important contribution. I am humbled sometimes by the successes they have delivered.

Chairman

I know from dealing with them that they have an agenda on which they work and this has been effective. Before noting the Vote I extend, on my own behalf and on behalf of the committee, our best wishes for a happy Christmas to Mr. Purcell, his staff, the secretariat of the committee and to the Department's officials. I look forward to having ongoing debates in the coming years with the officials of the Department of Enterprise, Trade and Employment. This is an important committee and it is important that this debate is opened up. It is a new opportunity for people to know what is happening.

Is it agreed that we note the Vote? Agreed. The next meeting will deal with Vote 33,Chapter 9, the Department of Health and Children.

The committee adjourned at 1.50 p.m. until11 a.m. on Thursday, 16 January 2003.