I move:
That a supplementary sum not exceeding £2,393,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1991, for the salaries and expenses of the Office of the Minister for Industry and Commerce, including certain services administered by that Office, and for payment of certain loans, subsidies, grants and grants-in-aid.
The purpose of this Supplementary Estimate is first, to provide an additional £7.75 million to the IDA, in respect of their capital grants expenditure; and second, to provide an additional £260,000 for the Department's consultancy subhead. The total additional funding required, £8.01 million, is offset by savings on a number of subheads, which, together with increased appropriations in aid, result in a net funding requirement of £2.393 million as detailed in the Supplementary Estimate.
For the year ending 31 December 1991, the IDA were approved a grant-in-aid of £106 million or capital grants. In addition IDA were permitted to avail of £12 million of their own resources made up of grant repayments and reimbursements from the European Social Fund. The IDA's approved expenditure, therefore, for capital grants in 1991 was £118 million.
The IDA require additional funding of £16 million for capital grants in 1991. This has arisen because of the increased level of grant claims in relation to the main grant programmes. The £16 million shortfall on capital grants will be partly met — to the tune of £8.25 million — as follows:
The transfer of £2.75 million additional own resources from building operations to capital grants;
The retention of £3.5 million proceeds from the sale of IDA property which was part of £4.5 million due to be remitted to the Exchequer and which will now be transferred to capital grants;
The realisation of £2 million additional own resources on capital grants from the European Social Fund and from grant repayments.
Over the past few years, there has been a substantially increased level of IDA backed job creation, which has included the attraction to Ireland of a number of major flagship projects in sectors and geographic regions of strategic significance for the IDA's inward investment efforts. These factors combined with an accelerated rate of project development in a number of instances have given rise to the need for increased funding in 1991.
The three-year period of the Programme for National Recovery, 1988-1990, saw an increased activity level, resulting in over 36,000 sustained first time jobs being created with IDA assistance. This represented an increase of 40 per cent over the previous three-year period. At the same time, over the past number of years, there has been a greater focus on achieving greater value for State expenditure. In project negotiation maximum emphasis has been put on achieving sustained long term performance at least cost to the Exchequer. As a result the cost of IDA-backed jobs which have been sustained over a seven-year period fell from £20,097 per job in 1986 to £14,271 in 1990 — measured in constant 1990 prices.
Over the same period — 1986-90 — this allowed the Exchequer capital grant-in-aid to IDA to be reduced from £166.1 million to £110.1 million in constant 1990 prices. Notwithstanding the substantial effort on the part of the IDA in relation to the achievement of value for money, the significantly increased job creation activity since 1988 has led to a short term real increase in IDA capital grant-in-aid requirements. In the medium-term, as the balance between activity levels and the reduction in support for individual projects levels off, the overall funding requirement will recommence its real decline.
The shortfall in grant-in-aid has occurred now because, since 1987, it has been the policy to include a performance clause in every grant agreement, tying payment of grants to fulfilment of job creation targets by companies. Because of the very strong job performance of companies approved for grant support since the introduction of performance clauses, substantial tranches of grants approved to these companies have now become due for payment. In negotiations with companies, IDA always stress that they see the grant agreement as a two-way contract between the company and the Government. Just as companies must fulfil their job commitments, it is, of course, equally important that IDA be in a position to meet their grant payment obligations promptly if they are to maintain credibility with companies.
Since 1988 a number of flagship projects have been approved in sectors of strategic significance for the IDA's inward investment effort. Some of these projects have been significantly large and in a number of cases their investment programme is ahead of schedule. One example of this is the large development at Leixlip for Intel Corporation, the first ever dedicated wafer fabrication plant in Ireland. This investment has been brought forward by one year, and construction of the new 400,000 sq. ft. facility commenced in 1991. The success in attracting this type of facility is invaluable to IDA's marketing efforts in the electronics sector.
The continued efforts to reduce the costs of industrial development in the future are reflected in the implementation of the recommendations of the Triennial Review of Industrial Performance, which my Department published last year. Since 1988, substantial progress has been made in introducing repayable grants in medium-large Irish industry. At the end of 1991, nearly one-third of all financial support approved to this sector was in repayable form. The IDA are confident that, in line with the objective set out in the triennial review, they will be in a position to move by the end of 1993 to a position where 50 per cent of all financial support to medium-large indigenous industry is in the form of repayable, or other remunerating, forms of aid.
The reductions in grant levels recommended in the triennial review in respect of small business and expansions in overseas industry are also being implemented by the IDA. IDA backed companies have made a substantial contribution to job creation in the economy in recent years. Over the three years 1988-90, these firms contributed 18,000 jobs per annum on average towards the national objective of 20,000 jobs a year, which was set down in the Programme for National Recovery.
Despite the difficult environment in 1991, the IDA's target for new first time jobs in manufacturing and international services has been substantially met. In addition, the manufacturing sector as a whole is expected to hold its own and, while other countries are experiencing a decline in the employment contribution of the manufacturing sector, the outlook in Ireland is promising.
The key priority at present must be to address the unemployment problem. Through a combination of prudent Government policy aimed at creating the appropriate fiscal and macro-economic environment and focusing on the achievement and maintenance of international competitiveness at company level, the Irish industrial scene is now in a strong position to move forward. I believe very firmly that, assuming the international economic climate becomes more favourable, we should be able to return to the levels of manufacturing job creation achieved in the 1988-90 period.
However, while the success of that period was built to a significant extent on strong gains in macro-economic competitiveness in our major export markets, in future we are unlikely to be able to rely as much on macro-economic effects. Further gains in competitiveness must, therefore, come from improved performance at industry segment and company level through the more focused development policies being pursued by the IDA.
The projected excess on the consultancy subhead arises primarily because of assignments related to the work of the industrial policy review group which was set up in June, 1991 and the section 14 inquiries which I commissioned into certain aspects of the Greencore and Telecom affairs. While there are some offsetting savings on other elements of the consultancy subhead, an overall excess of £260,000 is projected.
With regard to the industrial policy review group, Deputies will be aware that, last June, I asked a group of leading people from the worlds of industry, business, economic research and trade union affairs to advise on the full range of policies and measures that bear on or influence the development of industry and services here. They had to undertake a fundamental review of a large number of areas of public policy and for that they required independent advice.
The group are now finalising their report and I look forward to receiving it and considering its contents, in the new year.
The first section 14 inquiry relates to Siúicre éireann cpt and certain other named companies forming part of the Greencore Group. I have already made reference to this inquiry, in dealing with questions earlier this afternoon. As Deputies will be aware, the inspector furnished a final report to me on 4 December 1991, which I published on 5 December 1991. On foot of the final report, I decided to continue the restrictions imposed on the Talmino loan note following the interim report and to refer this report also to the Director of Public Prosecutions for consideration of possible action. Further possible breaches of company law and fiduciary duties were identified in the report.
The second inquiry relates to Hoddle Investments Ltd. and Chestvale Properties Ltd. I appointed an inspector, under section 14 of the Companies Act, 1990, on 14 October 1991 — replacing an inspector appointed on 1 October 1991 — to investigate and report on the persons who have been financially interested in the success or failure of Hoddle Investments Ltd. and Chestvale Properties Ltd. The appointment arose from concerns which arose from the purchase by Telecom éireann of the former Johnston, Mooney and O'Brien site at Ballsbridge, Dublin, and the recommendations on 1 October 1991 by an inquiry established by the Minister for Tourism, Transport and Communications. The fact that there have been so many attempts to disrupt the proceedings of the inspector is a matter of concern. All these actions have been strongly defended, in the public interest, and no effort will be spared to seek to ensure a proper conclusion to this inquiry.
Since these remarks were prepared, the House may be aware that apparently I have to appear before the High Court on Friday, arising out of the last named inquiry, at the instance of Mr. Dermot Desmond to show reasons why I should not be sent to prison.
