I welcome greatly the opportunity which we have today to debate the report of the Industrial Policy Review Group. For ease of reference, the report has tended to be called the Culliton report after the very able chairman of the review group, Jim Culliton, but it is equally the report of the other members of that group: Seán Barrett, Mary Broughan, Bernie Cahill, Peter Cassells, Denis Hanrahan, Chris Haskins and Lochlann Quinn. Together with their back-up team they have provided us with a document which is characterised by a clarity of analysis and which provides a clear-cut agenda for decisive action in the area of industrial policy.
The debate here today is timely. Unemployment is at the highest ever level in this country. The facts of demography make clear that further upward pressure on these figures is inevitable in the short term at least. At the same time, fundamental changes are taking place in the world in which we trade which will greatly influence our employment prospects in the future: the Single European Market will be largely in place by the end of this year and the transition of the EC towards economic, monetary and political union has gained significant momentum; fundamental reforms of the Common Agricultural Policy are in train along with the prospect of fundamental reform of world trade under GATT and the influence of centrally-planned economies world-wide has gone into sharp decline with new regional trading blocs and realignments emerging across the globe.
All these changes will pose new challenges and present new opportunities for the development of industry in Ireland. At the same time, we must seek to increase the contribution which industry can make to employment creation throughout the economy. The task in hand is daunting but one which we can approach with optimism if we are prepared to take a fundamental look at how we have managed our industrial policies to date and to put in place the changes necessary to bring success in a new world economic order. The Culliton report provides a framework through which such a task can be tackled.
Our present high level of unemployment is not something that has come upon us overnight. The underlying demographics and lack of performance have been clear for many years. We simply have not, as a people, created a sufficient number of jobs to provide employment for an increasing labour force and to replace those jobs lost in the dynamic changes which occur in an open economy. The reasons for this are not of recent origin. They are deeply embedded in the social and economic structures of our society: in our attitudes to business and success; in the way we manage our business enterprises; in the content and output of our training and educational system; in the way we manage our economic affairs, and in the administrative systems we have put in place at national and sub-national levels.
No one can be in any doubt that serious long term unemployment will remain a feature of Irish life for the foreseeable future. In view of this, we must strengthen our resolve to effectively address the sense of alienation and hopelessness felt by the unemployed and their families and to ensure that they are accorded meaningful participation in society. I am anxious that the initiative for a jobs forum under discussion at present is one that primarily addresses the needs of the unemployed and indeed involves them in the consultative process. While the adoption of a new approach to industrial policy will not, in itself, provide an overnight solution to our unemployment problems, it can make an important contribution — a contribution that will increase over the next five to six years and beyond. The report of the review group puts the issue succinctly and in perspective when it states that:
There are no single policy actions that can ensure a quick solution to the problem of unemployment. We can only rely on the fruits of a systematic and sustained effort to improve the effectiveness and competitiveness of our economy and to promote active involvement and enterprise throughout the economy, in public and private sector alike.
I doubt if anyone who is serious about the unemployment situation here could disagree with that position.
I am grateful that the group reported within the six month time-frame. In asking the group to report within such a relatively short period, I was conscious of three principal factors. First, the absolute urgency of taking decisive action in relation to industrial development policy and its implementation in the light of the highest ever levels of unemployment occurring in this country. Second, I was aware that a great deal of analysis of our existing policies and their implementation was already available from sources such as Government Departments, NESC, ESRI, the OECD and Commission of the European Communities. In particular, following my Department's review of industrial performance in 1990, it was revealed that while close to £5 billion was spent both directly and indirectly on industrial development by the State in the seven year period from 1983 to 1989, net employment in industry decreased by about 24,000 over that period. It was abundantly clear to me that the crucial gap was not one of analysis but there was an urgent need for a cohesive, practical and action-oriented prescription across a range of policy areas. Finally, the members of the group had, each in their own areas of operation and mainly in the industrial sector, successful track-records of performance which indicated an ability to cut quickly and decisively through often conflicting analyses to well-thought action to achieve defined objectives.
The Government have already announced that they accept the broad thrust of the recommendations of the Culliton report. A task force have been established to follow-up on the implementation of the recommendations. The establishment of such a task force was a key recommendation of the review group and the announcement of their establishment soon after the publication of the report is an indication of the Government's commitment to implementing both the recommendations of the review group and any other recommendations which will enhance the scope for development and employment creation in the industrial sector. The task force have been asked to widen their remit beyond the immediate recommendations of the Culliton report to make any other recommendations which they feel would be appropriate to support the creation of sustainable jobs.
The report of the review group responds fully to the terms of reference set for them. It is a cohesive document and the implementation of its recommendations requires an integrated and comprehensive approach by the task force. In practice this will mean that in considering the implementation of specific recommendations it will have to focus on how one can support the other rather than be introduced in isolation.
Overall responsibility for the formulation and evaluation of industrial policy has traditionally rested with the Minister for Industry and Commerce. One of the most fundamental recommendations of the Culliton group is that the:
Formulation and evaluation of policy for industry needs a broader strategy. It must go beyond traditional departmental demarcation lines to take account of all the major relevant factors, including notably the level and structure of taxation, the cost and quality of infrastructure and the relevance and effectiveness of education and training.
I agree fully that the broad-based approach advocated by the Culliton group is sensible. It is the direction in which to go. I support this approach and I see the task force as an important instrument through which this more broad-based approach can be developed and achieved. The ultimate test of the effectiveness of the task force, however, will be the extent to which this braod-based approach is achieved in a substantive way over the next six to 12 months.
The review group forcefully make the point that:
In no other single area does the Government have at its disposal the tools to make as far-reaching and effective a reform to support an enterprise economy as in taxation.
I agree fully with their view. The Irish tax system has developed in an ad hoc manner. It is characterised by a multiplicity of reliefs, concessions and exceptions each designed to promote the development of an activity considered, from an economic or social perspective, desirable in itself. The tax relief provided for one activity frequently conflicts with that provided for another. Each relief to one activity involves a cost to be borne elsewhere in the economy.
The existing taxation system also encourages the deployment of savings away from investment in industry towards savings instruments with the lowest risk-reward ratio such as Government gilts, pension fund investments and life assurance policies. There is a need to restore neutrality to the tax treatment of the flow and deployment of savings with the objective of securing greater investment in productive investments, especially indigenous Irish industry.
Successive and credible analyses conclude that the Irish tax system is now in need of major structural reform. The Culliton group endorse this need from an industrial development point of view. This has been a constant theme of the policies of the Progressive Democrats since their foundation and we have made it a central feature of Government policy. This year's budget represents a significant step in this process of reform.
In the area of direct support for industry the main recommendations made by the Culliton report include: the grant-aid budget for internationally mobile industry should be squeezed further; there should be a decisive shift from grants for home-managed industry to the use of equity; the grant-aid budget should focus more on fostering industrial clusters around industrial segments and niches of national competitive advantage; and the case for more effective Community restrictions on State aids for industry in the more developed member states should be actively promoted.
These recommendations reflect the approach which my Department have adopted to a considerable extent in recent years and further progress along the lines recommended is envisaged. For example, both my Department and I have constantly promoted the case for more effective restrictions on State aids for industry in the more developed member states of the Community.
We will maintain downward pressure on the budgets for the promotion of both internationally mobile and home-managed industry for a given level of projects or employment creation. For larger projects the cost-benefit approach adopted by the IDA will be reviewed to ensure that it reflects current economic realities. The potential for the development of clusters around industrial segments and niches of competitive advantage is accepted by my Department and the development agencies and work is in hand to examine how this can be given practical effect.
Overall, there is a decisive shift away from grants for indigenous industry development. The agencies had earlier been directed by me to increase their equity or repayable forms of grant support to 40 per cent of aid to medium-large industry for the current year. The scope for achieving an increase in that level in 1993 is under consideration.
The main recommendations made by the review group in relation to institutional strengthening include the following: the Department of Industry and Commerce should redefine their role as being predominantly one of policy determination for industrial development and the supervision of its implementation and a recognition of the importance of the business-related legal and regulatory environment.
The Department should develop an enhanced internal capacity for fundamental policy review and evaluation with measurable policy objectives for the industrial development agencies.
A number of regulatory and administrative functions should be removed from the Department and established as self-financing organisations.
The Department should recruit and arrange the secondment of individuals with industrial experience.
The Department should establish an advisory board on industrial policy and their three yearly review of industrial performance should include policy review.
A regrouping of institutional functions is necessary to reflect the very different character of internationally mobile investment from the rest. One agency, formed from the present IDA, would have as its mission to attract to Ireland the greatest possible level of internationally mobile investment.
There should be a new agency for the development of indigenous Irish-managed industry to bring together in a more integrated way the developmental and support services provided at present on a separate basis by IDA, ABT and Eolas in particular. Such an agency would provide a new impetus and focus for promoting the development of locally-based industry.
A task force should be established, reporting directly to the Taoiseach, to give an impetus and direction to the wider focus of industrial policy recommended in this report and to ensure that the recommendations of this report are acted upon. The task force should have a defined time-period of three years of operation.
I accept the thrust of these recommendations. The Department have already reorganised their internal arrangements to formulate and more effectively monitor the implementation of industrial policy. These arrangements include: making the determination of industrial policy and its supervision a central role of the "management board" of the Department under the direction of the Secretary; a centralisation of responsibility for monitoring the performance of, and liaising with, industrial development agencies, within one division; and the allocation of additional resources to strengthen the evaluation and analytical capacity of the Department in relation to industrial policy.
In relation to the removal of regulatory and administative functions which are not strictly necessary for the effective operation of the Department, the Department are now examining how this recommendation could be implemented for the Patents Office and the Companies Registration Office in the first instance. The Department also accept that the three yearly reviews of industrial performance required under statute should be widened to include a review of industrial policy.
My Department are also prepared to attempt to develop a programme of secondment to and from industry and is in the process of drawing up a number of job specifications for areas in the Department where this might be possible. Previously when such programmes were attempted across the public service the response from the private sector was limited. The Department will make a determined effort to achieve better results this time around.
As regards the establishment of an advisory board on industrial policy the "management board" of the Department with its strengthened role, as indicated above, will act in that capacity. The Department are considering the introduction of external expertise to help the "board" in relation to industrial policy matters.
The Department are also examining how the separation of the promotion of overseas and indigenous industry can be put in place and made work in practice in order to maximise the generation of projects and the creation of employment arising from both inward investment and the development of indigenous industry.
The review group make a number of important recommendations in relation to the area of science and technology (S&T), for example, it advocates the following: involving industrialists in the application of S&T programmes; greater emphasis should be placed on the acquisition of the technology required to upgrade product quality and competitiveness in Irish industry; and decentralisation of administration of industry-related S&T programmes to executive agency level.
All of these recommendations are accepted and are in line with actions already adopted or in train in several cases. My Department have embarked in a more deliberate way on a course to make science and technology expenditure for which it is responsible more responsive to the needs of industry. Considerable progress will be reported within six months in relation to each of these recommendations. Already, a number of new measures have been initiated in line with the recommendations. For example: an advisory committee system with strong industry representation has been established to ensure that science and technology activity is more related to the needs of industry; new financial and management procedures are being introduced for the Programmes in Advanced Technology (PATs) which will encourage a greater commercial orientation of the PATs and allow programme activities more relevant to the needs of industry to be determined; a research and development group drawn entirely from the ranks of industry has been established in recent months with the strong support of the Department to advise on the needs of industry in the development of science and technology programmes; a review of departmental activities of those of EOLAS in the science and technology area will be completed before mid-year.
The positive approach which the Department of Industry and Commerce are taking to the recommendations of the Culliton group has already been reported to the task force. I understand that the response the task force has received from other Departments and agencies responsible for implementing the recommendations of the review group has also been very positive. Undoubtedly not all the recommendations put forward by the review group will be implemented precisely as set out in the report of the group. The Culliton report is very much a strategic document which points the way forward towards a more comprehensive and effective industrial policy. It does not attempt to provide a detailed implementation blueprint for every recommendation which it makes, nor could it have done so within the time available even if it were appropriate to do so. It will be a matter for Departments along with their agencies to put the flesh on the recommendations of the Culliton group, which have received widespread general endorsement from most quarters.
I look forward to the debate on the Culliton report here today. There may be points on which we disagree with the group, where we might have welcomed a greater development of some of the issues covered or where we consider that certain issues have been neglected. If we do come to such conclusions we should remember the broad nature of the group's teams of reference and the relatively short time period within which they were asked to report. I think the group have done us a great service in this House. I hope we can build on what they have achieved. They have fulfilled the responsibility placed on them extremely well. It remains to be seen if at political and administrative level we can build on the solid foundations that they have laid.