I agree to a considerable extent with the expressions made by Deputy O'Kennedy. However, I must express concern at his suggestion that because Ministers told the public the facts about unemployment and our tax situation they were in some way undermining morale. Surely we have not reached a stage where the Opposition would encourage the concealment of such facts? It would be a very sorry day if that was to be the mark of how you build up morale. I hope he did not mean what he said.
I should like to address my remarks to the continuing concern about the contribution of foreign based investments in this country. We have to acknowledge the importance of foreign industry which employs 80,000 people. We must also bear in mind the widespread public concern about the repatriation of their profits rather than reinvestment and the highly footloose nature of some of these enterprises. Today in Cork we had the collapse of one of the industries supposed to be on the leading edge of technology. That must be a very worrying development because it is a very short period since this industry was first established here.
We must also be concerned about the low value added and the tax contribution. The fact that there is a considerable amount of transfer pricing operated by these companies means that even the figures we have on value added may be overstating the position to some degree. I do not know the full details.
There is concern also about the serious shortfall by these companies from the targets they set up for output and employment. In that context the Minister has introduced a number of measures to increase selectivity in the way grants are handed out to such companies. It is important to realise that grants are not the sole form of aid. A writer recently pointed out that only half the aids to industry are in the form of grants while the other half are in the form of tax relief, training and assistance from the ICC, Fóir Teoranta and other sources of State funding. There is need for a much more serious examination of the true impact on the economy of foreign industry than we have had to date.
I welcome the greater selectivity the Minister hopes to apply but I am somewhat concerned about the slight vagueness of the terms which describe this selectivity. We need to know in greater detail what companies are saying they will achieve and to what degree they achieve their targets. We should limit the aid we give them to the achievement of those targets. That type of selectivity would have a cutting edge and the mere restatement of the desirable features of foreign companies is not enough. We must go a step further if we want to make selectivity a reality in choosing foreign industry.
I acknowledge the importance of continuity in the form of grant aid. I also acknowledge the greater effort now being made to develop linkages by these companies but we must investigate how they are affecting the economy and link the money we give them to actual performance.
There are a number of other important points. Deputy O'Kennedy touched on one of these points but regrettably he did not develop his thoughts. The question is whether our tax regime has been unduly encouraging the wrong sort of investment. There is an excessive bias in our tax regime towards property-type investment to the detriment of employment-creating investment. We have had concessions for many years towards development of flats and special concessions to pension funds, house building and mortgages generally but we have failed to step back at any stage and ask what this is achieving. Are we not encouraging savers to channel their money into property, which does not create employment, rather than into employment-creating investment? We must examine the tax regime in that area. Reform would cause a lot of headaches because many people have entered into contracts built on those reliefs. It is important that in developing industrial policy we should look at the wider issues and not confine ourselves only to the industrial agencies under the aegis of the Department of Industry.
In the same way we have an unfortunate feature in our tax system whereby we encourage companies to take on machinery rather than give employment. The PRSI issue is not primarily a matter for the Department of Industry but in an overall look at industrial policy we must be conscious that we are putting an improper bias on the way people in industry decide to use their investable resources as between employing labour and employing machinery.
I was somewhat confused by Deputy O'Kennedy's reference to the need for greater marketing and greater franchising of new technology and research. He did not refer to the important new initiatives in the White Paper on Industrial Policy in precisely those areas. I welcome those initiatives but I would sound a warning. It was stated recently that it would be very difficult to distinguish between the new technology grant and the old re-equipment grant. In conception the two are entirely different. One is designed to bring an entirely new type of technology into the country and to develop small companies to franchise it from abroad, whereas the other was an improper grant which was very often made available to companies to substitute for employment. The terms under which that grant is administered must be carefully drawn up to ensure that the money made available is not used for re-equipment at the expense of employment but is actually bringing brand new technology into Irish industry.
One of the very welcome features in the White Paper is the introduction of much closer performance tests on bodies such as the IDA. This is crucially important, particularly as the White Paper envisages giving IDA executives much greater scope for personally deciding the sort of things that should or should not be assisted. If we are giving such discretion to State companies there must be much greater scrutiny of their performance and I am a little concerned about the general considerations listed in the White Paper as to the tests of performance. These are such things as employment creation, output creation and the general features of industry. We must go a good deal further and look for a comparison from the likes of the IDA of the targets set by incoming companies and their performance. If the IDA are grant-aiding foreign companies setting up here and they state that they will achieve a certain employment target or bring in certain research and development facilities or new skills, these should be quantified and made the basis on which the IDA executives are tested at to their performance. That is the sort of information the public need in order to say whether the IDA and other agencies are living up to what is asked of them. We cannot allow a feeling among the public that the IDA are trying to get off the hook in regard to employment targets by their new approach. That new approach is the correct one. The IDA must look for net domestic value added rather than employment as the sole criterion. However we must fix that target and force them when they grant aid to pin down what they are grant aiding. Against those standards let them be judged. In the same way it is important that other State agencies have very visible performance targets against which their performance would be judged.
I am glad to see the Minister has included in the reports on the IDA actual employment rather than the somewhat fictitious employment figures we got in the past. That is a step in the right direction but we must go a good deal further.