The Minister of State, Deputy E. Collins, was in possession.
Industrial Development Bill, 1985: Committee Stage (Resumed) and Final Stages.
Debate resumed on amendment No. 8:
In page 8, lines 31 to 35, to delete subsection (2), and substitute the following:
"(2) A directive under subsection (1) shall not apply to any individual industrial undertaking or to giving preference to one area over others in regard to the location of an industrial undertaking.".
—(Deputy Lyons.)
I had given the Deputy the information required, indicating that great care had been taken in the drafting of the section to ensure that adequate safeguards existed in regard to the use of the directives, that they were limited basically to policy issues, that they had to be laid before the House and were, therefore, open to scrutiny. Of course, directives shall not apply to any individual industrial undertaking. Finally, directives in regard to industrial location policy can only be made in the context of a general review of industrial policy.
Can I have the Minister's assurance that the situation that arose with regard to the Hyster plant in Limerick which we debated in May of last year can be adequately guarded against in this Bill? None of us wants to see a repetition of that debacle when there was a loss of 800 jobs because the Government would not agree with the conditions and proposals accepted by the IDA and the promoters. I want to ensure that adequate precautions are taken to ensure that that sort of thing does not recur because of the damage it has caused and could cause both at home and internationally in our efforts to encourage industrial development.
If grant aid over a certain limit is given to a project, then it must have the approval of the Government. The Government retain the right to approve, amend or reject such projects. The Government have the responsibility to take whatever decision is deemed necessary in the best interest of the country. It is seldom that a Government would not be anxious to have industrial projects established. It is also seldom that they would differ with what the IDA feel is appropriate. As regards the question mentioned by the Deputy, the Government in taking a responsible attitude felt that the package as proposed was not acceptable. They took the decision in the best interest of the country and with a view to securing the best deal possible. The Government exercised their rights under the various IDA Acts to make a decision on what was a major project.
Amendment, by leave, withdrawn.
Section 13 agreed to.
SECTION 14.
I move amendment No. 9:
In page 9, subsection (1) (b), line 2, after "Act" to insert "or any repealed enactment".
The amendment is necessary to put beyond doubt that the Minister with the consent of the Minister for Finance may make grants to the authority to enable them to fulfil their obligations and liabilities in respect of grant approvals and commitments given under the repealed enactments. Section 2 of the Bill defines "repealed enactment" as an enactment repealed by this Act as set out in Schedule 4. It is to make doubly sure that obligations and liabilities of the IDA under previous Acts will stand under this Act. It is a consolidating Bill and we are taking the opportunity of repealing some previous legislation. This amendment is simply to ensure that there is no ambiguity about the fact that liabilities and obligations entered into by the authority under previous legislation would be met by this Act.
Amendment agreed to.
I move amendment No. 10:
In page 9, subsection (4), line 13, to delete "taken as" and substitute "no greater than".
The purpose of this amendment is to set a maximum limit on the exposure of the authority in respect of loan guarantees in any foreign currency under section 24 — fixed assets; section 26— enterprise development; and section 27 — restructuring of the Bill. The affect of the amendment will be to limit the maximum extent of the authority's liability in respect of a loan guarantee in a foreign currency to the equivalent in Irish pounds at the time of the giving of the guarantee. In essence the new provision protects the IDA from any unfavourable exchange rate losses. At the same time it allows the authority to benefit from the strengthening of the Irish pound vis-á-vis a currency in which the loan is being nominated. It is a prudent international currency mechanism which protects the authority from adverse movements in currency rates.
It is proposed to substitute the words "taken as" by the words "no greater than". In the light of present activities on the foreign exchange and the uncertainty of the value of currency is that what prompted this change of wording? If so, how would it apply in years to come when international currency might be more stable than it is at the moment? If the answer to the first question is in the negative then the latter one does not apply.
It did not arise because of the recent realignment of the currencies within the EMS and the fact that the Bill was published before this arose. There are general currency movements every day. We have a mechanism in the Bill to ensure that we give out so many IR£. In doing so the expenditure commitment will not be diluted from the point of view of the Irish taxpayers. It is simply to ensure that we will not suffer currency exchange loss on the money we give out.
It seems extraordinary that the parlimentary draftsmen who prepared this Bill a short time ago found it necessary to make so many amendments and this one in particular. Was the restructuring of subsection (4) relevant to the timing? Otherwise, why was it necessary to make this change when it was not seen to be necessary when the Bill was being drafted a short time ago? To substitute the words "no greater than" for "taken as" might seem a very small change but why was that not done when the Bill was being drafted?
It is only a tightening up phrase. On reconsideration the draftsmen felt that the words "no greater than" are more precise and make it clear that Irish currency will be used and not other currencies.
Amendment agreed to.
Section 14 agreed to.
SECTION 15.
I move amendment No. 11:
In page 9, lines 15 to 17, to delete subsection (1) and substitute the following:—
"(1) The aggregate amount of grants made by the Authority and of payments made by it under sections 16 and 31 or the corresponding provisions of any repealed enactment, after the commencement of this section, shall not exceed the aggregate limit specified in section 14 (2).".
The Industrial Development Bill, 1985, repeals and re-enacts with amendments the industrial development legislation specified in Schedule 4 to this Bill. In understanding these repeals the authority will have outstanding obligations and commitments in respect of grant approvals or contracts entered into on foot of the repeal legislation. The authority have the legal power to fulfil such obligations and commitments but no provision is made in the Bill as drafted to include payments made by the authority in respect of the commitments made under a repealed enactment within the financial limits set in the IDA aggregate capital expenditure. The amendment set out above remedies this deficiency and provides for the inclusion of payments made on foot of repeal enactments within the aggregate limit on the IDA's capital expenditure. This is to make quite clear that whatever obligations have been entered into by the IDA under repeal statutes will be met under this statute.
Amendment agreed to.
I move amendment No. 12:
In page 9, subsection (2), line 24, to delete "subsection" and substitute "section".
Amendment agreed to.
Question proposed: "That section 15, as amended, stand part of the Bill."
Is this a new section?
There has always been an aggregate limit set to the amounts which the Authority can pay out under the various headings. It is not a new section. We have to control all State expenditure.
Question put and agreed to.
SECTION 16.
Question proposed: "That section 16 stand part of the Bill."
Is this a new section?
It is not. It is a continuation of the position as pertaining in previous Acts.
There is nothing new in that?
There is no new element or new philosophy enshrined in this section. Sorry, I may have misled the Deputy. I was referring to section 15. In section 16 there is nothing new. The provisions were included in the 1952, 1959, 1963 and the 1969 Acts. In considering the Bill the Deputy will see notes in the margin which may be a guide.
Could I ask the Minister to elaborate on the services and facilities which are mentioned on page 9?
The section consolidates disparate sections in earlier Acts. This is not a new provision. It means that where the IDA are providing a new factory, they are empowered to provide the services and facilities required such as water, sewerage, electricity, telephones, etc.
There is reference to an undertaking conforming to the criteria set out in subsections (3) and (4) of sections 21 and 25 (2). Is that not a new provision whereby certain criteria have to be met before grants are paid?
I take it it would be proper to say that it is important to relate any expenditure the Authority undertake to their overall philosophy. In other words, they could hardly build a factory and hand it over to a non-economic undertaking that does not fall within their remit. It is merely referring expenditure to sections 20, 21 and 25 which set out the criteria for grant aid. It must be within the ambit of the Authority in order to spend the money.
There is a certain amount of confusion in my mind in trying to follow what this legislation is proposing to do. My understanding is that there are certain provisions which had been previously consolidated, that there was nothing new in the provisions. Apparently, within the old sections it now appears there are new provisions being applied, which confuses the issue. The Minister's explanation is not very clear.
There is no new policy input into what is being done. We are merely relating the giving of grant aid and sections 21 and 25 back to expenditure which the Authority might undertake. The expenditure mentioned in section 16 must conform to the general philosophy of the grant aiding powers of the Authority.
Strictly speaking is it not a consolidation of the existing provisions?
That is correct.
This is very confusing.
Any consolidating Bill which tries to consolidate and at the same time make something simple must result in this type of inclusion. There is nothing in this section which has not already been, in practice, a necessity for the IDA to act on.
That is the part which worries me. This may well bring in some rigid restrictions in an area where they did not apply before and may well be detrimental, especially to the provision of industrial projects. I am speaking of projects in very isolated areas where you have the problem of attracting industry. What I fear in this legislation, overall, is that some of its provisions will be detrimental to the development of industrial projects in isolated areas where it is already difficult to establish industry. While the Bill is welcome, there are provisions which would be detrimental to industrial development especially in isolated rural areas such as those I represent.
I see the Deputy's point but perhaps it would be more appropriate to deal with it when we reach sections 21 and 25.
The difficulty is that the provision which was previously there in section 16 is now being watered down and there will be certain restrictions.
Obviously any expenditure which the IDA are involved in must conform to their statutory powers and these are being laid down in the Bill and the philosophy of expenditure which the Deputy referred to in section 21 and 25 will be a guided philosophy and we can discuss this matter when we reach those sections. But no matter what is in sections 21 and 25, any expenditure must conform to what the Authority are empowered to do. Otherwise we could end up with all sorts of situations which would be undesirable.
Question put and agreed to.
Sections 17 to 19, inclusive, agreed to.
SECTION 20.
Question proposed: "That section 20 stand part of the Bill."
Under this section the Authority have power to engage consultants and advisers. It is very necessary to take cognisance of this whole question of employing consultants. I would like to be assured that there will be some element of control in regard to the engagement of consultants to ensure that wastefulness of scarce resources is eliminated. Those of us on sub-committees of this House come across these matters very often. We are finding that consultancy charges are very heavy. I ask the Minister to ensure that expenditure on consultants is kept to a reasonable level in regard to any aspect of the IDA's activity.
I take the Deputy's point. It is not the wish of Government that any money would be wasted on consultancies. It is primarily a matter for the Authority and the Authority come before the Committee on Public Expenditure and can be examined. Obviously if the Minister felt that expenditures on consultancy services were out of order he would require an explanation. But the Authority are dealing with what can be, on occasions, very specialised projects and they have to be allowed leeway in regard to the engagement of consultants. I agree with the thrust of what the Deputy is saying. We would like to see expenditure on the consultancies being reasonable but we must accept that the Authority are dealing with a multiplicity of different industries all requiring very specialised knowledge and when the Authority need to engage consultants I think they have to be allowed to.
I am not finished with this aspect of it yet. It is not good enough for the Minister to indicate that when the public accounts committee and the appropriation accounts committee meet questions can be asked. It is because of my experience on those committees that I am raising this matter at this time. That is like locking the stable door after the horse has bolted. To be fore-warned is to be fore-armed. If the proper development and the proper accumulation of information and statistics by the IDA require the employment of consultants, then they should be employed. I am not saying that we ought not to employ them.
I am indicating that it has been the experience of committees of this House that fees charged by consultants and consultancies have been grossly out of proportion to the volume of work and their involvement.
I am glad the Minister accepts the thrust of my argument. We need to invest as much as we can in industrial development. Many State and semi-State bodies are closely associated with and working in conjunction with the IDA and if we have to go outside of all those to employ consultants, I wonder about the total costs of consultancies and reports. At the end of the day, are we getting value for money? I ask the Minister and the Authority to be prudent in the expenditure of taxpayers' money.
I fully concur with the Deputy. I am anxious that any expenditure incurred under all headings by the IDA would be prudent. This section is virtually identical to section 21 of the Industrial Development Act, 1969.
It is a different time. Nineteen hundred and sixty nine and 1986 are two different times.
I take the point, but we must realise that the IDA are an autonomous body. I understand that quite an amount of consultancy fees go to the IIRS in relation to environmental aspects of various projects and I am not aware of any wasteful expenditure incurred by the Authority. If the Deputy has any specific problem in this regard I will be happy to discuss the matter with him privately and, of course, when we come to Estimates each year we examine the block grant in relation to the administrative expenses of the IDA. The employment of consultants was reduced by 25 per cent last year. It will go up and down because of the nature of the projects coming in. I understand the need for pruning and we have due regard to it, but the Authority must be allowed a certain independence in this regard.
It surprises me that we have to make provision in the Bill for consultants. The IDA themselves are by nature a consultancy agency because they vet industrial projects. It amazes me, in particular, that they have to go outside the country for consultants. Can the Minister tell us the cost in 1985 of the consultants employed, the nature of the work of the consultancies, what assessments did they carry out and how many of those consultants were from overseas? Most industrial development here has been imported. Some large projects have come in, mainly of a computerised type.
I do not have the breakdown the Deputy is seeking but I will be happy to give him all the non-confidential information I can. That may be the most appropriate way. If he writes to me I will give him as much information as I can, taking into consideration that some of the information is confidential.
We need a better explanation of the section. That is why I asked those questions.
It is an enabling section to allow the Authority to engage consultants. It is only a continuing provision.
By their nature, the IDA are a consultancy body. Why do they have to employ consultants?
They are not a consultancy body but a grant aiding agency. Quite a number of matters could arise in regard to any project or range of products which might involve environmental impact. Studies might be necessary because of the nature of the projects. For instance, consultants might be required in regard to the special components of projects and in regard to sectoral strategy, and in this respect outside consultants might be needed so that we could not be accused of going in any particular direction. The IDA might have to engage consultants overseas so that certain opinions might be got to bolster the IDA's knowledge. The Deputy seems to be emphasising the monstrosity of consultants, but it is wise for the Authority to engage consultants on many occasions.
We do not dispute the need for consultants because it is essential that the best possible advice should be available. However, the cost to the taxpayers is sometimes substantial and it is extraordinary that the Minister cannot give us the figures for last year.
The global figure is available in the IDA annual report but, as I said, I cannot break it down.
Can the Minister give us a breakdown between local and foreign experts?
The figure for 1983 was £2,286,235 and in 1984 it was £1.722 million, a reduction of 25 per cent. I do not have a breakdown, but as far as possible I am prepared to get the details, taking into account that there are certain confidential matters.
We are talking about a substantial sum of money, £2 million, and there has been some vocal criticism in relation to the work of some of the consultants, their ability, competence and expertise. I find it strange that in face of this anxiety the Minister has not suggested that he will amend the section, as he did in relation to other sections, to ensure that consultants engaged on any projects will be competent to do the work, particularly bearing in mind the widespread complaints in regard to this matter?
By and large, it is a matter for the IDA. We look at the expenditure on consultants every year and we note the direction in which it is going. I agree we should not be putting unnecesary expense on them in regard to their essential work.
Question put and agreed to.
SECTION 21.
Dublin North-West): Amendments Nos. 13 and 14 are consequential and may be taken together.
I move amendment No. 13:
In page 10, subsection (2), line 39, to delete "this section" and substitute "subsection (1)".
The first amendment is merely of a drafting nature, necessitated by the proposal to allow the Authority to make grants in respect of new employment created in small industrial undertakings as defined from time to time by the Minister. Its effect is to exclude the employment grants in respect of small industry from the percentage limits specified in subsection (2).
The second amendment is an important one which I am sure will be welcomed. It will allow the Authority to make an employment grant in respect of additional persons employed in small industrial undertakings as defined from time to time by the Minister. This is a major amendment to the Bill. Quite often small undertakings do not qualify for substantial grants in relation to fixed assets. This is a mechanism which we are using to help to top up the grants to which small industries will be entitled.
Small industry undertakings, as the House is aware, are defined at present as those which employ up to 50 people and with fixed assets of up to £500,000. The making of a grant by the Authority under this subsection shall be subject to such financial limits and other terms and conditions as may be specified from time to time in a scheme governing the making of such grants sanctioned by the Minister with the concurrence of the Minister for Finance. The financial limit on such grants will be set by reference to the 13,000 ECUs ceiling on employment grants and the principles of co-ordination of regional aid systems of the EC.
The intention is that the rate of grant under this subsection would be differentiated to take account of the level of sophistication of the undertaking and the skill content in the employment being created. The level of grant for a simple assembly type operation would be lower than that which would be made available for an advanced high technology operation. The appropriate levels of grants will be set in consultation with the IDA and the Department of Finance. It is the intention that such grants would be made to an industrial undertaking only in lieu of making a capital grant under section 21 (1) to that undertaking in respect of fixed assets whether alone or with one or more of the other capital incentives available under sections 22, 23, 24 and 32.
Grants given under this subsection will not be reckonable for the purposes of percentage limits on capital grants under sections 21, 22 and 33 of this Bill. They will, however, be reckonable for the purposes of the financial limits set in section 34 which provide that the Authority must first receive the permission of the Government where they propose to make a grant exceeding in the aggregate £2½ million.
As this scheme presents a significant alternative to the range of State aids to small industry, it will be necessary to seek prior approval of the Commission of the European Community prior to its implementation. Formal notification to the Commission under Article 93/3 of the Treaty of Rome is at present being prepared in my Department. We are confident that the Commission will raise no objection to the proposal. This again is an innovative aspect of the Bill in that we are taking into account the particular importance of small industries. We are taking as flexible a stand as possible in relation to grant aid. Quite often the employment type of grant is much more beneficial to small industrial undertakings than a capital grant. I am sure it will be widely welcomed and widely availed of throughout industry.
The changes proposed by the Minister are certainly welcome, as they extend the scope as he outlined. I am not too sure about the reference in the amendment to page 10, subsection (2), line 39, to delete that section and substitute subsection (1) of section 21.
Subsection (2) at the bottom of page 10 of the Bill deals with the percentages of grants in designated areas and subsection (1) of the same section talks about making a grant under such terms and conditions as is thought proper. Am I to take it from that that we are now removing from the legislation the percentages of 60 per cent and 45 per cent which heretofore applied? If we are, what is the reasoning behind this and will the rates of grants in future be decided without the criteria of those two percentages?
On Committee Stage, as everybody will be aware, every word, line and figure is so important and so relevant. That is why I am asking for an explanation of the proposal in amendment No. 13 relating to section 21. Then there is a reference to page 11, between lines 28 and 29 to insert what is in amendment No. 14.
I should like to get a view on the parts of section 21(3) (a), (b), (c) and (d) on page 11, in particular, with reference to the service industry.
I do not want to interrupt, but it might make things easier for us if we addressed ourselves to the amendments first. However, I am quite happy to fall in with what is proposed.
Acting Chairman
Could you deal with the amendments first, please?
That is no problem. We can deal with section 21 at any stage before we finally agree to it and that is fair enough. I was proceeding through the section.
I was afraid that the Chair might pull me up if I replied.
We shall not disagree on something as fundamental and reasonable as taking the amendments first. I have asked a question about amendment No. 14. The Minister indicated that amendment No. 15 would give greater assistance to small industrial undertakings. If that is the case, then I wholeheartedly agree with it. However, consultation is to be carried out with such bodies as maybe specified by the Minister from time to time. Does this mean that the IDA will be deciding or will it be consultants and staff who will be making these decisions and not the political head of the Department?
I gather that these amendments are to broaden the scope of the Bill to the benefit of the small industries sector and as an encouragement for the employment of additional people. That is very welcome because it is a section which could contribute handsomely in relative terms to small businesses. I have no difficulty in agreeing to the inclusion of the amendment as an addendum.
I have to use the technical phrase "amendment" because it is a new subsection. The Minister shall have the power to define from time to time what is a small industry. The present level is up to 50 employees and fixed assets worth £500,000. That definition needs to be amended from time to time, not necessarily radically amended but to take into account practices and inflation. We want to be as helpful as possible to small industries by giving a genuine and generous definition so that they can benefit to the greatest possible extent from legislation. The Minister would consult and discuss the matter with the IDA but he would not necessarily be advised by consultancies on this matter. The Minister himself will determine it.
The Deputy is quite right in saying that this is an innovative mechanism to help small industries gain the maximum grants possible, not through the usual route of bricks, mortar and machinery but through employment grants. This will be especially suitable to new industries which have a high technological involvement and a highly qualified staff. This mechanism will be very attractive to such industries and I am quite confident that small industries will be very aware of it and will avail of it.
The end of amendment No. 14 states:
(c) A grant under this subsection shall not be reckoned in the calculation of the maximum grants payable to the undertaking concerned for the purposes of subsection (2) and section 33.".
Subsection (2) is being eliminated in accordance with amendment No. 13. Nevertheless we are referring to it in amendment No. 14. Is it intended that this element of amendment No. 14 in section 21 is to be in part or in total a replacement for what we deleted in section 21(2)?
Paragraph (c) removes the 45 per cent and 60 per cent levels because it is not possible to calculate employment grants in the same way as grants for buildings or machinery. We are removing those criteria. Similarly it would not be possible to define how much employment grant one would give as between one industry and another. We have kept the most flexible method possible. A question may arise as to the differential which exists in designated and non-designated areas. This is a matter which we will have to consider. Obviously we would wish to maintain a balance. If a small industry were applying for a grant under this section we would have to balance what we could give them, depending on their location. Quite often in high technology industries the question of location is not paramount. Other criteria are often more important, such as proximity of high-tech universities or institutes, communications and proximity to airports. We had to remove the maximum grant percentage because it is not feasible to apply it to employment grants. There is a different way of calculating them and it would not fall easily within the percentages we employ for fixed assets and buildings.
Initially I asked about the effect of amendment No. 13 which deals with the Authority's grant-making powers. I accept that amendment No. 14 deals with a grant for the employment of people. I am querying the effect of amendment No. 13 on subsection (2).
Although the employment grant cannot be calculated on the basis of 45 per cent or 60 per cent of the eligible fixed assets, we have stated that in respect of grants in relation to eligible fixed assets the 45 per cent and 60 per cent will be retained. It will not be retained in respect of the new subsection which we are introducing. We are retaining the percentage criteria for all eligible fixed assets, buildings and machinery, but we cannot use those criteria for the employment grant because of its nature. That is the import of the amendment.
I accept that, but when this goes for final printing the percentage reference is 60 and 45. If I am reading this correctly what we are being asked to do in amendment No. 13 will disappear when this documentation is implemented.
Subsection (2) will read as follows:
The amount of a grant under subsection (1)...
That refers back to fixed assets.
So we are only deleting one line.
We are only specifically referring in subsection (2) to the percentage of grant allowable under subsection (1) of the section, and we are applying different criteria in respect of employment grants. The amended subsection (2) refers back to the bricks and mortar, so to speak. Those grants are 45 per cent and 60 per cent. It is defined as relating to those grants, but we are not using those criteria when it comes to the employment grants, because that is not practicable.
I accept that so long as it is clearly laid down in those terms. Amendment No. 14, paragraph (c) provides:
A grant under this subsection shall not be reckoned in the calculation of the maximum grants payable to the undertaking concerned for the purposes of subsection (2) and section 33.
Section 33 (1) refers back to section 22 (2) which we have just amended to ensure that we are talking about maximum grant percentages. We are saying that it shall not be reckoned in the calculation in that manner. We are simply ensuring that where we are giving an employment grant it shall not be reckoned as 45 per cent and 60 per cent, but in a different manner.
I accept what the Minister says. People studying this Bill in future will have to chase back and forward through the sections as we have been doing here, and God help any industrialist who has not a consultant employed to examine the bricks and mortar of this Bill, not to speak of the bricks and mortar of the building. It is a pity this is not easily examined by a layman.
I note the Deputy's comment. If the Deputy reads section 21 (1) and (2) and takes into account the new subsection (5) and related section 33, it will be quite clear that the criteria used for the decision making process in reference to an employment grant are different from those for eligible fixed assets and buildings. This, being a consolidation Bill, will help an industrialist, as prior to this Bill an industrialist would have had to go through five Bills to find out his entitlements. We are moving towards simplicity although in doing so it may look complicated.
It is only half as complicated as it was. That is some progress.
Is amendment No. 13 agreed?
Amendment agreed to.
I move amendment No. 14:
In page 11, between lines 28 and 29, to insert the following new subsection:
"(5) (a) The Authority may, in the case of small industrial undertakings as defined from time to time by the Minister, make a grant on such terms and conditions as it thinks proper in respect of any additional person employed in such an undertaking.
(b) A grant under this subsection shall be subject to such financial limits and such other terms and conditions as may from time to time be specified in a scheme governing the making of such grants sanctioned by the Minister with the concurrence of the Minister for Finance.
(c) A grant under this subsection shall not be reckoned in the calculation of the maximum grants payable to the undertaking concerned for the purposes of subsection (2) and section 33.".
Amendment agreed to.
Question proposed: "That section 21, as amended, stand part of the Bill."
Is the section agreed?
No. Some subsections of this section require some attention. I will deal with subsection (3) (a), (b), (c) and (d) which reads:
This section applies to an industrial undertaking in respect of which the Authority is satisfied that it—
(a) Will produce products for sale primarily on world markets, in particular those products which will result in the development or utilisation of local materials, agricultural products or other natural resources; or We are all familiar with production for export only. Some elements of manufacturing industry find that the stipulation "for export only" does not always meet with their consensus of approval in the best interests of the market place for some of the products. The subsection continues:
(b) will produce products of an advanced technological nature for supply to internationally trading or skilled sub-supply firms within the State; or
(c) will produce for sectors of the Irish market which are subject to international competition; or
(d) is a service industry as specified by the Minister by order under section 3.
We are all well aware of various elements of service industries that could do with grant aiding from the IDA to survive and to maintain and increase employment. The Minister may by order provide that any undertaking engaged in the provision of a service specified in the order shall be a service industry for the purposes of this Act. I would encourage the broadening of whatever standards or criteria are being operated by the IDA in their decision that particular service industries are grant aided while others are not.
I am sure I am not alone in saying that many more elements of the service industry should be in the position of qualifying for grant aid from the IDA but too often the Authority are unable to approve of certain service industries in respect of grant aid. This constraint may stem from the provisions of the Acts relating to the IDA. However, I should like to hear the Minister's view on the possibility of broadening the scope of the criteria in respect of including more elements of the service industry. This might not relate necessarily to the service industries on the home market but very often nowadays they are competing with foreign products. In any area in which that is happening the IDA should give every assistance to the native manufacturer, be he large or small. Many products from low cost countries, for instance, are to be found on our markets. This creates problems for our manufacturers in terms of competition. Very often the foreign company are in a more advantageous position in terms of cost effectiveness and so on. In that way there is an unfair advantage so far as the Irish producer is concerned.
I trust the Bill will succeed in its many aspects but that in particular it will succeed in terms of this section. The criterion at (d) is the one that must be looked at. It provides that the Minister by order may provide that the provision of any service specified in the order shall be a service industry for the purposes of this legislation. We have been restrictive to a large extent in aiding aspects of our service industry and that is the kernel of the point I am making.
The international services industry order of 1981 specifies the areas that are to be included for the purpose of grant aid by the IDA. I have referred to those already but perhaps I should mention them again. They include data processing services, software development services, technical and consultant services, commercial laboratory services, administrative headquarters services, research and development services, media recording services, training services, publishing services, national financial services and health care services. These are all services that are traded internationally.
The scheme has been in operation for the past five years only but I should be happy to have it reviewed so as to determine whether it has been successful and to enable us to decide whether it should be expanded. It would not be my intention to include non-trading services in this Bill. There are services for which there is a finite market. There is no competition from abroad in relation to them so there is no reason for devoting scarce resources to that area.
This section represents the kernel of the IDA's grant-giving powers in respect of capital grants, grants towards the cost of fixed assets and for industries undertaken on such terms and conditions as the Authority consider proper. In broad measure there was agreement in the White Paper on Industrial Policy with the thrust of the Telesis report which recommended greater selectivity in the use of State incentives for industry and also for the concentration of key cost disadvantages in logistics, process development, market exporting, linkages and skills. The selectivity criteria are designed to assist the achievement of these objectives. That new criteria overlaps with the old of necessity in respect of financial assistance, the commercial viability of firms, the provision of employment, the use of natural resources and technological concepts. The question of research and development is dealt with in section 29. It is a separate issue that we can discuss later.
Our resources are limited so we must decide how best to concentrate the resources we have so as to ensure not only the best possible broad industrial development but that our efforts are concentrated on the broad area that will need industrial incentives in order to expand and prosper. We must use our resources to attack those industries that are involved in international trading. This is why we have set out new broad criteria in the matter of empowering the Authority to make grants. That is not an unrealistic approach. It is the proper line for a Government to take. Periodically a Government should review areas in which grants are expended, define such areas and narrow them down so as to ensure the best possible expansion of industry and to ensure also that the grant-aided industries are moving in the right direction. We must ensure, too, that we attract those industries involved in specialised areas. Allied to that is the development of our natural resources. What we have here is a mélange of criteria which meet the requirements of our natural resources industries and also the product and services areas that have the best potential for development.
I do not need to spell that out. We have defined and highlighted the areas that we want to concentrate our scarce natural resources on. The direction set down in the White Paper, which took into account the contents of the Telesis report, established the broad area of consensus in relation to the direction of our grant aid policy. That is included in section 21. There is a good balance between natural resources, services and internationally traded goods. There is no need to expand it further at this stage. I take on board what the Deputy says. Perhaps a review of the criteria could be undertaken and included in the three yearly review on industrial policy.
Would the Minister not agree that quite an amount of studies and reports have indicated the success of the service industry in other countries as a means of redressing the economic situation pertaining to those countries? Are we to become so entrenched that we do not propose to move with the times? Would it not be reasonable to extend the support that the IDA should be giving to the service industry? We know that all sorts of reasons are given when one applies to the IDA for assistance in the service industry. The resources which the Minister speaks about could easily be channelled to extending support for the service industry. We have a severe restriction of not giving grant aid to any concern or person who wishes to start up a project if they do not buy a brand new machine. That aspect of support for the service industry as well as the manufacturing industry should be looked at.
The entire section deals with the authority's general grant-making powers. From experience in my constituency and elsewhere I find that the restriction on projects of only grant aiding new machinery should be looked at with a view to encouraging the small manufacturing industry who, by their contribution, will surely make a return to this economy tenfold and maybe more. I asked the Minister to give more assistance to and to encourage the service industry. I have no doubt that the IDA feel constrained. They say that they are obliged by regulations and by legislation to grant aid only new machinery. By doing this we could be killing off enthusiasm and the desire and the will of people to do something for themselves and to help our economy. I ask the Minister to give serious consideration to those aspects of section 21. Subsection (4) deals with development of the undertaking, investment, equity base and a suitable company development plan. All these things are necessary. We should also look at the decision to back a technically risky project which depends as much on the evaluation of the individual as on the project. Recently I went to see a project where the evaluation of the individual was not taken into account because they had acquired a machine which was not new. Because the firm did not prepare a projected return over a five year period it seemed to the people concerned that the IDA were more of a hindrance than a help. If that attitude is widespread to any degree, the Minister should avail of the Industrial Development Bill to eradicate it. We should give the IDA freedom in at least two of the elements of section 21, the service industries and the grant aiding of previously used machinery. By doing this, we would go a long way in encouraging more people to get up and go and do something for themselves and the economy of the country. I would like if the Minister would comment on those two aspects of section 21.
The Deputy has raised a number of issues. It is not my experience that the IDA have not been sympathetic to the entrepreneur, the man who would appear to be the driving force in industry.
They are restricting.
I fully accept that. I am not surprised to hear on occasion that the IDA felt that the project as a whole, despite the calibre of the entrepreneur, did not satisfy some of the other criteria in subsection (4) of the Bill. The IDA are there to encourage people to become involved in industry and on many occasions I have seen them back with money the entrepreneur.
On the other side of the coin, I must say that I have responsibility for the sectoral industry division in the Department of Industry and Commerce where we have the industries in trouble. Time and again, I have found that although the entrepreneur may be first class, other factors come into play which if they had been addressed at an earlier stage would have meant that the company would have a bright future. In particular, I would be concerned that new projects would be soundly financed. That is one of the major problems I have found in relation to companies in trouble.
Quite often the company in trouble has not the right market penetration technique, advice or management. This is, perhaps, because the entrepreneur is too strong and is not prepared to delegate. There is a general problem in relation to the market itself. Again, a company gets into trouble because it has not got sufficient finance. I am merely giving some examples of the opposite side of the coin that the Deputy is endeavouring simply to show that there is a need to balance up the support for an entrepreneur by examing the other essential elements in any package that make up an economic enterprise. The criteria set out in subsection (4) are sensible, they are not overbearing and do not wrap strings or red tape around the project. I do not believe that subsection (4) does that. I think that subsection (4) tries not to put up red tape but lays down only five basic elementary criteria which are needed if one looks at a project as a whole.
In relation to international services, these have been rather successful.
The Minister has no problems there.
The moneys involved have been quite substantial. The IDA's grant commitment approved in 1984 was in the order of £8.7 million. I must reiterate that I would be happy to have a review of the scope of the international services programme. I do not feel inclined towards expanding it to the non traded services. That would be unnecessary and would not meet with the criteria of using our scarce resources to the best advantage.
In relation to secondhand machinery, this is not as ticklish a problem as the Deputy suggested. Of course, there is a problem in relation to the devaluation of any machinery and certainly there is great difficulty in the devaluation of secondhand machinery. The Deputy confined himself correctly to small industries where the bright entrepreneurs want to start up and get into the market with secondhand machinery. They test and penetrate the market with a view to modernising and upgrading their machinery. They take on new lines which require new machinery. We have had a good discussion on amendment No. 14 to section 21. We are going the route the Deputy is looking for. Although we have not specified it in the amendment we are going to allow an employment grant mechanism for small industries which will allow them avail of the use of second hand machinery.
What did the Minister say?
What we did say was that small industries may have employment grants but if they receive employment grants they do not have a percentage of grants for eligible fixed assets. If they go on the employment grants route, they may then purchase secondhand machinery and achieve exactly what the Deputy is asking for, which is to allow them to buy secondhand machinery while at the same time receiving substantial employment grants. In other words, grant aid is being directed where it should be, which is into specialised employment and the employment of people to work those grants. We are achieving exactly what the Deputy is looking for. Indeed, we are aware that there have been on many occasions representations on the purchase of secondhand machinery. We have allowed for that by giving grants for employment.
I am more than pleased to hear the Minister write into the record of this House the subject matter to which I directed some attention. Not alone have I experience of people looking for grant aid for previously occupied plant and machinery, but the IDA, the Department and the Minister are also aware of this problem, and this has been the position for many years. I know a man who ten or 15 years ago, imported a secondhand machine from Italy for £40,000, but the IDA were precluded from assisting him because of regulations passed by this House. Because of his drive and initiative this man now has a business in a village with a turnover of £10 million. Yet ten or 15 years ago the IDA could not advance him £1 because he had imported a secondhand machine from Italy costing £40,000. It appears that it has taken all that time to make the people in charge realise the position, but now plant, machinery and equipment previously used can be grant aided. This is a step in the right direction.
We are not grant aiding secondhand machinery; we are giving employment grants.
The Minister has deflated my argument.
I wish to make these matters clear.
If, in this Bill, we continue to apply the same strictures which precluded the IDA from grant aiding individuals or groups who wished to purchase previously occupied plant and machinery to set up a business, then we are neglecting one of the most serious aspects of encouraging the development of small industries, because the people who generally buy secondhand machinery are small entrepreneurs. From his intervention it appears that the Minister does not wish me to be as direct as I have been, but he indicated that by using different words we may be able to include in the Bill a provision which would cover the point I have made. A rose by any other name would smell as sweet. If there is likely to be a process by which the objective I have been stressing can be achieved, I would welcome it.
I would not like one of my constituents to come to me in a few months time and ask why we passed industrial development legislation which did not include a provision allowing the IDA to give a grant for secondhand machinery or previously occupied plant to help the small entrepreneur to set up a business. I do not want to hear anyone say that the IDA cannot help a small businessman to purchase previously occupied plant or secondhand machinery. I have heard that too often, and I am sure the Minister and other Members of this House have too. The Minister has shown an understanding of the point I am making and I have no doubt that he is aware of this anomaly in the IDA structure. I want an assurance from him that those in the IDA who will be putting this legislation into effect, whether the wording is as I suggested or otherwise, will remove the impediment which prevents the IDA from assisting financially any individual or group who may wish to set up a manufacturing or servicing industry with the purchase of machinery which is other than new. That is what we are talking about.
I can put the Deputy's mind at rest. Under section 21, if the grant scheme being availed of is the employment grant scheme for small industry, then it is irrelevant whether it is new or secondhand machinery. It was with that in mind that the new employment grant was included in this Bill. Where an entrepreneur is using the employment grant scheme to get grants, he may use secondhand machinery. That will be welcomed by all. Is that clear?
How many people must be employed before the businessman qualifies for the employment grant scheme? I remember some years ago that it was necessary to employ five people if one wanted a business telephone. But one cannot employ five people until the business has started and one cannot start a business without a telephone. In the light of that experience, must there be a certain number of employees before the businessman can qualify under the employment grant scheme?
The new subsection (5) (a) says: "The Authority may, in the case of small industrial undertakings..." That is defined as industries which have a maximum of 50 employees and net assets of £500,000. That is subject to ministerial amendment. It is based on the numbers employed and that is why it is called an employment grant. If only a few are employed them obviously the grant will not be great, but the more are employed up to 50 the greater will be the grant. That is how it is designed. Within the scheme once you are operating under the employment grant scheme you may use secondhand equipment.
On the number of employees, did the Minister say over 50?
Up to 50.
Is that from zero to 50?
Yes. Small industries are inclined——
If you are talking about 50 employees, that is no small industry nowadays.
Therefore, the mechanism should be all the more welcome. The present criteria for small industries are employment up to 50 and assets of £0.5 million maximum. If you fall within those criteria you can avail of the employment grant scheme — the more you employ the more money you get and you may use secondhand equipment.
Is it agreed that section 21, as amended, stand part of the Bill?
I am not satisfied that we are going far enough even on the figures given by the Minister. I refrained from elaborating on what I am talking about in case for any reason I would deter or deflate anybody — although I doubt if I would — intending to set up a small plant or small industry who after we enact this legislation will still find himself outside the scope of assistance from the IDA. That worries me. I want to place that on record before I agree with section 21. I have that feeling and the Minister has not convinced me that I should not have that feeling.
What aspect of the section is the Deputy talking about? Is he talking about the employment grant?
I am talking about the employment grant and, inter alia, previously used machinery.
I have given the Deputy an assurance——
I know the Minister has.
——that small industries can avail of secondhand machinery if they are availing of the employment grant. I cannot be clearer than that.
Then the Minister came on with the numbers and the value of the assets and various other things. We will leave it in case by any further discussion we deter anybody. I will come back on this in a short while.
Employment of 50 is good employment for a small industry.
If the Minister wants to go into it along those lines I am quite prepared to stay here all night talking about it. I agree that any concern that employs 50 nowadays is more than a small industry. Practically all firms who employ 50 or over 50 and up to 500 have closed down, have gone into liquidation, in recent years. I see announcements about the same jobs being made four and five times. I hear them announced on radio and television nationally. A few days afterwards they are announced locally and our quote of 98 for the south-west was announced some months ago. Three times the announcement was made about 98 jobs.
Deputy, you are making the fourth announcement now.
I am, and there will be a fair few announcements yet before the 98 jobs have 98 people in them. It is regrettable that we are getting into this sort of thing on a long day here, but I suspect that the Minister referred cynically to the 50 employees I mentioned as being in the category of medium to large industry nowadays. Of course, they are. I was talking in terms of one or two employees and up to five or ten, and then the Minister comes in and talks about 50.
Up to 50.
That is why I asked if it was from zero to 50.
Yes.
I agree that we want to help all strata of industry, but if I thought that the Minister was being in any way cynical — I doubt if he was; but I got that feeling and, if I am wrong, I accept I am wrong — and if somebody wants to take me on along those lines, I am quite prepared for it.
I was not being cynical. I was anxious to clarify exactly what is in the Bill because it will be read outside the House. I was saying that at present a small industry is determined by the Minister as one which has up to 50 employees and/or £0.5 million assets. I consider that those enterpreneurs who are starting new businesses and who avail of the employment grant mechanism are looking on it very favourably because it will allow them to get an employment grant for the numbers they employ and to buy secondhand machinery. I was trying to be concise as to the parameters of the scheme.
I accept what the Minister says, but when I mentioned the same words as he has used now at the end of his contribution he seemed to pull me up and tell me that I was using the wrong words. I know the IDA are very sympathetic and give people every consideration when they go to them for assistance and so on. Everybody knows that. But the feeling abroad among many people is that the IDA would assist people if they could. We must eliminate that attitude wherever it exists because only 1 per cent of the total number of inquiries is 1 per cent too many. This Bill will have to be an instrument that the IDA can use to eradicate any feeling abroad among people that the IDA will listen to you, they will do what they can, but that they are restricted or confined by regulations or whatever and it is not their fault. We have heard that very often. There is no point in buying our heads in the sand about it. We have heard that from constituents, from people who have ideas and proposals and initiative. I am well aware when the Minister says that we must have a financial structure that a financial structure is essential. It is a big element of any proposal many of which are listed there and I threw in another about the evaluation of the individual in a project. I hope that we are not overreacting to the closures of many grant-aided firms where jobs are lost and the close down is total. In any updating of the legislation or regulations we must take cognisance of the fact that Fóir Teoranta had to be called in and that the IDA grand-aided many elements of industry which were failures, but it is better to have tried and failed than not to have tried at all. In the light of some bad experience in the industrial world of grant-aided firms closing and job losses, naturaly we will have to be cautions in spending taxpayers' money by making sure that all the criteria are met: This can be done if the IDA stay within the regulations they are working with and, in the light of past experiences, avoid situations where projects cease to operate and jobs are lost. Past experience must be taken into account, but I do not think we should over-react. Let this Bill give the IDA much more freedom to pursue what we want them to do in every way they can, to broaden the industrial base of the country and strengthen that which exists. If we do not legislate correctly, it is our fault. We have this opportunity after at least five years of examining the situation. We should not miss this opportunity. The whole purpose of this Bill is to give the IDA a structure and a format to revitalise industry and industrial development. That is what it is all about and that is what we have to aim at. If there are things which need attention this is our last opportunity to look at them.
I fully accept what the Deputy says. The amendment in relation to employment goes quite a long way towards solving one of the major problems which all Deputies have come across when meeting industrialists. I feel that the criteria set down in section 4 are not onerous. There will always be a few disappointed people whose amibition may have been thwarted. On the other hand, it is lucky that one John de Lorean was not accepted as one of our new entrepreneurs. We were lucky to escape that. It is difficult to know when to say no and when to say yes. We were lucky. But, of course, we have been unlucky on occasion. By and large the Authority is receptive rather than trying to put barriers up for entrepreneurs.
I am very tempted now to give my point of view of the project the Minister has just mentioned. There are a lot of claims and counter claims made about that one even today. Believe it or not, I looked up the Official Report of May 1985 to get some information on the project. But I will desist. I will find another opportunity to talk about de Lorean and that project and the fellows who were fired over it too.
Question put and agreed to.
Section 22 agreed to.
SECTION 23.
Question proposed: "That section 23 stand part of the Bill."
Is there anything new in this section? There is no indication in the column that there is anything new or partially new. Is it just the 1969 Act, and how does it operate in relation to the deduction of interest?
It replaces section 36 of the Industrial Development Act, 1969. The amendment made previously to that Act basically reflects the selectivity criteria that we have adopted in section 21. That is really the only difference. We are relating it to the fact that the grant itself must be in conformity with section 21. There is no other basic amendment to what is in section 23.
Would the Minister elaborate? The section provides that the Authority can make a grant on such terms and conditions as it thinks proper towards a reduction of the interest payable on a loan raised to provide fixed assets and so on. Is there any requirement as to from whom the loan is raised? Does that really matter?
That is primarily a matter for the promoter. The IDA, in making a grant in relation to the interest paid, is using Irish money and therefore the grant made would be expressed in Irish money and may not exceed 60 per cent or 45 per cent of whatever grant falls due to be paid. Primarily what is of interest to the Authority is that proof of the loan exists and the loan is actually drawn down. Otherwise they could not pay the interest subsidy.
When I ask from whom the loan is raised I am wondering is it from the commercial banks or the ICC or the ACC or does that come into it at all? I have a doubt about elements of that.
The main proof that the Authority would require would be that the loan exists and there is proof that the loan exists and proof that the loan is drawn down. Otherwise they could not actually pay an interest grant. The proof that the loan exists and has been drawn down is the most relevant aspect of it.
Does that mean that the IDA would have no function until after the negotiations had been concluded between an industrialist and a commercial lending agency? Will the IDA have no function in the securing of the loan but just come in to grant aid for payment of the interest without having a prior involvement? Could we have any indication about whether there is a criterion or standardised format for the involvement of the IDA in the paying of interest on loans and have they any input into the raising of that loan? Would it be restrictive in any way if the IDA had to be involved in the negotiations for securing a loan? Is there any information on it apart from what is there?
First, this mechanism of granting aid for interest payments usually forms part of an overall package put by a promoter in respect of a project and it may suit the promoter to have part of a package of grant aid paid by way of the grants towards interest payments. It is not the Authority's remit, nor does it have power, nor should it have power, to negotiate or be party to negotiations in relation to the financing of a project.
It is important that the promoter comes with his package and is paid the grants on proof of the existence of machinery or buildings or, in this case, proof of the existence of a grant which has been drawn down. It would complicate the promoter's position and that of the Authority if they were involved in the often complicated aspects of the promoter's financial position. Quite often, because the promoter may have other interests, he may be put off if there is interference by the Authority in relation to his financial package as he may not want the Authority to know about it.
Question put and agreed to.
SECTION 24.
Question proposed: "That section 24 stand part of the Bill."
This section deals with guaranteeing loans and paying the interest on the loan.
This section replaces section 37 of the Industrial Development Act, 1969, as amended by section 3 of the Industrial Development (No. 2) Act, 1975. There have been some changes, for example, in relation to loan guarantees to the new selectivity grant criteria, which apply to the interest grants also. A limit of 80 per cent of a loan is being introduced as the amount which may be guaranteed by the Authority in respect of fixed assets and not 100 per cent as heretofore. The capital value of a loan guarantee under the section will be reckoned in the calculation of the maximum amount of grants under section 33 as a percentage grant, which is normal. The other change is that it is expressed in IR£ which protects the IDA from adverse currency fluctuations. These changes are rational and sound.
Subsection (5) says that the Authority shall not without the prior permission of the Government, give in respect of a particular industrial undertaking a guarantee under this section where the amount of the principal of any money guaranteed exceeds £750,000. Is the Minister satisfied with that figure? The figure in relation to Hyster was £1 million but, according to this section, approval must be sought for amounts over £750,000. Are we giving the IDA freedom to operate and yet putting a limit on the figure? I accept that there must be a ceiling on grant aiding a particular item but is the figure of £750,000 the right ceiling? We expect this Bill to be in operation for many years and, because of that, this figure is a little on the low side.
There is no ulterior motive in retaining the figure of £750,000. In fact, I understand that the Authority expressed themselves satisfied with this figure.
Who am I to argue with the Authority?
Well, we all argue with the Authority on occasions but one should remember that the guaranteeing of loans is only part of a much larger package, the major part of which is grant aid for eligible fixed assets such as land, buildings and machinery.
Question put and agreed to.
SECTION 25.
Question proposed: "That section 25 stand part of the Bill."
This section refers to the employment grant and subsection (3) says that the amount of an employment grant shall be subject to such financial limits as may be fixed from time to time by the Minister with the concurrence of the Minister for Finance. I understand the section but I hope it will not be too restrictive. Subsection (4) says that the Authority shall not, without the prior permission of the Government, give in respect of a particular undertaking an employment grant or grants exceeding in the aggregate £1,250,000. This is new and very welcome and if it can be extended a little I will welcome it even more. However, I will not go into any more detail.
I would not wish the section to be restrictive. We are confined by the aids code for industry and the EC which establishes an equity level of £13,000 in relation to this area. It is of interest to note that in November 1985 there were 2,944 international services jobs which arose from 181 projects grant aided by the IDA and this reflects the success of the international services programme which has been innovative and successful.
Question put and agreed to.
SECTION 26.
Question proposed: "That section 26 stand part of the Bill."
What difference, if any, is there between the guarantee of loans and interest subsidies for restructuring industry as distinct from what we dealt with in sections 20 and 24?
The other sections applied to fixed capital machinery. This section deals with the guaranteeing of loans and interest subsidies for restructuring industry. We have a mechanism which is intended to help a restructured company in their working capital requirements. It reproduces section 2 of the Industrial Development Act, 1977, and also incorporates the financial limit of £750,000 over which it is necessary to seek Government approval. The limit meets with the approval of the Authority. It is not a weapon in the hands of the Authority. It is to help where a company is taken over. The provision is not subject to the selectivity criteria because we are dealing with the question of a follow-on to existing industries and undertakings where there is an acquisition or an amalgamation in relation to two or more undertakings. It is a very handy but not over-used provision in the IDA armoury. It is a sensible provision.
The provision repeats what is contained in another section.
Question put and agreed to.
SECTION 27.
Question proposed: "That section 27 stand part of the Bill."
I have no objection to the section which deals with the guarantee of loans and interest subsidy for enterprise development. Will the Minister indicate what is buried in this section that is not contained in sections 23, 24, 25 or 26? Is there anything new in it?
Not particularly. The provision is to assist those involved in the enterprise development programme which was launched in 1978. It reproduces section 3 of the Industrial Development, 1977. The loan guarantee and interest subsidy are being made subject to the new selectivity criteria. Secondly, the IDA powers to guarantee loans in respect of enterprise development projects is being limited to 80 per cent of capital. They are the only changes from the 1977 provision. The Authority assist people involved in the enterprise development programme and, quite often, what they need most is an interest subsidy and a loan guarantee. Very often executives who have been employed in industry do not have the capital necessary to get their enterprise underway. This provision meets their needs in that respect. I should add that the programme has been very successful.
Question put and agreed to.
SECTION 28.
Question proposed: "That section 28 stand part of the Bill."
There is reference in the section to subsections (3) and (4) of section 21 and there is not anything new in that. There is reference in it to the 1969 and 1981 Acts. Has the Minister any observations to make on the section? Is the training programme in operation or is is something that might arise in particular circumstances?
It replaces section 39 of the Industrial Development Authority Act, 1969 and includes the selectivity criteria. The training grants may be paid only following consultation with An Comhairle Oiliúna while before the consent of the Minister for Labour was needed. We are recognising in a real way the importance which AnCO play in the area of training. It is intended that the role of AnCO in the IDA's training grants programme will be strengthened and that future training grants will be made by the Authority only following consultations with AnCO.
Question put and agreed to.
SECTION 29.
In regard to this section amendment No. 15, in the name of the Minister, arises and it is cognate with amendment No. 16, under section 30, in the name of the Minister. By agreement they may be taken together.
I move amendment No. 15:
In page 14, subsection (1), line 40, to delete "The" and substitute "Following consultation with such bodies as may be specified by the Minister from time to time, the".
The Minister, Deputy Bruton, when moving Second Stage stated that it was his belief that there was a wealth of invaluable technical expertise available in the Institute of Industrial Research and Standards which would prove a major asset in identifying suitable projects for assistance under the R and D and technology acquisition grant schemes. He indicated that the IIRS would be consulted on all such projects. These amendments give formal recognition to the proposed consultation procedure in so far as R and D grants are concerned. They have been drafted in such a manner as to allow the Minister to specify, where appropriate, other bodies in addition to the IIRS. Obviously, it was because of the expertise at the NBST that he required that an expert from there be consulted in relation to such a grant. In my view it is a wise provision.
This is an important departure although the Minister does not seem to think so. The original section stated that the Authority "may make a grant" but the Minister is proposing to delete the word "the" and substitute "following consultation with such bodies as may be specified by the Minister from time to time". The Minister is seeking to extend the scope of the authority of the Minister. For far too long we have been underestimating the importance of research and development and undersubscribing to it. Is the intention of the amendments to broaden the scope of groups or authorities? Is it an extension of the original provision? If that is the case it is a further example of not enough emphasis being put on research and development as occurred in the recent past when it became more important to keep up with changing technology. Research and development have been given a back seat position. Is the Minister satisfied that the amount of a research grant shall not exceed 50 per cent of the approved costs of the project concerned or £250,000, whichever is the smaller sum? I have no doubt that £250,000 is a reasonable sum for research and development. But there is much research and development to be done by way of smaller amounts than that. I wonder would the Minister consider a scaling of grant aid for research and development, perhaps rising from a figure of 60 per cent? Would the Minister consider a two or three-tiered scale of grants for research and development?
I am afraid what is stipulated is some what restrictive. It is all right in the upper bracket no exceeding £250,000. What about a much smaller enterprise where the expenditure of moneys on research and development would be so essential to its success and when the amount of assistance it would receive, 50 per cent, would not be related to the overall project? I put it to the Minister that with regard to smaller enterprises 50 per cent would hardly be sufficient. Would the Minister give some consideration to having a tiered system of grant aid for research and development because its importance cannot be over-emphasised.
Perhaps the Minister would comment on that suggestion I have made.
Recognition has been given in my amendments to the expertise available to the IIRS. We want to harness that expertise and that available also in other institutions such as the NBST. If we were to increase the maximum grant allowable beyond 50 per cent we might be offending EC competition rules. I think that is the reason for having the 50 per cent stipulated. Fifty per cent constitutes a good incentive in relation to research and development projects and is highly competitive internationally.
In relation to a tiered type grant I should say that the words used in subsection (4) (a):
Subject to paragraph (b), the amount of a research grant shall not exceed 50 per cent...
mean that there can be a scaling up to the maximum, again probably dependent on the quality of the grant.
I might draw Deputy Lyons' attention to subsection (5) which says:
The Authority may, in the case of small industrial undertakings as defined from time to time by the Minister, make payment of up to one-third of a research grant prior to the approved costs being incurred on condition that the amount so paid shall be repaid to the Authority if the research or development project concerned has not been carried out to the satisfaction of the Authority.
Here we are trying to help small industry to become involved in research and development by giving them a prepayment of up to one-third of the grant in order to encourage them. We recognise the importance of research and development. We are very anxious, when industries are established, especially those from abroad which have tremendous capabilities in relation to research and development, that they should locate part of their research and development activity here. We are now meeting with some success in this area. I should like to see a higher level of involvement in research and development by foreign companies who have located here. This grant scheme for research and development is welcome and is meeting with some success.
I accept the Minister's explanation. However, I am becoming sceptical about EC rules and regulations being advanced as reasons for our being precluded from doing this, that or the other thing. I have the feeling that we must be the best behaved member nation in the Community with regard to adhering to the rules, while we see many others not doing so. I became concerned when I hear so frequently about how good we are in this respect. As the Minister says, this may be another example of our being constrained by EC rules from deviating from the 50 per cent of approved costs of a project for research and development. For the betterment of the national welfare a time will have to come when we become more selfish, like other nations, when something like this would mean so much to us here battling to broaden and restore our industrial base. Without breaching the rules too much, surely we should be able to circumvent some of these regulations that deter us.
The Minister quoted the one-third grant referred to in subsection (5) —"one-third of a research grant prior to the approved costs being incurred on condition that the amount so paid shall be repaid to the Authority if the research or development project concerned has not been carried out to the satisfaction of the Authority." Where does a small industrial undertaking expect to find the remaining two-thirds? Could we not reverse those proportions? If it is a small undertaking surely we could substitute two-thirds for one-third? Over the years applicants for reconstruction grants and so on provided one-third of the cost and the Department or local authority the remaining two-thirds.
It would be no harm for the Minister to give some consideration to having small industrial undertakings provide one-third of a research grant prior to the approved costs being incurred, with the IDA being given the freedom — and I use that word advisedly — to grant aid the remaining two-thirds, of course recouperable, as is said, if the project is not carried out satisfactorily. It should be remembered that resources invested now in research and development will have beneficial effects in the long term for our industrial structure.
The maximum amount of grant we consider appropriate is 50 per cent. We must realise that we are getting the maximum ceiling on the aid code and that other industrialised countries cannot give anything like that figure. Our business is to ensure that we benefit to the maximum, ensuring that other countries adhere to the regulations of the scheme which is done by way of surveillance in Brussels.
Subsection (5) is innovative in that we are pre-paying research grants, something not done before. One-third is a fair enough contribution in a start-up position with regard to research and development and will be so recognised by promoters.
I want to thank Deputy Lyons for his constructive opposition. We have had a fairly good debate on the sections we have managed to reach and I am grateful for his contribution.
As it is now 6.30 p.m. in accordance with the order of the House I am putting the following question: That the amendments set down by the Minister for Industry and Commerce for Committee Stage and not disposed of are hereby made to the Bill; that the Bill, as amended, is hereby agreed to in Committee and, as amended, is reported to the House; and Fourth Stage is hereby completed and the Bill is hereby passed.
Question put and agreed to.