As I was saying in my replies to Questions, the announcement made by the Minister for Energy this morning in regard to electricity prices for industry is very important and I welcome it. It was an early response by the Minister to the findings of the Committee of Inquiry into Electricity Prices which indicated that prices for electricity here are higher than in most of our competitor countries. I am very glad the Minister for Energy, in conjunction with the ESB, has been able to arrange for an improvement. Since I became Minister for Industry it has been my concern that we should do something about the spiralling costs experienced by industry. It is desirable that we should try to set up new industries but that would be of little value if we cannot preserve the industries we have.
One of the reasons we have been losing so many industries is that for a wide range of items our costs are higher than in competitor nations. One such item is electricity. We have been successful in reducing our general rate of inflation and we are now heading for a time when Ireland will have about the same average rate of inflation as throughout the OECD. Earlier our rate was almost twice that average. This is a major step forward. It is important that conservation of costs in industry should be a contributing factor to all Government decisions that might have the effect of raising costs. Some decisions are taken for financial or policy reasons and these might have the side effect of increasing industrial costs.
Until recently we did not have a way to monitor these costs so that the Government could be advised in good time of the consequences to industry of decisions that might appear quite justifiable in other contexts but not in regard to industry. The cost monitoring group established in my Department, with an independent economist as chairman, have prepared a first report on industrial costs in Ireland. It covers the entire range of costs, including insurance, social insurance, electricity, transport, labour and others. That very comprehensive report will be presented to the Government in the very near future and I hope it will result in the adoption of policy by the Government which will affect Ministerial and Cabinet decision making in an effort to ensure that we will not allow a situation to develop again like that of the late seventies when industrial costs of production ran completely out of control.
We are getting our inflation and consequently our industrial costs, back to a position comparable with those of our competitors. However, they are at too high a level and having got the thing partly under control we must ensure that we will not allow it to get out of control again.
Industry and industrial training are receiving a high priority in the Government's overall expenditure plan for 1985. The overall rate of increase in Government expenditure in 1985 over 1984 is only 9 per cent but the amount of the increase in expenditure under the heading of industry and labour is 27 per cent or three times the rate of increase of expenditure generally. That is a further indication of the priority the Government are giving to industrial development. Of course, we must ensure that we get value for the money being spent on industry and training.
An area which has in my view been one of deficiency in the past has been co-operation and co-ordination between industrial development and industrial training. They are under separate Ministers with the Industrial Development Authority under me and AnCO under the Minister for Labour. One recommendation of the Joint Committee on Small Businesses was particularly telling in its emphasis on the need for improved management training and that improved management training should be seen as part of every serious effort to either rescue, restructure or expand Irish industry. However, up to now that perspective has not always been seen because the agencies concerned with training and industrial development were under separate Ministers.
I am glad to say that the latter has been remedied and that on the management committee on industrial policy we now have representatives sitting around the table, under the chairmanship of my Department, from AnCO, the IDA, CTT, Údarás na Gaeltachta and other agencies who are under a variety of Ministers. In future their programmes will be dovetailed together. It is my intention that, where the Industrial Development Authority are undertaking what is known as a company development programme with a company, where the IDA will be sending staff to visit the company regularly to examine their performance with a view to seeing where potential expansion can be found, AnCO will be closely involved in that process so that everything AnCO can contribute either in the form of formal training or, as important, informal advice, should be given. I hope also that AnCO will keep in close co-operation with one-stop shops which are being established in the regions and where all the services under the agencies of my Department will be centred in one building.
It is obvious that AnCO should also have a representation in such an office so that anybody going to the regional industrial office with an idea for expansion can not only be advised, as he will now in the one building by competent and responsible staff on industrial development, on export markets, product and process development and research, but also on the training needs of himself and of his employees. We are proud of the fact that the total amount of money being provided for industry and labour training this year is three times the average increase in public spending but we must ensure we get proper value for that. The co-ordinated approach I have indicated is one that will give great returns.
The industrial policy has been criticised by the National Economic and Social Council in one or two what I would regard as relatively minor respects. They were unhappy that there was not an adequate detailed formulation of the measure of performance anticipated in respect of industrial activity to be achieved by the expenditure. In formulating measures of achievement as against measures of expenditure we suffer severely from the fact that our statistics are out of date and inadequate. The census of industrial production, for instance, can be up to one year or two years late. Clearly, one has great difficulty in measuring performance with outdated statistics. However, I can tell the House — this has not been publicly known up to now and is a response which was already in train to the criticism of the National Economic and Social Council — that the economic unit in my Department are preparing, and hopefully will have approved by the management committee on industrial policy during the first half of this year, a statistical base upon which to analyse the success of industrial policy. That will provide the National Economic and Social Council, and everybody else concerned, with a means of seeing for the first time how well we are doing by comparison with the amount we are spending.
I should also tell the House — this has not been announced publicly either — that the Government have decided that my Department and the Industrial Development Authority, should work out a sector by sector analysis of how we are going to achieve the targeted increases in manufacturing employment contained in the White Paper on Industrial Policy for the next ten years. As the House is aware we are aiming at an annual increase between 3,000 and 6,000 jobs per annum net in manufacturing or a 30,000 to 60,000 net increase over the next ten years. We have to achieve that within the budget that has been provided. That will not be done by a random approach which responds to applications for grants as they come and hopes that the sum at the end of the day, when we have accepted as many applications as we think we can accept, will add up to a sufficient number of jobs. We have to be more deliberate and purposeful in all the agencies involved in industry bearing in mind that the first objective of industrial policy is the achievement of these job targets. One must work back from these targets through the sectors and target the sectors which are capable of achieving the increase in manufacturing employment. The IDA in addition to responding to grant applications from viable promoters, must be actively seeking out projects in areas where promoters are slow in coming forward where in their view these promoters have the potential of contributing to the achievement of the employment targets set by the Government in their White Paper.
In December I wrote to the IDA asking them to analyse carefully the overall use of their budget over the next three years. They are now in a position that they have never been in before of knowing, as a result of Building on Reality, what their budget will be for the next three years, I want them to see how they can use that budget to achieve in the first three years what they should be achieving if we are to reach the overall target of between 30,000 and 50,000 additional jobs in manufacturing over ten years.
This is not just a question of the IDA having to make a contribution in this area. It is important that all the agencies see themselves as having a responsibility to contribute overall job creation and maintenance of jobs. Rather than individual agencies taking a narrow view of their own functions and having a single mission, which is valuable and it would continue to be the case, they must ensure that they have at all times the wider perspective, that what CTT are doing contributes to what the IDA are trying to achieve and vice versa and what AnCO are doing contributes to what the Irish Goods Council are trying to achieve and vice versa.
I am glad to say that as a result of the operation of the Management Committee on Industrial Policy we have been successful in working out detailed and formal distributions of responsibility as between the relevant agencies in regard to product development, an area for which grants are already given, and the company development approach, and discussions with companies over a longer period to develop their potential. As areas emerge where there is either a possible conflict or a possible complementarity between agencies we will continue to use the management committee on industrial policy to formulate the problem and to formulate the solution in a cohesive overall fashion rather than have the situation which existed in the past where agencies tended to pursue their own mission and hoped they would do better than the other agencies in the battle for funds each year by having a better profile with the Minister of the day. That competitive approach while in some senses laudable is something we cannot afford in present circumstances. We must get the maximum return for the money we are prepared to invest and that is why we are arranging the management committee in this way.
I am reviewing industrial development legislation generally. I will have to introduce legislation this year to provide for the consequences of the White Paper on Industrial Policy. In particular I will be introducing legislation to enable the IDA to pay technology acquisition grants, about which I will be saying a little more later. I intend to avail of this opportunity to review all existing IDA legislation. I have gone through all this legislation in detail and have a number of ideas where it could be improved and made more effective and accountable. I intend to avail of the opportunity provided by the legislation I will have to introduce for matters that are strictly required by the White Paper on Industrial Policy to make some other changes which may emerge from the more general review to which I have already referred.
I said I would speak about technology acquisition grants. It has been recognised that Ireland has been successful in the last number of years in bringing in new technology. Much of our industrial base is very modern and its technology is ahead of our competitors, but most of that modern industrial base is owned by people or companies not resident in Ireland. I would not say that it is undesirable that we should have such foreign enterprise in Ireland — the more we can get the better — but is undesirable that foreign industry is modernising but Irish industry, relatively speaking, is not modernising. One of the reasons for this is that Irish industry has not had adequate incentives available to go abroad to buy technology, to buy licences or patents, to bring in trained people who can show us how to use the most modern technology and so on. In the industrial development legislation which I will be introducing, with the consent of the Oireachtas, I will be giving the IDA power to give companies grants not only to buy patents overseas but also to go overseas, to spend time there and the send staff overseas to learn how to use this technology.
I am confident that this scheme will lead to a very significant strengthening of the technology of Irish industry. I said in response to questions here today and on other occasions that, unless Irish industry can reduce their cost of production by an average of 3 per cent every year, one year after the other, they will lose the market share and lose jobs. The objective must be to reduce in real terms production costs by 3 per cent every year, even when they are making a profit. If a company is not succeeding they should ask themselves some very hard questions. They should reduce their costs by 3 per cent every year, because that on average over the product cycle is what is necessary if industry is to stay with their competition and maintain employment levels. I believe that must be the target of management in every industry in Ireland. One key way to bring down costs is to apply new technology. In my view this new system of grants will be very important.
There are other ways which costs can be reduced within the industry. I will mention two of them — absenteeism control and quality control. I have asked the Industrial Development Authority to obtain information from all firms with a staff of more than 50, and from all firms with a staff of less or more than 50 who are applying for an IDA grant, about their levels of absenteeism because if a company has a high absenteeism rate it is not well managed and the main responsibility for such a situation rests in the company itself. I acknowledge that improvements can be made in the tax and social welfare systems to assist management in reducing absenteeism, but not-withstanding these difficulties there are companies with absenteeism rates as low as 0.5 per cent while other companies have rates as high as 20 per cent and both operate in the same tax and social welfare environment. If some companies can get their absenteeism rate as low as the best, then all companies can do the same. This is primarily a matter for management. I believe that IDA and the other grant giving agencies should push Irish management hard to bring absenteeism levels down because absence from work adds to costs, and costs cost jobs. High levels of absenteeism are a direct contributor to loss of jobs.
I am asking the IDA and other agencies to ensure that companies to whom they are giving assistance have proper quality control procedures in operation. It is fine to have an ethos of quality, and we all should have that in any aspect of our life, but it is necessary in manufacturing not just to have an ethos but to have specific procedures written down and applied day in and day out by all staff and management to ensure that there is a minimum level of goods produced that cannot be sold. Lack of quality control in industry means that too much raw material is being turned into goods which at the final examination before they are sent to the supplier are rejected and cannot be sold. If 10 per cent of the goods produced cannot be sold, that means that the costs of production are 10 per cent higher than those of your competitor if he has no rejection rate. Of course, it is far worse if the goods are sold and found to be of deficient quality because industry then faces the prospect of either being sued for defective quality or losing the market share because of a bad reputation. Good management can do a great deal in industry to improve quality control. I will ensure that all State agencies will push management hard to perform better every year in these vital areas as far as costs are concerned in the years ahead.
I should like to refer again to the important job creation potential of the tourist industry. I opened my speech by referring to this and I hope I will be forgiven for returning to it without repeating anything I have said already. Access transport is a key feature in determining that people come to Ireland. We did extremely well last year and we expect to do very well this year in respect of American tourists coming to Ireland, although we are getting far less than we should be. Of those who go to the UK no more than one-tenth visit Ireland. We are doing well because of the strength of the dollar and because air fares across the Atlantic to Ireland are very competitive. In contrast, however, air fares to Ireland from Britain or from Continental Europe are not very competitive. One of the reasons for this is that there are insufficient package deals available for people coming to Ireland either from Britain or the Continent. I fully understand that Aer Lingus do not want to have their business fare, on which they make their bread and butter so to speak, diluted or reduced below what they believe they can obtain on the market from business users simply to facilitate tourists, because if that happened we would be taking money out of one pocket and putting it in another. We would be increasing the losses of Aer Lingus by putting money into tourism but the net position of the economy would be no better.
On the other hand, if we can develop specific packages which involve not only a low air fare but competitive accommodation and perhaps meals and entertainment vouchers for tourists in a variety of hotels, not necessarily one hotel as is the case in Mediterranean destinations, suitable to the type of holiday which people want to have here, that would help the tourist industry. If the providers of entertainment, food and hotels could get together with air carriers and offer composite packages which would only be of interest to tourists because of the other items provided in the package, we could convince the airlines that they should offer much lower priced air fares for those packages because that would be additional business over and above what they would be getting anyway and it would not dilute the price structure for basic business.
I will be meeting the confederation of the tourism industry in the near future. It is very important that people in the tourist industry realise that the Government can only do so much and it is up to the industry to show that they can respond to that. This is the best budget for tourism in many years. One way in which they can respond is by seeking to develop, in co-operation with one another, package tours of the kind I mentioned which would enable us to reduce access transport for tourists coming to Ireland without diluting the fare base of the national or other carriers for normal business traffic.
I should also like to acknowledge a point made by the chairman of the Committee on Small Business, Deputy Yates, that we must recognise that the tourist industry, comparatively speaking, is far more labour intensive than almost any other industry. One pound invested in tourism is likely to create more jobs if it is well spent than a pound invested in any other sector. That is why the Government have been extremely wise in putting such great emphasis on tourism in the budget.
