I move:
That a sum not exceeding £213,365,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1983, for salaries and expenses of the Office of the Minister for Energy, including certain services administered by that Office, and for payment of certain loans, subsidies, grants and grants-in-aid.
The Estimate for my Department for 1983 provides for a total of £213,365,000, a decrease of approximately £50 million on last year's outturn. My Department's Estimate takes fully into account the Government's objective of reducing public expenditure. However, the reductions do not imply a les effective role by my Department in the development of industry and energy in the country.
Most of the saving in 1983 is due to the fact that no provision has been made this year for the Irish National Petroleum Corporation or for Irish Steel Limited, for which provisions of £10 million and £25 million respectively were made in 1982.
The other major savings were in grants-in-aid to the IDA for capital purposes (£28 million), State support for mining operations (£4.2 million) and the town gas subsidy (£2.6 million). The reduction in the grants to the IDA reflects the somewhat smaller demand on IDA services in a number of spheres, notably in their building operations where they have adequate stock of advance factories. The town gas subsidy reduction is possible because of the development in the use of our natural gas resources in the Dublin and Cork areas while most of the money saved on mining operations is due to the winding up of the Avoca Mining Company.
These savings were partially offset by the provision of £7 million for the National Development Corporation, £3 million for the National Enterprise Agency, a shipbuilding subsidy of £2.2 million and the provision of £1.7 million for the purchase of Clondalkin Paper Mills. In addition, there was an extra £2.8 million provided for the IDA administration and almost £1 million extra for SFADCo grants to industry.
The areas I will concentrate on in my speech are the development of industrial policy, improving the efficiencies of State-sponsored bodies and the cost and security of energy supplies.
We are at a crucial stage in industrial development. Our indigenous industry is internationally uncompetitive and is even losing market share on the domestic market. Wage increases are wiping out hard earned productivity gains. There is a growing trend towards protectionism worldwide which will seriously damage both our exports and our ability to attract new foreign investment. It is clear then that competitiveness — all round competitiveness — must be central in our strategy for recovery. It will be the dominant theme in the White Paper on Industrial Policy which I am having prepared in my Department. The White Paper will spell out measures designed to improve the environment for industry, thus enabling us to take advantage of the economic recovery. Whatever changes of emphasis may be evident in the White Paper, it will be based on one clear premise. It is that in this country in the eighties and nineties industry will be the motor of economic growth.
We must be ready and willing to adapt to rapid technological changes, improve our industrial relations and our quality image. We must achieve high rates of productivity and output growth if we are to create the wealth that in turn will provide the jobs for our unacceptably high numbers of unemployed. Government action alone will not solve our industrial problems. It also requires the goodwill and active co-operation of both employers and trade unions.
The commercial State-sponsored bodies play a critical role in the economic life of the State. For example, the seven commercial bodies operating under my aegis have a combined annual turnover of £900 million approximately and employ in the region of 21,500 people — over 10 per cent of the industrial work force. The State bodies have been a useful source of commercial and entrepreneurial innovation in our economic development since the foundation of the State. However, they have been subject to growing criticism in recent years for a variety of reasons, principally the overall deterioration in their financial positions and the level of their prices or charges in certain cases.
I believe that the right way to address the problems of the commercial State bodies is to look to their boards and senior managements who are primarily responsible for their control and supervision. Board members must be fully aware of their individual and collective responsibility for the performance of their organisation. A problem in recent years has been the tendency to pass on their problems for the Cabinet to solve.
There must be more accountability to central Government and the Oireachtas for the performance of the bodies and targets must be set against which their performance may be measured. The introduction of corporate plans for the bodies is under consideration. This will necessitate a more professional and highly-focused monitoring of their activities by central Government and involve improving the expertise and business experience of central Government staff as well.
Turning to energy, my main concerns are with the cost of energy, security of supply, the development of indigenous resources and an adequate return on the very large public sector capital investment in this area which comes to £300 million this year. This is a complex area in which the different factors have to be carefully balanced and account taken of the massive investment and long lead times that are necessary to bring about fundamental changes.
The cost of energy has risen dramatically in the past decade. This price rise was initially "fuelled" by the impact of OPEC in raising oil prices and in more recent times by the continued strengthening of the dollar. These were international trends broadly affecting most industrialised countries in a similar fashion but which hit Ireland more than most countries. But these are now being added to by domestic factors and it is becoming clear that growing energy costs are seriously affecting our industrial development and competitiveness, as well as raising the cost of living of ordinary consumers. The effective performance of the public sector agencies in supplying electricity, peat, natural gas and oil is a major part of the Government's review of State-sponsored bodies to which I have referred. I will return to this in more detail.
The Government have decided to proceed with the publication of the White Paper on Industrial Policy in the coming months. I do not propose to speak in detail about the likely content of this paper. When I took office I reviewed the work which had been done on it and I concluded that I should not simply rubber-stamp this work and hastily publish a document which must address probably the most fundamental task that faces us during the remainder of this decade. As I have said, competitiveness is the major objective.
What might be described as the basic professional work on the White Paper has been carried out. There are the NESC and Telesis Reports and the analysis and recommendations by an inter-departmental committee on these reports. The IDA have prepared a strategic plan which has been reviewed in joint discussions which I and officials of my Department have had with the IDA.
In the course of these discussions both with the members of the Authority and with the executive board and senior managements of the IDA, we have reached a broad consensus on issues of strategic importance. We are in general agreement on how the international environment for industrial development and promotion is likely to work out when the present world recession lifts. We have considered the range of problems, some of them complex and not easy to solve, which must be tackled to improve the domestic environment for growth in the industrial, service and commercial sectors. We have also agreed broadly on the lines on which future policy should proceed.
The completion of work on the White Paper will be carried out under my supervision and in consultation with the Government Task Force on Employment. My intention is that the development programmes for industry which will emerge will be consistent with and complementary to the Government's overall economic policies.
I should make it clear that the White Paper will not contain any "soft options" but will chart in a realistic way the Government's industrial strategy for the decade ahead. The emphasis will have to be on action rather than rhetoric. Against this background, industry will be in a position to plan its business with a degree of confidence and assurance for the future. The eighties will be the toughest period ever in the history of Irish industry because European markets' growth rates are unlikely to exceed the low levels of the seventies; competition in the market place will intensify in response to slow growth, rising unemployment and increased competition from newly industrialised countries; technological change will intensify as competition accelerates and mobile investment will be reduced and competion for it greatly increased.
It is in this changing economic environment that Ireland has the challenge not only of reducing its high unemployment level but also to create employment for the most rapidly growing labour force in Europe.
In recent years manufacturing industry's competitiveness has been seriously undermined. To put the blame on external factors would be to fail to recognise the reality that domestically generated cost and price inflation have been the principal source of the problem.
We have many advantages which are appreciated in the countries from which we hope to attract industrial investment. But it would be a mistake to assume that our weaknesses go unnoticed. A number of German businessmen whom I met recently expressed their concern at the rate of wage and price inflation in Ireland relative to the rest of Europe. The unreal level of some of the wage claims lodged here can have an alarming effect on potential investors on the Continent and in the US. They expect, even allowing for the niceties of bargaining and asking figures which one always expects to get, a greater sense of realism in industrial relations than may be evident here most of the time.
Apart from the damage which these cost increases impose on firms which are fighting for survival, they seriously damage Ireland's attractiveness as a location for the establishment of new industries and the expansion, often decided outside the country, of existing companies here.
As a first step to tackling this problem we must measure and assess the trends in the major cost elements affecting industrial performance. In the past Government policies have often added to industry's difficulties. This is why I have recently established a committee to monitor costs and prices to industry and to advise the Government on the implications for industry of any new policy proposals in areas such as taxation, social welfare and State company pricing.
When viewed purely in an overall statistical light, Irish manufacturing industry's productivity record has in the past five to six years been moderately encouraging. However, the gains which we have made have been bought very dearly. Despite State support by way of grants and tax concessions amounting to many hundreds of millions of pounds in recent years, manufacturing employment is now down to its 1975 level. The hard and bitter lesson which we have to accept is that the growth in industrial earnings has been wiping out the advances which we have been making in productivity.
This requires that we seek to pursue excellence, not alone in production, but in the key strategic functions of marketing and design. It is only by doing this that we can make up for the losses in competitiveness in other areas. Increased market share — and this is the only path to growth — can only be achieved by higher productivity and efficiency in the use of all factors of production. In short, it means we must be internationally competitive.
Enhancing our competitiveness is not simply a matter of curbing wage levels or shedding excess labour. It is, of course, important that industry keeps its costs in check and that manning levels are consistent with efficient operation. It is equally important that the services bought in by industry from outside represent good value for money.
This is only part of the picture. Non-cost factors such as management efficiency, sound financial control, marketing expertise and new product development are even more critical to the survival and growth of a manufacturing undertaking. Productivity is a key element in competitiveness. There is no magic formula to increasing productivity. It requires a combination of the efficient organisation of production; flexible and co-operative work practices, and increased sales and value added.
It is patently obvious that if we as a nation are to increase our living standards we must continue to improve our performance on export markets. We are totally dependent on export-led growth and our greatest threat at present is the move towards short-sighted protectionist policies even among countries who have traditionally been committed to a free and open market. This protectionist trend has manifested itself in the EEC in moves to curb Japanese imports. The Government are opposed to such moves and we will use all our influence in the EEC to prevent any form of protectionism because it is against our interest as an export nation and also is against the prospects for an early economic recovery in the world.
The best way that European industry can limit imports from outside the EEC is to become equally as competitive on world markets and this is what we will be trying to do with Irish industry. As part of this on-going development we are prepared to learn from the success of the industrial countries such as the US, Germany and Japan and of course we will continue to attract and wholeheartedly welcome new investment from these countries.
The nature of much of modern industry is that change, and rapid change at that, are constant threats to survival. Many of the products and processes of today could be relegated to the realm of history in 12 to 18 months time, if not sooner. Modern technology and its successful implementation make traditional demarcation and restrictive work practices totally irrelevant. Every product, no matter how well designed, conceived or marketed, has limited product life. People must remember this and that we are going through a phase in which new products will replace old and industries will rise and fall.
There have been instances in the past where new machinery and equipment have never been brought into use because of an obdurate resistance to change by workers. In other instances compensation has been conceded as a right where the installation of new machinery and the associated improvement in work practices were essential to the firms survival and, therefore, to the survival of the jobs in question. In blunt terms that means compensating people for having their jobs saved. In future the rewards for greater productivity will not generally be felt in the wage packet but in the satisfaction and security of a long term job. It is only through that that jobs can be secured by further investment in new technology.
Industrial relations are, of course, a two way thing. Bad industrial relations very often arise and are allowed to fester because managements fail to give unavoidable problems on the factory floor the time and attention which they deserve. If changes are dictated by the marketplace the onus is on management as well as workers to face up to the new and harsh realities.
Absenteeism has been an even greater scourge to industry than strikes. In fact, man days lost through absenteeism have in some recent years been between 15 and 30 times greater than those caused by strikes. We can no longer tolerate or indeed afford this type of selfish and unjustified attitude.
This serious problem is one which surprisingly has received little public attention so far. In the case of a number of large Irish firms the absenteeism rate has been steadily increasing during the seventies and is currently running at levels of up to 20 per cent.
An ESRI study in 1982 contained some frightening statistics which give some idea of the scale of the problem. For example, the number of working days lost through illness in 1978 was 12 per cent of total potential working days. This was equivalent to over five and a half weeks lost time per person per year or to withdrawing 100,000 persons from the insured labour force for that year. It represented lost production of £340 million or 5.5 per cent of GDP.
Undoubtedly, a large proportion of these cases were genuine but there is more than a strong suspicion that abuses in this area are commonplace. Perhaps a more disturbing element is that such abuses are no longer regarded as socially unacceptable. It may be that there has been some improvement in absenteeism rates of late — perhaps influenced by the high unemployment levels and greater anxiety about job security. Nevertheless, I have noted that a number of firms still regard this matter as a major problem which adversely affects their costs and competitiveness. I have to confirm that on visits to a number of foreign firms located here this problem has been mentioned as being serious for them and a difficulty for them in recommending to their parent companies that further expansion should take place here.
Lest I have given the impression that all or many of the problems of industry are due to the workers, I would like to address some even harder words to Irish management generally.
There are a number of disturbing factors in the performance of Irish industry in recent years. The sad reality is that many Irish firms — in fact too many of them — are not competitive in free trade conditions. One thing which causes me most concern is increased import penetration which is the one most readily rectified by a little thought on all our parts.
There can be little excuse offered by any of us for the fact that importers' share of our domestic market has increased from 29% in 1977 to 37.5% in 1980. The effects of these increased imports are particularly keenly felt in the textile, clothing, footwear and leather and furniture sectors.
When one considers that import prices in these sectors have been growing faster than domestic prices in recent years, serious questions need to be asked about the marketing efficiency, quality, choice and delivery reliability offered by Irish firms. It is not just a question of cheap imports but a question of imports being able to beat us in fields such as marketing efficiency, quality, choice and delivery reliability which are factors essentially within our own control and within the control of our management. These are areas in which we need to do better and to do so quickly.
Again, when I look at the number of industries established in Ireland in recent years, all of which import a large volume of their everyday needs, I see a huge opportunity lost by Irish industry. In 1978-79 new industry firms purchased only 14.5 per cent of their requirements in Ireland and most of these products are made up of packaging, simple metal products and other goods not normally imported on a weight for value basis.
New industry firms could double the value of their domestic purchases with ease and, in fact, are anxious to do so. But again we are faced with the old problems of poor quality control, inability to meet delivery dates and a lack of price competitiveness. The first two are as important as the last one in this context. A lot of discussion on import penetration tends to concentrate on prices and wage costs rather than on other matters more directly within the competence of industry, such as quality control, delivery dates and so on.
Our much heralded export success in recent years is largely attributable to the expansion of new overseas industry, particularly in electronics and chemicals. I have not tired of pointing out that in a world market which contracted last year by ½ per cent Irish exports increased by 13 per cent. This was largely the result of new production being brought into being by much maligned foreign industry. Export growth in indigenous industry has been poor. In the period immediately ahead, I will be looking for a new dynamism from native Irish industry. Our exports grew remarkably last year. It is in one sense a reproach to us, however, that this surge in exports was laid mainly by foreign companies.
Few new Irish firms established in the past 15 years have managed to overcome the formidable barriers to exporting in a competitive world. Irish companies should be doing much more in this area. This may be due to a lack of long-term commitment to marketing, and to general conservatism on the part of traditional Irish industries. It may also have something to do with the status of enterprise in our scale of values and our tendency to be suspicious of business success. Let me draw a clear distinction between successful creative enterprise, which should be applauded, and mere opportunist speculation. We need enterprise and profit-making industries in this country as surely as our soil must have water.
Many references have also been made in recent months to import substitution. True import substitution is about improving the competitiveness of our own goods and services through improvements in quality, price, product design, delivery and after sales service so that Irish products can win the genuine support of our population in the domestic market place.
Quality is among the most important of these considerations. Many Irish firms have been slow to recognise the importance of quality and are clearly more preoccupied with production and price considerations. Successive surveys have revealed that quality is the main influence in determining whether overseas customers buy from one supplier rather than another. I could not stress that often enough. Many small firms fail on their first export ventures because of poor quality. This must also be of relevance as far as our home market is concerned.
The Irish Quality Control Association have estimated that over £245 million is lost by Irish industry because most firms pay insufficient attention to the application of quality control systems and methods. There is a misconception that quality can be controlled by finished product inspection rather than by systematic and careful attention to the more fundamental matters that go to make up quality, namely, market research, advance design, supplier evaluation, incoming raw materials control, in-process control and after-sales service. There is no point having a good quality control product if you are producing the wrong product.
It is obvious that improving product quality improves competitiveness dramatically, not only through an improvement in the quality of the product, but also through cost reduction and elimination of rejects. The direct result of improving competitiveness is, of course, job security and the prevention of job losses. We must now formulate the policies necessary to strengthen the indigenous manufacturing sector. This is a task we must face up to and overcome if we are to provide the standard of living demanded by our people.
The basic elements of our industrial strategy of the future are already clear. For medium and large firms the objective must be to strengthen their business so that they can regain a greater share of the Irish market and contribute significantly to exports. The primary onus for these changes will rest with the management of the firms concerned. We must also get the committed involvement of workers and their representative in this process.
The role of State assistance to the sector must, however, also be adapted to these ends and strike the right balance between investment, market development and technological capacity. This will require: first, the development of close on-going relationships with the staff of the State development agencies and companies so as to be aware of their precise needs and to be more effective in tailoring State aid to companies' requirements, and secondly, the provision of financial and non-financial aid as appropriate, and the latter may be even more important in the future.
In the area of small firm development it will be necessary to build on the expansion and development of Irish small firms in recent years and to aid firms in successfully meeting the challenges of the eighties. Ideally the most efficient and cost-effective manner for promotion and development of small firms is by being closer to the client.
A start has already been made with the regionalisation of the IDA's small industry programme. The IDA are at present in the process of assigning a small industry specialist to each of their regional offices. In addition, a concentrated small industry programme has been launched on a pilot basis in Cork city and the non-designated areas of County Cork.
We have in recent weeks suffered severely from redundancies due to the closure of large industrial firms. Many of those who lost their jobs are highly skilled people. I have asked my Department and the IDA to explore the opportunities which may enable these people who have become redundant to set up in business for themselves using their skills. Indeed taking the "Start your own business" theme further, I have arranged that the IDA will soon be opening an office in Dublin specifically to help people who wish to launch a business or industry on their own.
This office will be open not just during normal office hours, but in the evening as well so that people who have existing employment, and who do not wish to have to take leave and explain to their employer why they are taking leave to visit the IDA, will be able to meet IDA specialists in this office in the evening. This will be of valuable assistance in the development of the enterprise sector, particularly in the Dublin area. If it is successful, it can be expanded to other major centres as well.
I should also add on this subject, if I may, with your indulgence, Sir, that, apart from their advertising campaign which most Members here will have seen either in the papers or on television, if they get a chance to see the media with the heavy pressure we work under, the IDA have launched a series of regional meetings, about 20 or 30 of them, in various provincial centres where people who might have an idea for a small business are being invited to meet IDA executives.
The main thrust of Shannon Development's industrial development programmes in 1983 is to secure major manufacturing projects for the Shannon Industrial Estate and to develop Shannon intensively as a major service industry location within Ireland. Under SFADCo's Small Industry Programme the focus will be on lifting competence in technology, design, marketing and management skills in new and existing firms. Development of new programmes and systems, in addition to experimentation in field services and related business services support systems, will be undertaken in an intensive way. Special emphasis will be placed on the development of the small indigenous food processing sector and a specially designed food processing enterprise centre is to be built in Limerick city. I know my predeccessor will be interested in this development.
