Vol. 423 No. 6
I move:
That a supplementary sum not exceeding £20,460,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1992, 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 subsidies, grants and sundry grants-in-aid.
As Deputies will be aware, the Supplementary Estimate that is being moved this morning arises from the Government's decision to immediately establish a market development fund of £50 million for the period up to the end of March 1993 to assist those firms which have been seriously affected by the recent turmoil in exchange rates——
I am sorry to interrupt the Minister, but could I point out that, so far as I can ascertain, the Supplementary Estimate that the Minister is moving has not yet been circulated.
It is on its way, Deputy.
That would appear to be the speech rather than the actual Supplementary Estimate document.
It is about to be furnished, Deputy.
That is the speech. I am not talking about the speech, I am talking about the Supplementary Estimate document.
The Supplementary Estimate was formally moved by the Minister for Finance just a moment ago.
The usual procedure is to circulate the document.
The document will come. The Minister formally moved the grant of a supplementary sum of about £20 million.
The procedure is quite in order.
I suppose the Minister is hoping it will come anyway.
As Deputies will be aware, the Supplementary Estimate which has been moved by the Minister for Finance and which I am now following up on this morning arises from the Government's decision to immediately establish a market development fund of £50 million for the period up to the end of March 1993 to assist firms which have been seriously affected by the recent turmoil in exchange rates within the exchange rate mechanism.
The recent currency crisis was not precipitated by the Irish Government. For several years we have pursued a consistent line in regard to our exchange rate policy. We have sought to maintain a firm and stable exchange rate within the narrow band of the EMS. We have lent credibility to this approach by adopting a set of economic policies which are consistent with membership of a strong currency regime.
This approach has paid dividends. From 1987 wage and price inflation reduced sharply to facilitate the achievement of significant gains in the competitiveness of the traded sector of the economy. This improvement in competitiveness coincided with reasonably favourable increases in import demand from our main trading partners, particularly the UK, as economic growth achieved a modest acceleration. This gave a major boost to exports to sustain a record surplus on our balance of trade and balance of payments in recent years. I realise I am repeating what is known to the House, but it is important to sketch the economic context and background to this morning's debate.
Inflation was brought down to the less than 3 per cent annual rate that prevails at present. Interest rates, which soared almost ten percentage points above the German rates in the mid 1980s, fell to less than one percentage point above those rates just before the recent currency crisis. The Exchequer borrowing requirement has been reduced from 13 per cent of GNP in 1986 to the 2 per cent rate now prevailing. Government debt as a percentage of GNP has come down by about a quarter over the last four to five years. Significant progress in the reform of our taxation system has also been achieved, especially over the past three years, thereby engendering investor confidence and a growth in numbers in nonagricultural employment.
Ireland's, capability to sustain a stable position within the ERM has been recognised consistently by our Community partners. The recent tensions within the European Monetary System have led, through, to speculative attacks on the EMS currencies on a scale not previously contemplated. The withdrawal of sterling and the lira from the exchange rate mechanism of the EMS and the devaluation of the peseta has created further fears in the market that the EMS might break up, thereby fuelling further speculation against the Irish pound as well as other EMS currencies.
There are many good reasons why it is important that Ireland remain part of a hard currency regime within the ERM. In the time available I will refer to a number which are important from an industrial development point of view. First, the obvious reason. Firm currency policies in recent years have contributed to competitiveness and allowed our trade with the rest of Europe to increase dramatically. Certainty and the assurance of stability contribute to trade growth. Uncertainty and the risk of fluctuation undermine trade and serve to inhibit firms from undertaking costly and potentially high risk marketing initiatives in new markets.
Secondly, nearly £8.9 billion of our national debt is denominated in currencies other than sterling; accordingly, a devaluation of our currency would increase the cost of servicing our national debt by almost £1 billion per year if the Irish pound devalues to the extent of the recent devaluation of sterling. This would considerably constrain the Government's objective of achieving a continuation of the tax reforms initiated in recent years, which aim to encourage enterprise and employment creation.
Thirdly, a devaluation of the Irish pound now would lead to similar expectations at times of future currency instability and would very definitely drive away future investment. It would add a higher risk premium to interest rates in future and would discourage industry from taking the actions required to expand in future years.
Fourthly, our membership of the ERM and adherence to its disciplines has facilitated a significant improvement in the state of our national finances. It has contributed greatly to the improved rate of employment. While recognising that much more must be done to sustain and increase employment, we cannot jettison recent progress by now going for a devaluation option.
The degree of dependence of Irish industry on the UK market in particular as a location for overseas sales, has greatly exacerbated the difficulties faced by manufacturers here. Since we joined the European Community, our reliance on the UK market has almost halved, from 61 per cent of total exports in 1972 to 32 per cent last year. However, even though we have achieved that remarkable progress, one can only shudder at the thought of what would have happened had progress not been achieved in the diminution of dependency on the UK market, but it still remains a dominant market for us.
An Bord Tráchtála calculate that in 1991 indigenous industry exported some 43 per cent of its output to the UK market. It is therefore not surprising that the dramatic fall in the value of sterling in recent weeks and days caused immense difficulties for a wide range of industrial firms.
In response to the growing crisis facing many industrial firms, the Government established a working group representing the main Departments of State and State-sponsored bodies to look at the nature and extent of the problems arising for firms and to make recommendations.
The working group drew strongly on the information available from representative bodies of exporters, industry and trade unions, as well as many individual firms, in evaluating the extent and nature of the problems.
I should like to pay tribute to the representatives of industry, trade promotions groups, individual firms and trade unions for the open way they conducted their business and their lobbying with me, the Minister for Industry and Commerce, the Minister for Finance and the Government. There was a realisation that something had to be done and a clear recognition that the Government meant to do something. There was a common point of view and it was possible, therefore, to work out the plan.
On the basis of the information available to them the working group concluded that the devaluation of a number of EC currencies, in particular sterling, has caused significant potential problems for some firms notably in the UK market where the cash receivables in Irish punt terms have fallen by over 10 per cent; on the domestic market where there is high import penetration from UK firms and in certain third markets which take a high proportion of exports and in which there is serious price competition from UK firms.
The firms under greatest pressure have some or all of the following main characteristics: a high level of dependence on markets where the forces of competition have changed radically because of recent currency instability; existing low margins; high gearing; a high level of debtor exposure and little or no forward cover. Some have all those components, some have one or two but they all share those common characteristics. The Government accept that the short term impact of the currency crisis holds very serious consequences for a large number of Irish trading firms because of its suddenness, intensity and the size of devaluation which has occurred. They also recognise that the first responsibility for responding to the consequential and fundamental change in the market place rests with each individual firm affected and that the essential role of Government is to support firms in doing this.
I know from speaking with many firms in recent days that this process of adjustment is already taking place. Firms are exploring ways in which they can reduce production and distribution costs and are taking action to improve the products and services they offer customers to justify an increase in prices to help maintain margins. Many are also looking at the opportunities available in markets whose currencies have not devalued such as Germany and the Netherlands.
The Government, and their agencies, will provide significant assistance to help firms to help themselves in the current difficult situation which many of them face. That is the purpose of this debate today and this Estimate.
The market development fund has been introduced as a support which is quick, flexible and concentrated on those firms that require support to put into place the adjustment measures needed to survive and expand in the changed marketplaces which they serve and wish to serve.
The Government have ruled out a blanket provision of employment or other subsidies which would apply to firms irrespective of their needs or of the actions they were putting into place to maintain competitiveness and market share.
The market development fund will be operated on a number of general principles first, it is a temporary support measure. Firms must be expected to take measures to maintain competitiveness in order to adapt to the new exchange rates. The fund will last for no more than six months and there will be a detailed review at the end of this year, at the half way stage. The Government have also directed that the fund will be subject to ongoing monitoring, particularly in the light of currency movements. In the event of a significant revaluation of sterling and other recently devalued currencies the underlying necessity for the fund would require immediate re-examination. Second, the fund has a limit of £50 million. The provision of this level of Government support over a six month period is a generous response by the Government to the difficulties of business and this has been recognised by the representative bodies and individual firms. Third, the fund will be targeted at firms which demonstrate a willingness and an ability to manage their way out of their difficulties which would have difficulty surviving without assistance and, as far as possible, maintaining employment during the six month period of the action.
The establishment and management of the fund is being supervised and directed by a management board comprising the managing directors or chief executives of An Bord Tráchtála, the IDA, and FÁS together with representatives of the Departments of Agriculture and Food, Finance, Industry and Commerce, Labour and the Marine and a representative from the industry/employer bodies and from the Irish Congress of Trade Unions.
The administration of the scheme is being carried out by a special management team drawn from experienced executives from a number of State bodies. The team are responsible for the day-to-day running of the fund, the operation of the eligibility criteria and all decisions on whether applicants qualify for support and the level of support, if any, to be made available. The management team are being led by an assistant chief executive from An Bord Tráchtála and the team members are located in An Bord Tráchtála's head office in Dublin. Payments to successful applicants will be made by An Bord Tráchtála.
Yesterday, at another gathering in the offices of An Bord Tráchtála, I had occasion to see the plan in action, so to speak. I was very impressed by it. All the agencies were working together, phone inquiries were received, forms were being returned and there was a great air of activity. There was a very committed response from the public sector involvement. I was particularly struck by the way the various agencies and Departments were working together to ensure that the help firms need was being given with the minimum of fuss and bureaucracy. I say: "Well done to those involved in that team."
It is a crisis.
They are responding in a very fine way, as one must do in a crisis. Too often State agencies of one kind or another are the subject of criticism. I saw them in action and there were no demarcation lines but rather a huge co-operative effort.
The Supplementary Estimate before us is for £20 million to be allocated to a new subhead within the Vote of the Office of the Department of Industry and Commerce. This represents a first tranche from the £50 million commitment by the Government to the fund. I am advised that, on the basis of the information available to date, the £20 million allocation will cover any necessary draw-downs from the fund in 1992.
The second part of today's Supplementary Estimate is for an additional £460,000 under the subhead dealing with An Bord Tráchtála's administration and general expenses.
When deciding on the establishment of the market development fund, the Government also decided that £1 million from the fund should be allocated to a number of marketing bodies in the remainder of 1992 to enable special assistance to be provided towards travel costs of firms to meet existing and new buyers and for other exceptional marketing activities. An Bord Tráchtála is to benefit from £800,000 of that £1 million. By way of explanation I should say that the other £200,000 is broken up into £150,000 to CBF and £50,000 to An Bord Iascaigh Mhara. This £800,000 will be made up through the provision of the additional £460,000 provided for in this Supplementary Estimate and the restoration of a reduction in An Bord Tráchtála's grant-in-aid of £340,000 which the Government had decided upon in their mid-year review on expenditure.
This increase in An Bord Tráchtála's general marketing expenditure will underpin the efforts of the organisation to respond to the particular needs of small to medium indigenous exporters. On 2 October An Bord Tráchtála introduced a special 1-800 contact line to help firms deal with market difficulties arising from the currency devaluations. Forty market specialists from An Bord Tráchtála's offices in Europe, the UK and the US have been recalled to Ireland and are meeting with companies throughout the country. The specialists are visiting companies, advising them on specific difficulties and opportunities and, where appropriate, setting up market visit programmes.
An Bord Tráchtála are also accelerating their inward buyer missions programme bringing overseas buyers to selected companies in the regions to discuss business opportunities. The board will also organise a campaign which focuses on local industry successes and heightens the awareness of their contribution to the local economy. These initiatives are an intensification and redirection of existing programmes to meet the problems which the currency crisis has caused for firms. In recent years An Bord Tráchtála's grant-in-aid has increased significantly as a result of the support provided to it by the European Regional Development Fund which supports marketing measures at a rate of 75 per cent.
The market development fund initiative has received widespread support from employer bodies, trade unions and across the entire political spectrum. It is a speedy and targeted response by the Government to an unprecedented situation which has faced many of our businesses.
The Department appreciate very much the briefing of Opposition spokespersons yesterday by officials of the management board and team. I appreciate the positive response which the setting up of this fund has received from Deputies on all sides of the House. I would welcome the support of the House for this Supplementary Estimate. I look forward very much to the debate which will follow. I shall avail of the opportunity to clear up any points which are raised. I wish to say "well done" to the firms who, in very difficult circumstances, have shown great resilience in dealing with the difficult financial situation in which they now find themselves.
The Minister of State began her contribution by stating that the recent currency crisis was not precipitated by the Irish Government. That is true. However, the Government could have done more to mitigate the crisis, particularly for firms and mortgage holders.
I am not dealing with mortgage holders.
I understand that. I said the Government, not the Minister. The Taoiseach and the Minister for Finance appear to be stumbling through the present economic crisis without any co-ordinated plan. Almost every household is facing financial problems as a result of interest rate rises which could have been avoided if the Government had accepted the Fine Gael proposals put forward by Deputy John Bruton some weeks ago. Two days before interest rates were increased by 3 per cent, the Fine Gael Leader made three solid proposals to avoid this increase and save employment. These proposals were rejected by the Government even before they were read. The Fine Gael plan would have protected mortgage holders by keeping interest rates down, protected jobs through lower mortgage rates and lower interest rates, halved employers' PRSI for manufacturers and protected the value of the IR£ through action rather than talk. Fine Gael proposed that the Government should guarantee that the present exchange rate would apply for foreign holders of IR£ denominated Government securities for a fixed period. These were the only constructive proposals to come from any quarter during that crisis.
I assert that if the Fine Gael advice had been followed two weeks ago we would not now be discussing this huge Supplementary Estimate which is required to bail out companies who are experiencing significant problems at present. The pain and fear being experienced by struggling businesses, farmers trying to stock their land and mortgage holders would have been avoided if some of those measures had been put into effect. We were told at the time that rules would have to be changed. The very Government who were so afraid to change the rules to help the people to whom I have referred have now admitted that the £50 million subsidy scheme they propose to introduce for a minority of those affected by them is a direct breach of EC competition rules, rules which exist mainly to protect smaller countries and in the enforcement of which Ireland has a vested interest.
The 3 per cent rise in interest rates has occurred only because certain nonresident investors lack short term confidence in the value of the punt and have been selling it. If their confidence was restored their money would flow back and the 3 per cent interest rate could be reversed. Fine Gael have put forward a concrete proposal to make this happen. We propose that the Government guarantee that the exchange rate will apply for foreign holders of Irish pound denominated Government securities for a fixed period only. If the 3 per cent increase was to remain with us for over one year it would cost Irish businesses and other sectors £615 million. This is based on internal borrowings of £20.5 billion, as stated in the autumn Central Bank report. That is a huge drain on the Irish economy.
During the past number of weeks the punt has appreciated by over 10 per cent against sterling. I know that this has eased somewhat in the past few days. This has resulted in a trade weighted appreciation of the punt of approximately 3 per cent. As a result, Irish manufacturing in particular has suffered serious competitive distortions and a deterioration in business, especially in the UK, on which, as the Minister of State said, 43 per cent of our total trade depends.
In some sectors; not all sectors.
Yes. Not only does this loss of competitiveness create a major risk of a rise in unemployment in the short term but a loss of contracts in the UK could have a serious long term effect on our market share. Effective action is required to tackle the effects of the fall in sterling on our export competitiveness. This action is vital. Fine Gael will support this Supplementary Estimate. It is an important step forward in helping firms who have found themselves in temporary difficulties because of the present sterling and currency crisis generally.
Once it was recognised that the export and import substitute labour intensive sectors were worst hit an immediate reduction in employers' PRSI should have been introduced. Fine Gael propose that employers' contributions in manufacturing, including food, should have been reduced from 12 per cent to 6 per cent. If administrative changes were introduced, this could have been modified to 4 per cent on the first £10,000 and 8 per cent on the balance. This proposal is in line with the need to reform the tax system, as proposed by both the Commission on Taxation and the Culliton report. These proposals would not run contrary to the measures being put into effect by the Government at present. This measure would lower labour costs by approximately 3 per cent. Labour costs in vulnerable sectors, such as textiles and confectionery, are as high as 80 per cent of in-firm costs. Lowering these costs would go a long way towards offsetting the loss in competitiveness which they have suffered as a result of the fall in sterling.
The direct cost of this proposal would be £125 million in a full year. This cost has to be compared to the cost to the Exchequer of increased unemployment if nothing had been done. Obviously this would depend on the level of ensuing unemployment. Some weeks ago various commentators gave a conservative estimate of 5,000 job losses. The tax loss to the Exchequer from these job losses would be approximately £20 million and direct unemployment costs would be increased by approximately £30 million. Therefore, the shortfall would have been £75 million. If the employment shake-out was as high as 7,500 the shortfall would drop to £50 million, which, coincidentally, is the figure we are talking about today.
All of this particularly the currency crisis and the extent to which Irish firms depend on exports, brings home to us the urgent need to bring forward early proposals at European level to establish a European Central Bank. All European countries have become hostages of the Bundesbank. During the past few weeks Fine Gael have proposed on many occasions that the Government should seek at European level — the Taoiseach might have an opportunity to do this at Birmingham tomorrow — to bring forward proposals to establish a European Central Bank without delay. This would reduce the level of distortion in currency markets which has hit many vulnerable, export-orientated and export-dominated economies like Ireland in the past few weeks.
With regard to the measures which have been announced here today by the Minister of State, I thank the Minister, the officials in the Department of Industry and Commerce, the IDA and An Bord Tráchtála for briefing the Opposition parties yesterday on the type of measures which will be implemented to allay some of the problems being experienced by firms in trouble. Typical firms experiencing trouble at present are those in the clothing, food and joinery sectors. Some food firms are covered by monetary compensatory amounts by the European Community, particularly those in dairying and beef. But sectors like sheep meat, pig meat and mushrooms have come under serious threat as a result of the sterling crisis and are in urgent need of attention. I am glad that application forms for assistance have already been issued to many firms nationwide in order to ascertain whether they are eligible for such assistance.
I am disappointed the Minister of State did not avail of the opportunity to spell out in more detail the type of action she proposes taking in the course of her introductory remarks this morning.
I will do so in the course of the question and answer session.
It is important to place the appropriate guidelines on the record of the House, detailing the nuts and bolts of this scheme and how the appropriate finance will be allocated.
I welcome the fact that the Government and An Bord Tráchtála — under the leadership of Mr. McCrea — have devised a system easily understood and implemented by way of application for assistance under this Market Development Fund. There is one particular aspect of the guidelines in respect of which I contend the provisions of the scheme should be more flexible. I refer to the section — No. 3, under the heading of "Financial"— subhead 3.4 — where it is indicated that this assistance will be applicable to companies subject to the 10 per cent corporation tax. I would appeal to the Minister to be as flexible as possible in the implementation of this fund. I would point out to her that there are many other export services also experiencing difficulty particularly in the tourism sector. While realising that that is not applicable specifically to the Department of Industry and Commerce I want to avail of this opportunity to highlight the fact that there are other sectors, apart from the firms I have mentioned, experiencing short term difficulties.
In the guidelines issued for application for assistance under the market development fund it is anticipated that the provisions of the fund will be reviewed in December when there will be a review undertaken of currency fluctuations at that time. There is also an indication from Europe that, if we do not breach competition rules and if we get limited approval by the European Commission to implement this scheme, it cannot last any longer than six months. I acknowledge that there must be a limit to the extent of application of any scheme. It would be my hope that his scheme — if deemed to be ineligible and in breach of EC competition rules — will not mean that firms will have to repay the amounts of assistance approved. Perhaps the Minister would clarifiy that when replying.
I am also impressed at the speed with which payments will be made to firms by An Bord Tráchtála through a bank Giro system, that there will be no delay over the next couple of weeks, that if applications are received quickly payments will be made speedily, at regular intervals, thereby protecting firms at present experiencing difficulties.
The overall purpose of these temporary measures is the protection of employment and the business share built up by Irish firms in recent years. It is important also that our market share in the United Kingdom, in particular — penetrated by very aggressive marketing on the part of An Bord Tráchtála — be maintained. I can assure the Minister that firms are making every effort to visit their clients in the United Kingdom and elsewhere to ensure they understand the temporary problems Irish firms are experiencing. Even though the Minister aspires to having firms further reduce their costs, thereby becoming more competitive, I can assure her that they would be doing so in any case and that it is difficult to expect them to be more competitive than they are at present. The costs they must incur are largely those about which they can do nothing themselves but rather about which this House can do something. I am thinking of the costs of insurance, telecommunications, transport, all of which must be addressed in any case if we are to be competitive apart from any fluctuations in currency in the context of the single market and the aggressive competitiveness that will arise as part of the completion of that single market. I did say there were other sectors that would require financial assistance to which I might now refer in the context of the protection of employment and living standards generally.
I contend that mortgagors should be considered also. Though recognising that this does not fall directly within the remit of the Supplementary Estimate I might seek the Minister of State's assurance that the Government plan to bring about circumstances in which householders, mortgagors in particular, nationwide will also be considered for assistance when they have concluded their deliberations. Mortgagors should not be left hung out to dry by the Government in the face of a 3 per cent hike in mortgage interest repayments. I predict we will see further closures of firms if we do not implement the provisions of this scheme flexibly. We shall also see repossessions of dwellings if we do not ensure an important contribution in keeping mortgage repayments down. When one considers that a mortgage of £40,000 will mean an increase of £80 per month in repayments one readily appreciates the huge financial strain that will impose on householders. Therefore, it behoves us all to do whatever we can, particularly in the case of the Minister for the Environment, to ensure that building societies and financial institutions——
I might draw the Deputy's attention to the fact that that is not the responsibility of the Minister of State present.
I welcome the package introduced by the Minister of State. I am particularly impressed with the fact that it deals with current problems speedily, effectively and without bureaucratic delays. It would be my hope that the flexibility in its implementation assured us by the Minister's departmental officials will mean that sectors, apart from those directly in her remit, and apart from those subject to the 10 per cent corporation tax, will benefit from the £50 million fund. Therefore, it would be my hope that the temporary exposure of our economy to fluctuations in sterling and other European currencies will prove to be temporary and that employment opportunities painstakingly built up by firms over many years will be protected, allowing them to expand further on the completion of the internal market.
I welcome this Supplementary Estimate.
The Labour Party will not be opposing this Supplementary Estimate. It arises because of the need to fund a new market development fund for businesses that have been badly hit by the effective devaluation of sterling.
In general, the fund and the scheme behind it is a well designed one and ought to transmit money quickly, with the minimum of bureaucratic fuss, to where it is most needed. To that extent I commend the Minister on her actions in the drawing up of the fund. In particular may I say that whoever designed the various forms associated with the fund deserves congratulation. They are the clearest and simplest forms I have ever seen. I am quite sure they will be a welcome innovation for the people who are used to dealing with the ever more complicated world of Irish bureaucracy.
However, I do have some reservations about the scheme itself. It is as well that I place them on the record. For example, as I understand it, the scheme is aimed principally at labour-intensive businesses. But the criterion, if I understand it correctly, applied to measure the concept of labour intensity is a ratio of employees to sales of 15 per cent. Unless I am mistaken that will open the scheme to a great many businesses I would not have described as labour-intensive.
The scheme appears to operate on a sort of honour system. As far as I can see there is no in-built check that will ensure that the money being paid out will be used for intended purposes only while appreciating that the scheme was drawn up as an emergency response and that the Minister is anxious to avoid an over bureaucratic approach, it does appear to me that a very careful eye will have to be kept on this money once paid. If we have learned nothing else over the past few years, we must surely have learned how tempting it is to abuse public money when it is easily come by.
The major reservation about the scheme is that it is designed to help profitable businesses who have run into difficulties or crisis because of external factors which we hope will be temporary. The purpose of the scheme, put crudely, is to help them ride over those difficulties and return to profitability. If the scheme works really well in helping business to establish new and diversified markets, new sources of raw material and so on, it should help at least some of those businesses to become even more profitable in the long term than they are now. So far so good, but there is no provision in the scheme for pay back. Taxpayers are putting up this money, for a good and necessary purpose, but with no prospect of seeing any return on that money in the event that it helps to restore profitability in the businesses to which it is being given. That seems wrong in principle. In other words, this scheme would not have been designed and operated as a handout scheme. It should be a condition of the scheme that as and when businesses return to the level of profitability they have enjoyed, and especially if they succeed in increasing profitability, they should be required to make at least some contribution to the cost of the scheme.
It is also worth making the point that one of the principal reasons it is necessary to introduce this scheme is that since 1987 there has been a systematic dismantling of the existing agencies in the State sector which were geared and equipped to carry out the kind of rescue operation this scheme is aimed at. The destruction of Fóir Teoranta and NADCORP was carried out for ideological reasons. The folly of that destruction is becoming clearer by the day. There would have been no need for interdepartmental committees or new schemes like this if one of those agencies had been kept in place and operational. They would have had the expertise, the background and the personnel to get this scheme up and running quickly and to provide the advice that will undoubtedly be necessary in drawing up individual company plans. The Trade Board have never had that function in the past and their experience across the whole range of financial management, production and materials is very limited. It would be nice to think that sooner or later the Government would learn lessons from their past mistakes. There would be no need for ad hoc responses, no matter how well designed, if we had the proper structures in place to deal not only with crisis management but with ongoing development.
This is a debate essentially about the competitiveness of business in a small open economy. It is perhaps timely that it should take place the day before the Birmingham Summit. On the general issue of this Supplementary Estimate, the Government have been commended for recognising and responding quickly to the crisis facing small business. They have been further commended for making those arrangements without breaching the already established borrowing targets for this year. The signs are that even after the £50 million we are providing today is spent we will still end the year well under target.
In that context it is worth pointing out that the small business crisis is not the only crisis demanding urgent action today. We are debating an Estimate for £50 million to meet that crisis but we are still ignoring the many other crises that face Irish families. When will we have a Supplementary Estimate for mental handicap, for homelessness or to deal with hospital waiting lists? Why is it enough where hospital patients are concerned to produce glossy charters which fail to mention the six hours waiting time in casualty rooms or the hour and a half one must wait for an ambulance? None of these problems could be solved overnight by a Supplementary Estimate, but all of them could be alleviated to some degree without breaching the target for borowing. It gives some indication of the priority of the Government that a crisis facing business becomes an immediate preoccupation and that it is possible to and the money virtually overnight to deal with that crisis while the urgent and short term crises facing the wider society continue to be ignored.
The general issue of competitiveness is at the centre of this matter. The damage to Irish competitiveness was caused by an assault on national currencies which has done untold damage. It tells us a lot about the Europe we live in now and the Europe we need to build. The governor of the Central Bank said the other night that it is difficult to say what economic advantage flows from currency speculation. That remark might well qualify is the understatement of the year. The outburst of greed and avarice that dominated the financial markets in the past few weeks should not have been allowed to happen and should never be allowed to happen again. It became almost a war, with commentators employing military terminology to try to describe unfolding events. Who were the speculators who unleashed their greed on the financial markets? They were highly respectable and powerful multinational banks and other financial institutions, insurance companies and pension funds set up to ensure security for working people in the first instance. It would be interesting to know how much money Irish banks made from the many attacks on the Irish punt. Reports suggest that the British banks made more than £1 billion from bringing sterling to its knees. British pension funds have contributed to the thousands of job losses that may well flow from the damage to the British economy. If we suffer job losses here, how much have Irish pension funds and banks contributed to it through their speculation in the currency markets?
Let it not be forgotten that the philosophy underpinning this piracy is known and revered as that of free market forces. Whatever the markets do, even if it brings countries to the brink of financial humiliation, must be all right because, as they say, "You cannot buck the market," to quote the high priestess of this religion, the notorious Lady Thatcher.
There ought to be lessons in all of this. In the context of Europe the lesson surely is a simple one. The only kind of Europe that will work is a highly co-operative Europe. A Europe built exclusively on free market forces cannot survive indefinitely. A progressive Europe must by definition be a social and responsible Europe. A responsible Europe would be laying its plans now to ensure that greed and avarice, the desire of already wealthy and powerful individuals and companies to increase their wealth and power at the expense of those least able to defend themselves, should become a feature of history, not of the present or the future. Above all, we should remember that the Maastricht Treaty is not an á la carte menu. It falls unless it applies to everybody equally. European Union will not succeed unless it addresses the needs of the 16 million people who are unemployed in the Community, a figure which is still increasing steadily.
For as long as exchange rate stability and lower inflation are the overriding priorities of European economic policy, irrespective of the level of economic activity, uncertainty and unemployment will be the consequences. The Bundesbank which, in the interests of German unification, was prepared to accede to a one-for-one rate of exchange between the East German currency and the Deutsche Mark was far less accommodating when asked to reduce German interest rates to preserve sterling's position in the ERM. There ought to be a lesson in that for us who have become dependent on our link with the Deutsche Mark. Let us not kid ourselves that the Bundesbank is immune from politics or from political machinations, especially when it comes to preserving the German position at the top of the economic tree.
Many Governments, including ours, are coping with the severe adjustments necessary to stay within the ERM in the face of persistent speculation. The paradox for Ireland is that at very considerable social cost we have taken corrective action to reduce inflation and our public sector deficit. Those indicators are now close to the Maastricht conditions for European Monetary Union. As soon as we get there, we will find that interest rates are up 3 per cent, increasing the social and economic burden, and that they have to rise further to stay with the Deutsche Mark. On the other hand Germany's current deficit is well outside the 3 per cent target rate. If Germany was to fund more of the cost of reunification through increased taxation, German interest rates could be reduced, thus helping other currencies to stabilise, especially the currencies of those countres which have the so-called economic fundamentals right.
It is in the fundamental interests of those countries whose currencies are under attack to strongly urge Germany — and use the Birmingham summit to do so — to take account of the European implications of German economic policy. It is in our interests that Britain, as our main trading partner, should not be shunned but rather encouraged back into the fold. Unless we succeed in that as part of a more coherent European approach, we will have to face the issue of devaluation. We cannot continue indefinitely coping with the present distorted relationship between the punt and sterling. Our trading relationship with Britain is too important for us to be able to cope indefinitely with the artificial loss of competitiveness that arises from the collapse of sterling. As far as I can see, there is no political possibility of Mr. Major and the UK rejoining ERM without some movement in German interest rates.
Until the Danes and the UK pass the Treaty the current uncertainty will persist and sterling will remain outside ERM and will probably continue to fall in the medium term. That will force us to choose between devaluation or crippling interest rates. It is Hobson's choice. Interest rates at the current level are simply unsustainable. They have to be brought down and Germany has to be encouraged to give positive ledership on this question immediately. Otherwise, the special summit in Birmingham could mark the beginning of the break-up of the EC and not just the end of Maastricht. Without a reduction in German interest rates Irish rates cannot come down. The consequences do not appear to have been taken on board by the Government for a period beyond some three months. That would represent an unacceptable price for membership of any monetary union.
On the wider issue of the appropriate economic policies which EC countries should pursue, the most dispiriting indications are that European economies are preparing for yet another round of deflation at the start of next year. We badly need instead, a co-ordinated European reflation to ensure that the prospects of additional growth from monetary union will materialise. Otherwise, job losses here and throughout Europe will continue to spiral downwards.
We are addressing here in a somewhat peripheral way the fundamental issue of our competitiveness as a small, open trading economy in a Europe wracked by self doubt and uncertainty. Passing this Estimate will help for today, but we cannot address the deeper issues alone. To do that we need to build alliances with all the other countries of Europe who share our interests and use those alliances to hammer home the message again and again that there is no such thing as a two-speed Europe. Either Europe will work for everyone or it will not work at all. We have to think well ahead on this issue. The three months or six months period is fine. That is the time span envisaged by the Supplementary Estimate before the House, but where do we go from there? We have to review the position of our link with the Deutsche Mark. Is it really producing the dividends that we require? The Minister said that this approach had paid dividends. There have been dividends. We have a low inflation rate but it might not be so low when the new increased interest rates work their way into the index. There might be a major rise in inflation rates when that works through.
One very undesirable dividend we have from these policies is that we have 300,000 people unemployed, the highest percentage rate in Europe. That is something nobody wants and unless the Government seriously review their economic policies to date and insist on obtaining from the Germans what they have refused until now, a reduction in interest rates and a review of all exchange rates in the ERM, the prospects of bringing down unemployment will not be bright in the foreseeable future.
I welcome the Minister's proposal and any criticism or reservations I have is not intended to mitigate my admiration for the speed with which she, the Department and the other organisations involved have moved to produce a reasonably good scheme. The crisis we have has not materialised from the clear blue sky. It is clearly the result of a failure of politics both at national level and at European level. It is a nonsense having had almost 14 years experience of monetarism to continue to argue that we can allow the market in whatever commodity, whether in currency or anything else, to have a free rein.
It is unfortunate that only a short time ago the Taoiseach said in this House that intervention was not a policy which his Government would support. Of course, the pressure of events has ensured that the Government have had to intervene; and today we have a classic example of intervention to protect jobs and to protect markets, because it is clear that there has to be political intervention and political control over markets. They cannot be allowed free rein because we can see the misery that is created when they are given a free hand.
It is in that light that I want to say also that the speed with which Sir Leon Brittan, the Commissioner for Competition, moved to say that he felt that this scheme might be in breach of competition rules was quite astonishing. If the European Community and the Commission, and indeed the Council of Finance Ministers, had moved as fast when the currency crisis occurred, perhaps we might not have to introduce this measure in the first place. I hope that the Commissioner and the Commission approve this scheme and allow it to proceed in order to ensure that jobs in this country are protected.
The question arises of what the Commission are doing with regard to the interference with competition which the unilateral decision of the British Government to pull out of the ERM has created and the refusal of the British Government to support, for instance, the social chapter of the Maastricht Treaty that has created inequalities in competition within the European Community. They are things that perhaps Sir Leon Brittan should examine to see what impact they are having. They are presumably having a much greater effect than the injection of £50 million by the Irish Government into companies that are at risk in Ireland.
There is no doubt also that the problem has eased to some extent in the last week or so. The punt reached almost £1.10p against sterling about a week ago and it has now dropped to around £1.05 or thereabouts. However, we recognise that there are still a significant number of firms facing very great difficulties because of the increase in the value of the punt particularly in relation to sterling, although obviously it has increased in relation to other European currencies as well, and there are particular problems for companies exporting to Britain, where almost 30 per cent of our exports go.
It would be totally unacceptable and irresponsible for the Irish Government or for this House to block in any way the efforts being made to save jobs, given that we have in excess of 300,000 people already in receipt of unemployment assistance and benefit. But it has to be emphasised that the sole purpose of this money must be to keep jobs and to protect markets and there must be no question of it being used to boost profits. The most stringent possible safeguards should be introduced to make sure that it does not find its way into private bank accounts. Already there have been predictable calls from some of the employer organisations that there must be no undue red tape.
I would agree that there should never be undue red tape, but I am always suspicious of organisations or anybody else who believe that there is something intrinsically wrong with bureaucracy. Bureaucracy is there in order to make organisations work. The largest private organisations, multinational and national, have their bureaucracies and it is important that we recognise that bureaucracies in themselves are not wrong or evil or bad. It is only when they lose sight of their objectives and the purpose they are there for that they become an obstacle to progress. So I would urge that a jaundiced eye be cast on calls for no bureaucracy or the least possible monitoring of this scheme. It is important that it is monitored because, after all, it is public money that is being used to assist primarily, probably solely, private firms.
The current crisis must not be used either to allow firms to evade their responsibilities in relation to tax payments. Again there have been calls for the Revenue Commissioners to go easy on those firms which are facing difficulties. There should be no question of this. Tax liability only arises where profits are made, and the law must be enforced. If there are no profits there will be no liability for taxation, so there can be no question of the Revenue Commissioners going easy on them.
I note the reference to the requirement that companies' tax affairs should be in order, and that is correct. I note also the degree of flexibility there is in that wording. I do not suggest for a minute that jobs should be allowed to disappear simply because the management or owners of a company have failed to keep their tax affairs up to date, but I do believe that it should be necessary that where a company does not have its tax affairs in order they be obliged to do so within a certain period of time, say, two or three months, and that otherwise payments would stop. It is important that that criteria be tightened up at least to that extent.
I welcome the decision that has been made not to interfere with the employers PRSI as has been sought by some employers' organisations because I believe that any tinkering around with that system will only undermine the whole social insurance system. Despite claims by various employers' organisations, the fact is that in many instances PRSI is the only contribution to State funds that some companies make. Indeed it is also a fact, arising from a question answered by the Minister for Social Welfare last week, that we have one of the lowest rates of employers' PRSI in OECD countries. We have a level of 12.2 per cent compared to 15.4 per cent in Norway, 17.8 per cent in Germany, 30.3 per cent in Spain, 33.2 per cent in Sweden and 38 per cent in France. It is important that this spurious claim that in some way employers' PRSI is crippling Irish industry is finally knocked on the head. I welcome the fact that the Department of Industry and Commerce have not gone down that road of relieving employers of that obligation.
It is also important to recognise that the question of payment to employees should not be under threat as a result of the current crisis. In fact I would argue that the Department and the Minister should insist on the involvement of employees of these companies in some way in monitoring the application of the money and in monitoring the progress that is being made in the use of the money in protecting the jobs, because if a company does go out of business — and no one wants that to happen — at the very least the owners of that company will have assets to dispose of, but generally the workers who will be thrown out of a job will have no assets.
There is a lot more I want to say on this but I realise my time has run out. I would urge the Minister to take the opportunity to report back to the House here at an early date on how the scheme is progressing.
The impact of the current crisis on the economy of this country is almost certainly as serious as any other event in recent history and demands a response from the Government which is firm, decisive and far-seeing. Admirable though the sentiments behind the setting up of the fund may be, it appears on examination to be a hastily devised concept put together without any great thought as to the further implications of its provisions and which will divert attention away from the real problems which the Government have continually refused to face.
To begin with, the market development fund poses as many questions as it answers. The very name is the first piece of misinformation. The purpose of the fund is to support those exporters who have found themselves exposed, principally in the UK market, as a result of being inadequately prepared for the drastic change in the relationship between the punt and sterling. Far from being a development fund the moneys now being sought for the Department of Industry and Commerce will be used as a rescue package for the firms which I have just described; at best it is hoped that it will assist them to maintain trading viability and to stave off job losses. The fact that applicant companies are in danger of being forced out of business does not appear to be reflected in the title.
Can the Minister tell us what exactly is meant by "manufacturing companies"? Is it the stereotype picture of a company based on a production line with three dimensional product packed into a cardboard box at the end of the day for shipment abroad? While that is a valid interpretation to put on the term it surely cannot be the only one. It seems to be an old-fashioned concept and fails to take cognisance of the manner in which our export trade has ended and diversified in recent years. While companies manufacturing a physical, indentifiable end product still form a significant proportion of our exporters they are far from being the only ones.
Has the Minister given any thought, for example, to the many companies engaged in the service industries where the product being exported is in the form of technology and expertise? We have a sigificant business in Ireland involving the selling abroad of engineering and architectural services and these can generate important earnings. They are also labour-intensive and would consequently react in a very volatile fashion to conditions which would impact on their foreign currency earnings. Forward planning is a vital component in this work and because of the time-scales involved it is necessary to tie down a financial commitment well in advance of any work actually carried out. It is easy to see the impact that the recent currency crisis would have on such companies which would have no other means of redress with their overseas clients. Does the Minister see the market development fund catering for such companies or do they not come under the heading of "manufacturing companies"?
There are many other areas where firms and businesses providing services will suffer losses due to advance commitments regarding payment in a currency other than the Irish pound. We have many computer service companies which do the bulk of their business abroad selling Irish technology and expertise in what might be termed "invisible exports". Does the Minister envisage that such companies, the bulk of whose spending would be in labour costs, may now be classified as "manufacturing companies" and came under the terms of the scheme?
While on the subject of "invisible earnings", can the Minister say what plan she has for the largest industry of all to be affected by the currency crisis but which does not appear to be covered by the market development fund? I am referring of course to the tourism industry which is the largest single foreign currency earner that we have and which could well be devastated by the currency events of recent weeks. The tourism industry in Ireland is based largely on people and is probably the most labour-intensive industry that we have and, potentially, it holds out greatest hope for job creation in the future. Yet ironically, it does not appear to qualify for support in this instance. If this is allowed to happen it will be catasrophic.
The current year, poor though it may have been in terms of earnings, is now part of history and already commitments for both next year and 1994 are being made. The Government's approach towards the tourism industry needs to be examined in the light of its potential for expansion and future growth and this should be done irrespective of the events which now force us to look at the industry in the light of sterling's collapse. The United Kingdom forms a significant sector of the incoming tourist market and anything which would adversely affect the spending power of the visitor while in Ireland must be examined and analysed in great detail. Experience has taught us that the tourism market in general is an unstable one at the best of times and subject to many external influences. Because of this it is imperative that we adopt an overall integrated approach to every aspect of this trade.
I would also like the Minister to comment on the criterion for eligibility for assistance under the fund by which the net trading balance of the applicant company, that is the balance between export sales with the United Kingdom and imports into Ireland, must exceed 35 per cent of total sales. If the figures released by the Confederation of Irish Industry recently are to be believed there must be a great number of applicant companies which will fail to qualify under this heading, irrespective of how they fare in either of the other two categories. The CII figures show that the export-import ratio for the 12 months ending in June last was 123.5 per cent; in other words, we exported 23.5 per cent more than we imported. Taking this as an average figure we must query the reason a minimum of 35 per cent net trading balance was set as a qualifying criterion when the average for the country as a whole is only slightly more than half that figure.
Can the Minister state the reason the figure of 35 per cent was chosen as the lower limit for qualification in category A and what percentage of all companies applying for assistance does she expect to quality in this category? The Minister might also explain how the criteria of 60 per cent and 35 per cent net trading balances for categories B and C respectively were decided upon.
In the absence of any explanation in the guidelines document, another point needs to be clarified. The market development fund proposed to provide assistance in the form of a grant which will not exceed the equivalent of £50 per week per eligible employee for a maximum period of six months. One of the criteria for eligibility is that total labour costs must be at least 15 per cent of sales. Can the Minister say whether she considers that this might in fact be a penalty against a company with high sterling earnings in a less labour-intensive environment?
In the overall context of this proposed fund, there is a strange irony which could only be conceived and instituted by the Government and that is that we are now being asked to fund a rescue package by the Government to help businesses in trouble because of the lack of action, even apathy, on the part of the same Government.
One may pose the question how serious is the problem? In recent days I have sought the comments of companies in my own constituency of Tipperary North and the mid-West region. A company with over 200 employees has said:
Quite bluntly, we will not survive if the present exchange rate between the punt and sterling continues. We sell 90 per cent of our output to the UK with a margin of 5 per cent to 8 per cent which is being completely eroded by the currency differences.
Another company with a workforce of more than 200 has said that the present impositions on the company's profitability due to the currency problem are unsustainable and threaten the short to medium-term viability of the company if drastic corrective measures are not taken.
I have determined from a number of companies in the region that they see the Government's role as carrying out a realignment of the punt with sterling either inside or outside the ERM or, failing that, taking up the full extent of the exchange loss suffered by companies trading with the UK using the mid point of the band that sterling and the punt could float relative to each other within the ERM as the base. A further alternative suggested by the companies I surveyed was the provision of a cash support system for the exploration of new markets outside the sterling area. A fourth alternative suggested was a short term reduction in employers' PRSI or the abolition of PRSI in manufacturing industry as recently proposed by Fine Gael.
These might seem drastic solutions and so they are, but we have a drastic situation. The people at the cutting edge of industry and business recognise the need for courageous and decisive action. It is highly significant that none of the companies came up with a suggested solution similar to that now being proposed by the Government.
I should point out that the Irish companies in the region to which I refer and which are affected by the currency crisis constitute 75 per cent of total employment in indigenous industry in the region and, consequently, their views must be taken seriously. There can hardly be a more valid viewpoint than that of the people who are most directly affected by the crisis. The enormous difficulties created in this situation may well prove in many cases to be the financial straws which finally broke the camel's back.
Who can deny that the costs associated with the plethora of legislation in recent years have been an intolerable burden on a great many companies and businesses? We have had legislation relating to environmental protection, health and safety in the workplace, product viability, fire and chemical control, company and private taxation and many other orders and regulations all of which are eminently desirable but which place an almost intolerable burden on many companies, not merely in financial terms but also in terms of the amount of personnel hours consumed in the bureaucratic paperwork involved.
What has happened in effect is that a large segment of the work of the Civil Service has been transferred to the hands of private industry. Whatever about the ethos of this, the next effect is the creation of enormous difficulties for companies, in particular new companies and businesses. The first basic principle in relation to industry now appears to be "thou shalt not do this until you have completed the paperwork".
The increasing complexity of running a business and complying with all the requirements is often a deterrent to small companies starting up and I feel not enough attention is being focused on this matter.
The Finance Act, 1992, contains 268 pages and is a minefield in regard to interpretation for the average person. An increasing layer of stumbling blocks is being placed in the path of most businesses, instead of encouraging people to find their own place in the framework of Irish industry. Indeed, a major criticism of this fund is that it represents merely the introduction of yet another layer of bureaucracy. The Government should carry out a major study of possible ways in which a more favourable climate for start-up industries and businesses could be created.
In conclusion, I should like to ask the Minister what sectors of Irish business life are covered by the fund. What exactly is meant by manufacturing companies, and does the Minister see the services sector as part of this? What strategy has she developed or is she developing, in relation to the tourism sector, which will be especially hard hit by the currency crisis. Finally, will the Minister outline the basis on which the criteria for eligibility were established and the percentage of the companies applying for assistance she expects to qualify?
At the outset, I should like to join other speakers in welcoming the introduction of this new market development fund. It is envisaged that £50 million will be available over the next six months to assist many of our industries which have been affected by the recent currency crisis. This debate gives us an opportunity to congratulate the Minister of State at the Department of Industry and Commerce, with special responsibility for Trade and Marketing, Deputy O'Rourke, for her involvement in the establishment of this fund and her obvious personal commitment to its introduction. Having regard to the industrial base we have established through sheer hard work over a number of years, it is regrettable that companies could be so savagely exposed because of events in financial markets which are largely outside the control of our people in the Department of Finance. Effectively, they are being put out of business overnight. I welcome the fact that decisive action has been proposed and will be taken to deal with this problem.
I am glad to see the use of the word "flexibility" at various points in the Minister's speech in regard to the operation of the scheme. I am sure it is not possible to accurately gauge at present the different sectors that will be directly affected. Certain industries come to mind but, inevitably and invariably, there will be industries which will not spring to mind immediately. For that reason alone, it is important that the management committee adopt the most flexible approach possible towards the implementation of the fund. Naturally, there will be the guidance of the eligibility criteria but, in all companies there will be a varying degree of impact depending on the financial structure, the number of employees and the percentage of exports to the UK.
The Minister mentioned the option of devaluation, and the obvious implications for our economy if we went down that road are clearly set out in her speech. The cost of servicing the national debt would increase by £1 billion per year. Over the past four or five years we have made considerable progress in regard to our borrowing requirement and the national debt problem. At the same time we have made significant moves in the direction of tax reform and tax reduction. However, devaluation would be a major setback to the financial position of our economy. A total of £8.9 million of our national debt is denominated in currencies other than sterling. There would be real implications in those areas if we opted for devaluation.
The Minister also stated that our dependence on the UK market in regard to exports has been reduced from 61 per cent in 1972 to 32 per cent in 1991. If we want a clear vindication of our original decision to enter the European Community, it is evident from those figures. This clearly underlines the progress we have made in the area of market diversification. It is also a tribute to companies who have foraged for new markets and to the State agency who have been to the forefront in helping to forage for those new markets. We wish them well in their continued endeavours in those areas.
I note that in 1991, 43 per cent of our net output in regard to indigenous industries went to the United Kingdom, and this is one of the obvious areas in which we are seriously exposed. Many of the industries involved have grown up in recent years through sheer hard work and commitment. In such circumstances, one inevitably looks to examples in their own area. The mushroom industry in Counties Cavan, Monaghan and Louth has grown enormously over the last ten years. I do not wish to advocate that there should be an MCA provision for the mushroom industry because, while there might be a benefit in the short term, there could well be a downside to that arrangement because it could level the playing field, as it were, for others in the UK market. That industry depends to a large extent on the fresh mushroom market in Great Britain to where we export approximately 16 per cent of our produce. That is significant market penetration by any standards and that achievement over the past ten years is a great tribute to one, two or, perhaps, three pioneers who have adopted a foraging marketing approach to the selling of their produce, with an ensuing benefit to those in the primary production and supply sectors of that industry. I am sure this is one area in which the Minister can anticipate applications for financial assistance.
Any currency fluctuation or variation tends to affect my constituency of Louth in different ways. In the mid-eighties, Dundalk, which is the largest provincial town in Ireland, was virtually for sale because of the seepage and slippage of trade north of the Border due to the price differential that existed at that time. There is no doubt that with the changing financial situation of recent weeks shoppers will be attracted across the Border. In the eight or nine-week lead-up to Christmas there will be an intensification of shopping and our loss will be all the greater. Obviously, there is no ready-made solution to the problem, but it is right and proper that the social problems people in trade and businesses in towns such as Dundalk, are experiencing is underlined in the Houses of the Oireachtas. Regardless of whether it is trade and commerce or industry, it is important to be able to accurately predict the position for the future, and in making investments, to be able to plan with a reasonable degree of certainly.
There are obvious difficulties for people running businesses which will be affected by the fall-off in trade. In recent times we were delighted at the tremendous surge of industrial development in the town. This has created a mood of optimism and has given renewed hope for the future. Naturally it will take some time for the impact of those industries to be realised but we are glad that the rate of recruitment in many of them is being accelerated. In a year or two the number of people on the unemployment register in County Louth will be considerably reduced as a result. In every town and every area the pattern is similar and those in business and commerce are benefiting. I hope this trend will not change as a result of the currency difficulties.
The recent currency crisis underlined the strength of our economy, as evidenced by the fact that we were able to withstand the turbulence in financial markets. I am sure it will take some time for the analysts to identify the real cause of the problem but I hope they can bring forward the necessary recommendations to deal with it both in the short and the long term.
Opposition Deputies feel it incumbent on them to nitpick on many issues. A precedent was set by Deputy Charles Haughey of opposing everything, including the Anglo-Irish Agreement, when Deputy Garret Fitz-Gerald was Taoiseach. However, that is not my style. I unreservedly congratulate the Government and the Minister for their initiative in reacting so positively to industry. That is a matter that should be above politics. The swiftness with which the Government have reacted to the crisis should be acknowledged by every party, and I do so unreservedly.
While there is a national crisis, I have to view it from a parochial perspective. We have witnessed a crisis on a smaller scale for the last 23 years, without any recognition of the difficulties by the Government of the day, including my own party. Perhaps this was the core of my difficulty with my party in the early years when I was a Dáil Member. The suddenness of the collapse of sterling was something that no Irish Government of any persuasion could have anticipated. The uncertainty of many of the economies of Europe at present is of great concern to all countries in the European Community. For that reason we should promote, as far as possible, the idea of a European central bank to prevent distortion of the various money markets.
In providing the money, which is very commendable, I do not believe that at the end of the day the whole £50 million will be expended because it is restricted to firms in the 10 per cent corporate tax bracket who have no insurance cover. If we cannot harmonise tax and excise duties on both sides of the Border, which has been a particular difficulty for many retailers and manufacturing firms in the Border regions in the last few years, this provision, albeit on a smaller scale, should be a permanent feature of economic life in those areas. I am sure there is not a Deputy in this House who would not acknowledge that the Border region has for the last 23 years been an economic wasteland, resulting in the depopulation of towns of Dundalk and Drogheda.
I would like to see a mini-plan in position. Dundalk is the first town to feel the impact of the present crisis. Many of the industries that have survived in the Border regions depend exclusively on exports to England. When this crisis has subsided the Minister should consider the need to stimulate and help hard-pressed businesses in the Border areas. Some kind of rescue operation should be undertaken for retail traders who employ a significant number of people. With the weakness in sterling and the approach of Christmas a veritable avalanche of people will descend on the North to buy the variety of attractive goods that will be on offer there. In recent years in Dundalk we have seen a haemorrhage of funds to the North of Ireland. As Deputy Kirk has said — and I accept this — that trend has slowed down in the last year. The economic life of Dundalk in particular has improved as a result of the narrowing of the differential between the punt and sterling. However, this sudden crisis will result in further difficulties for those traders who have managed to survive — many have not survived — in the Dundalk region.
Like all the other Members of the House I welcome the initiatives taken by the Minister — the role of the Minister of State in this matter is also welcomed. They have the full support of the House. We are all aware that some sectors have been hit worse than others, mainly those involved with the sterling link such as the food processing and clothing industries. These industries have been hit directly but other industries will be hit just as hard in the not too distant future. The tourism industry will be hit next year if the present rate of exchange continues. That is a matter that will have to be considered down the road in terms of assisting that industry.
It should be made quite clear that this provision is not a free lunch for people in the export business. The money is being given to tide them over a bad patch and they should not look forward to it as an annual bonus on top of their ordinary income. I refer particularly to the mushroom industry, an industry that has been hit very hard because its market is totally concentrated on the UK. While this money may help tide them over the short term problems, the industry will have to concentrate on new advances in technology, market development, market-driven processing and more streamlined costs. The industry must look at these matters.
Many of the companies involved in the clothing industry — there is one in my home town — will be very badly hit by the exchange rates because of the fact that their business is 95 per cent concentrated on UK multiples who buy and agree prices in advance. This sector is badly hit because of its density of employment; its major cost is labour, and I hope it will receive sympathetic consideration from An Bord Tráchtála. Deputy McGahon also referred to this point. The Government acted before people realised what was happening, they appreciated the problems and stepped in to bridge the gap but, in doing so, they are not giving a firm commitment to those people. We are trying to help people to develop other markets and the one lesson which can be learned from this crisis is that industry should not place all its eggs in one basket. They should try to ensure that the income from their sales is spread in hard currency. They must take that sort of initiative and I hope that the moneys provided by this scheme — or at least a major proportion of them — will be put into developing new markets in the hard currency area.
We must now look to continental Europe instead of the UK. There has been very satisfactory trading with the UK over the years, mainly because they are our next door neighbour; transport costs to the UK are much less than supplying continental firms. Because of the strength of sterling vis-à-vis the Irish pound for the past number of years it has been seen as a place where if you only had the sterling difference as your margin of profit, profits were satisfactory, especially if you bought in volume. However, the deficit is now 15 per cent in relation to many of those industries, they have lost the sterling exchange rate profit and their imports, prior to manufacture, have also increased. They are finding the going very tough.
The food industry should learn one very sharp message from this — they should go to mainland Europe where there are better prices as long as you provide a superior product. The co-operatives who concentrated on mainland Europe will weather the storm better than those who concentrated on the UK market. That short term strategy is coming back to haunt them.
I am aware of a number of timber processing industries who have recently been selling to the UK. It was a very tight market in which they sold when the exchange rate was much better. They have now been caught because they were not in a position to hedge in regard to forward selling of their sterling income. That was because the British building industry is in such chaos at present that importers to the UK were not prepared to give long term contracts; it was done on a once-off basis and every load was sold on the basis of the last one having been sold by the retailers in the UK.
A suggestion was made recently that Coillte would be a beneficiary of part of the funding which might go to these processors. I hope they will not benefit because it is not fair that a State guaranteed organisation should look for money from this fund which is available to help front line leaders in the marketplace in regard to selling products. I am not referring to selling raw products, I am talking about processed goods and I hope the Minister will examine that matter. In this scheme the progress which can be made in regard to developing new markets should be taken as the criteria in relation to any further grants which might be made to industrialists. If a certain percentage has not been put into developing further markets there should be a small penalty clause. Of course it should not be a big penalty because that could mean the difference between staying in business and going to the wall. The labour intensive industries should now move out of their traditional markets and into mainland Europe where there is a market for our superior products, which we can supply, and on which we should concentrate in future.
The hard lesson has been learned and many people will feel the effects of the sterling crisis, particularly in regard to interest rates on their mortgages, and job prospects. Many people face short term redundancy but, if that is the case, their employers should be asked to concentrate on developing new markets in mainland Europe. Anybody in industry here at present who has more than 50 per cent of their business in the UK — or in any single market — is at risk.
Once again I compliment the Minister of State for the action she has taken in leading this programme. The fund will do an enormous amount of good in helping people to develop new markets, to help to concentrate on maintaining employment and to keep people in jobs. If we are serious about long term development and creating jobs, we must be prepared to help people in this crisis. The moneys from this scheme could be the difference between someone being able to stay in business or closing down. Everyone is well aware that it is far better to pay somebody to work than to give them social welfare to sit at home, which would have happened if the Government had not taken action in regard to this matter. I hope the Minister's Department will concentrate on people who have become dependent on the UK market to seek wider markets in mainland Europe. We are all good Europeans and we should exploit these markets fully.
I also welcome the establishment of this fund which is a Government recognition of the problem facing many companies, particularly those who had a high dependency on the UK market. However, I share the reservations which have already been expressed. I would like to think that the Minister will take them on board in a constructive manner and consider them in an analysis of the scheme. Many of the regulations will exclude a number of companies, particularly small businesses, which perhaps do not have the required percentage of exports to the UK but for whom continuing access on a profitable basis to the UK market will be significant in determining whether the company will survive.
There must be an inbuilt flexibility which is not in evidence on the application form. The Minister must ensure that no firm will be excluded from benefit because they do not have access to the required percentage. The ultimate deciding factor in the Government's determination of whether a company should have access to this facility is the cost to the Exchequer of maintaining a number of people in employment by providing access to the scheme, as opposed to the cost of paying those people unemployment assistance or benefit. Unemployment is surely the single biggest crisis facing this country and it would be pointless to have the IDA and other State agencies doing everything possible to create new jobs without placing a similar emphasis on job preservation. It would be wrong for this scheme, which is essentially about job preservation, to turn its back on certain firms because they do not meet certain criteria laid down for qualification for the scheme.
A simple analysis of the currency crisis would be that firms exporting to the UK have had their margins completely wiped out. There is a possibility that markets in this country which are supplied by Irish industry will be undermined by exports from the UK in particular. Another possibility is that other markets outside Ireland and the UK will be undermined by cheap exports from the UK.
Several Deputies have referred to specific industries about which they are concerned. The previous speaker mentioned the food and clothing sectors. In the time I have available to me I should like to dwell briefly on the problems facing the timber industry, particularly as a result of the currency crisis.
The timber industry is a rural employer and I am sure that the Minister is familiar in her own constituency with the problems confronting the industry at present. Approximately 1,000 people are employed directly in sawmills throughout the country and about 12,000 people employed indirectly in nurseries and in the provision of other ancillary services to the sawmilling industry. That is an enormous amount of rural employment, which, if undermined by the present currency crisis in hard-won markets secured by the timber industry, particularly in the UK, will be lost and gone forever. It is essential that access to the new scheme be given to the timber industry regardless of the criteria that has been laid down. That access must be available in order to ensure that the industry is able to hold on to hard-won UK markets.
By nature, the timber industry is a high-volume, low-margin industry. It has high fixed overheads. The 3 per cent increase in interest rates will have a significant impact on the continuing viability of many of our sawmills. Serious structural problems in the timber industry are being overcome in a planned manner by the Irish Timber Council. I am sure the Minister is aware of the plans of the council in that direction.
Unless many companies involved in the timber industry are able to gain access to the new fund the present currency crisis will make many of them no longer viable. It is because many of the industries to which I refer will not meet the required criteria that I plead with the Minister to make sure that flexibility is built into the system. Without Government backing many of those industries will have to close.
One problem faced by the timber industry is the Coillte monopoly on the sale of logs in this country. Because it has been proven that the price of logs in Ireland is significantly higher than the price paid by manufacturers in other countries I appeal to the Minister to intervene directly with Coillte, even for the present period of difficulty, to ensure that Coillte give consideration to the crisis facing the timber industry.
It is essential that our timber industry be able to hold on to hard-won export markets which are now being undermined. I make a particular appeal for the timber industry, which, I know, is a significant employer in the Minister's own constituency. I ask that the Minister pay special attention to that industry.
If the House is agreeable, I should like to share my time with Deputy Tunney.
Is that proposal agreed to? Agreed.
I should first like to congratulate the Minister and the Government for so rapidly bringing forward this scheme in an effort to help exporters who have been hit by the currency crisis. I was particularly impressed to hear that the scheme would be flexible and would not be tied up or delayed by red tape and bureaucracy. I have discussed the matter with several exporters and I am now very much afraid that some people who are in serious trouble may be disqualified from eligibility to this scheme by rules and regulations. I shall use two firms as examples to illustrate my fears.
The first of the two firms, which I shall call firm A, employ about 80 people in the manufacture of children's clothes for export, mostly to the United Kingdom. Orders from the United Kingdom come primarily from large chain stores. Firm A also sell to Irish customers such as Dunnes Stores. The list of conditions quotes percentages of not less than 60 per cent in one part and not less than 35 per cent in the other part. On first examination, firm A qualifies with more then 80 per cent in the former category. However, they are a couple of points short when it comes to the latter figure, notwithstanding the fact that the currency crisis poses very severe problems. The main Irish customer of firm A, Dunnes Stores — who, incidentally, showed marked preference for Irish goods, unlike some of their competitors — are now able to buy goods more cheaply from the UK and have consequently demanded discount to take into account the cheaper cost of imported raw materials. Firm A have already been hindered from expanding a potentially lucrative export market by a lack of finance from the banks and other institutions and have had no encouragement whatever from the IDA and other State bodies. The fact that the firm deal mostly with chain stores and consequently have a very tight profit margin means that they are now seriously at risk. Surely under such circumstances we cannot insist on an "all or nothing" approach so far as percentages are concerned, especially in relation to marginal differences.
The second of two firms, firm B, is involved in the food manufacturing industry. This Donegal company employ 150 people and export their products to more than 60 countries. Firm B failed to meet the criteria set out in the second category in so far as the combined total of their home and UK sales, less UK imports, is only about 57 per cent of their total sales. However, if their worldwide sterling sales are added, as was encouraged by the Government, the percentage would increase to more than 70 per cent. The Government encouraged firms to seek markets outside of the UK, which firm B have done. The company are facing the same competition from UK manufacturers in those markets as they are in Ireland and the UK, and now estimate that at least 30 per cent of their total business is at risk. Without immediate help, which can be provided if a degree of flexibility is shown in the implementation of the new scheme, the livelihood of those concerned will be at risk within the next few weeks.
I strongly urge the Minister to be flexible in the criteria laid down for the new scheme. I would be prepared to bring representatives of companies such as the two I have mentioned to meet the Minister if such action was required. Donegal has a bad enough employment situation as it is without even more jobs being put at risk. The two firms I have spoken about today are firms that are rooted firmly in the community; they are not fly-by-night multinational companies whose fortunes are dictated by a board in Pittsburgh, San Francisco or elsewhere. The future of those two firms will be decided by this Government, in Dublin. I appeal for a flexible approach in the implementation of the fund.
Deputy Tunney now has five minutes available to him.
My count would give me a little more time.
Deputy McDaid has already spoken.
He was in possession for four minutes.
The Deputy has six minutes.
I join a procession of speakers who have, understandably and deservedly, expressed thanks and praise to the Minister present, Deputy O'Rourke, and I would be happy to anticipate that such compliments, coming from all sides, will not fall too heavily on her delicate ears.
This is a most welcome scheme, which demonstrates the Minister's sensitivity and sense of responsibility in respect of the plight that has fallen on industry and on the people who work therein. Naturally one is given to making a case on what one knows, and here, I would hope that in my constituency where, unfortunately, there is a very high incidence of unemployment, the spirit of the scheme rather than the letter should be applied, and that when all of us plead on that basis to the Minister she will apply the same sympathy and sensitivity to our requests as she has done in respect of the global action which has been referred to here.
I would ask my colleagues from all sides of the House to step a little further back from our utterances and pleadings for the industrialists in our constituencies and examine the unfortunate raison d'etre of the action that has been taken and to look at the root cause of it. For many years most people here, particularly myself, would have been very critical of a political ethos and idealism which was described as socialism in excess. We all know that excesses in anything are always unattractive, unwelcome and prejudicial to the legitimate interests of other people. Thankfully we saw an end to what was described as communism and extreme socialism. People from all over the world, including Ireland, rejoiced because we had evidence that in the pursuit of that ethos there were grave injustices. We should look at what has replaced it — capitalism and the power that comes with money and finances. What we are discussing here and what we should be treating with much more consideration are the excesses of capitalism and how that has interfered with the lives of every person in our country, directly or indirectly, and whether we should challenge the right of people who describe themselves as financiers to play around with money which is, in essence, the lives, the fortunes and the health of everthing affecting the human being and whether we should be crying “stop”.
Is it fair or just that any one person in the exercise of what he regards as his freedom should engage in an operation which allows them to trade in the fortunes of people and provide for themselves a licence to indulge in a lifestyle that is obnoxious and an affront to the rest of humanity. That is the most urgent problem we have today.
It appals me when I see on the television screen the representatives of these people full of excitement, giving the impression that what they are doing is vital to humanity when, in essence, it is vital to a small corps of people——
Themselves.
——who are completely insensitive to rights, freedoms and justice for mankind. To me they are more treacherous, and more intimidating and should be a greater cause for attack by us than, perhaps, communism or extreme socialism ever was.
Tá mé buíoch díot, a Chathaoirligh, gur thug tú ar deís dom labhairt. Tá a fhios agam go bhfuil mé fós taobh istigh den am a bhí tuillte agam, ach fágfaidh mé mar atá sé.
I congratulate Deputy Tunney on his contribution. He could not have made a better case against the unacceptable face of capitalism. I would like to put it on the record of the House that I agree with every word he has said. I am very pleased also to associate myself with the remarks made by Deputy McDaid regarding the need to safeguard employment in our indigenous industry. His remarks about multinationals being fly-by-nights is well merited and a matter to which I intend to refer.
I should say the Green Party support this emergency aid provided for in the Supplementary Estimate. I am sure all Deputies will try to rally around to minimise the serious job losses we are facing. However, we should not have allowed ourselves to get into this position in the first place.
It has been the policy of successive Governments, to which all the major parties in this House have, at one time or another, been part, to systematically dismantle our indigenous industry which was carefully and painstakingly built up by Fianna Fáil in the thirties. Our textiles, footwear, tanning, paper and board industries have all virtually disappeared I sometimes think we suffer from delusions of grandeur. We are a very small country in terms of population and natural resources. We are a very small player in the world economic stage. The going will always be tough and the road will always be hard irrespective of what economic policies we pursue. However, I maintain we have taken the wrong road in the way our industry has been structured. Obviously total self-sufficiency is impractical for a country such as ours but that does not mean we should not try for a reasonable level of self-sufficiency. Obviously we do not want to produce goods, particularly food, which are unsuited to our climate. We will always require substantial imports of a wide range of goods which clearly must be paid for by exports. Therefore, some of our industrial effort must go into exports.
We have become much too dependent on industrial exports. What makes the situation even more unstable is the fact that most of our export industries are owned by multinationals. Surely it is time to realise how volatile these companies are. They come and go on what appears to be a whim leaving economic and social devastation in their wake. When will we have the courage to shout "stop"? When will we make an effort to redevelop our indigenous industry? I had great hope following the change of leadership in Fianna Fáil that we would see a change in policy. I would remind the House that it is less than a year since the Taoiseach — then languishing on the back benches — stated very clearly that we needed such a change. In a speech made before Ogra Fianna Fáil in Limerick last October, the present Taoiseach stated: "Creating a native industry base takes longer, is slower and perhaps is not as glamorous as announcing an American firm with 1,000 jobs but it is the only way in the end". We in the Green Party have been saying this for years but no one listens. Perhaps this time the Minister will listen and take some action.
A modest improvement in our industrial situation could be achieved by adopting the main provisions of the Culliton report regarding the reorganisation of the IDA. Unfortunately, the Government appear to be split on this issue and have vacillated for far too long. The fact is that the policies of the IDA have been an unmitigated disaster for this country. They have absorbed a huge amount of public money but there has been no resultant increase in net employment. If the Government are unwilling or unable to change the way in which the IDA work, they should close them down. Some of the money could be used to set up a different type of authority to finance, preferably by way of interest free loans rather than grants, small family businesses and workers' co-operatives. The story everywhere in the world is that jobs can be created much more easily and at much less cost in small industries than in the large capital intensive multinational industries which we in this country not only tolerate but encourage. This policy must cease; it is economic madness.
The IDA's brief from successive Governments to attract foreign industry has cost the taxpayer in excess of £500,000 per job. The cost of the IDA from 1980-90 was £1.6 billion. Surely this is a damning indictment of the failure of our industrial policy during the eighties and thus far into the nineties? It should also be realised that much of the relative prosperity in Ireland and in countries throughout the developed world is based on the profligate exploitation of the world's raw materials and a gross waste of energy generated from fossil fuels. Clearly our limited prosperity is not soundly based and is unsustainable. Unless we mend our ways, the fallout when the oil and coal stocks run out will be horrendous. Let there be no doubt about it that it is not a case of if but a case of when. If we in this country and people in other developed countries were to make a fresh start to discourage the over-consumption of consumer goods by simplifying our lifestyles, carrying out a crash research programme into the development of renewable energy and discouraging unnecessary world trade, we would make the transition that much easier.
Another matter which impinges on the success of our industrial and agricultural sectors is the banking industry. So much still depends on the support — or lack of support, as the case may be — of the banking system. Apart from the very high interest rates now being charged here there is also sufficient evidence to indicate that the banks are operating a major credit squeeze on small businesses. As I said earlier, these are the businesses on which the economy will become increasingly dependent to provide jobs. The Government have now exacerbated the situation by their proposal to privatise the ACC Bank. It is essential at a time of near national emergency that the banking system be used for quasi-social purposes to assist genuine viable industries which have temporary cash flow problems. It makes no sense at all for small industries, some employing five, ten or 15 people, to be closed down by the banks for the sake of a few thousand pounds when at the same time the Government are dishing out millions of pounds to foreign multinationals. By allowing this privatisation, the Government are restricting their manoeuvrability in this area and will clearly be unable to help these small firms. However unpalatable ideas might appear at first sight, I appeal to the Minister to at least show the courtesy of giving them some thought.
When a Supplementary Estimate for the Department of Industry and Commerce is brought before the House everyone is anxious to make a contribution on how jobs can be created, how our unemployment crisis can be solved and what action the Government and the various State agencies should take. A recent issue of Business and Finance carried a headline which read: “300,000 coping with the unemployment Crisis”. In the short time available to me I should like to make some points based on the experience so far of the Oireachtas Joint Committee on Employment.
This committee have concluded their first report. Having consulted with the IDA, the Department of Industry and Commerce, the Department of Finance, local authorities, the banks and a wide range of other interests the committee came to some immediate conclusions and also decided that further study was needed. They concluded that there was a very severe shortage of equity for job creation in small industries, to which Deputy Garland has also referred, and that there was potential in that sector. They discovered that the IDA had effectively moved out of this sector and that FÁS had no role to play in this area. It became obvious very quickly that there was a major gap in terms of supporting small companies. I compliment the Taoiseach and the relevant Ministers on their quick reaction to the equity for jobs fund recommended by the committee. This is a positive and practical step forward which I hope will be implemented as soon as possible.
The county development teams will need some very decisive hands-on political management if they are not to be caught up in bureaucracy, red tape, more committees, more reports and more documents. All Members of this House will have to ensure that the committees which are set up in their areas are managed by decisive people and that they are given a positive role. A stop will have to be put to such pigeon-hole mentality as "This is my patch, I make the decisions here", regardless of whether we are talking of county managers, FÁS area managers, county development teams, etc. These people who are in State employment need to recognise that positive action must be taken to help those who are not in such secure employment. Up to now it has not been a hallmark of our capacity to be decisive and to take urgent action.
When one looks at the Culliton Report, the Telesis Report, reports on the food sector, reports on rationalisation and the other major reports which have been published during the past 20 years one cannot help but feel that there is no real commitment in the Department of Industry and Commerce to reframing industrial policy for the nineties. I am not being negatively critical just because the Minister for Industry and Commerce is not a party colleague of mine. I hope what I am saying will be regarded as constructive criticism on the lack of cohesive action in the area of industrial policy. This action has not been forthcoming from the Department. There is a great need for the Department of Industry and Commerce to become the engine of our economic policy. This was strongly recommended in the Culliton report. It is taking far too long to implement this recommendation. I do not think the Minister for Industry and Commerce has a real commitment to tackling the jobs crisis; his eye is off the ball and he is looking in too many other directions, for example, he is trying to lead his small political party. His excessive private enterprise philosophy has meant that priority has not been given to the jobs crisis. I solemnly believe that not enough decisive action is being taken in the Department of Industry and Commerce to tackle the problem.
When the Secretary of the Department of Finance came before the Committee on Employment it was obvious that that Department were pursuing a hands-on type of fiscal management strategy. That Department are presently preparing the national plan, which will be submitted to Brussels, for Cohesive and Structural Funding. The Department were examining the overall job creation position from an abstract point of view. The only driving engine of economic growth and development, through industrial policy, must emanate from the Minister for Industry and Commerce or be switched to a Minister for employment or job creation. At present there does not appear to be such a positive, decisive approach to job creation. We can all tinker at the edges, can recommend various changes vis-à-vis small enterprise committees and so on. I know the Minister of State present has been doing tremendous work to help exporters, promoting trade, endeavouring to relieve our manufacturers' difficulties because of the unacceptable currency fluctuations to which Deputy Tunney correctly referred. Nobody would condone the excesses of the capitalist system, leading to paper movement of money, mergers, takeovers and so on, leading to further unemployment.
The bitter rewards of the Thatcher era in the United Kingdom have left their economy and its productive potential in a very sad state. We must guard against that happening here, working towards a more cohesive industrial policy with hands on involvement. It is no longer acceptable that the major Government thrust of hands on job creation support is left to the manufacturing sector, through the Industrial Development Authority, driven by the Minister for Industry and Commerce. That will not in any way meet our requirements in the nineties. For example, within the overall figure of approximately 300,000 people unemployed there are seven or eight different categories. There are those who could find employment in the services or support sectors, there are people who will find employment in the manufacturing sector but there is a need to pull together all those sectors.
As was recommended in the Telesis Report, we should concentrate on indigenous industry. Having accepted their recommendation we must ask, what have we done about it? In my opinion — damn little because, regrettably, that is where there is long term job creation potential.
There is need for expansion of industrial policy. Senior officials in the Industrial Development Authority tell us many job opportunities have been presented to them which, because of their mandate, they cannot even consider or report on, that they do not fall within their narrow mandate of supporting job creation. That is a major flaw of industrial policy. There is great need for co-ordination between the tourism and industrial sectors. Senior officials of the Industrial Development Authority tell us that the leisure-related industry is an adjunct of large industrial organisations worldwide. They tell us when they endeavour to attract such organisations here to create manufacturing employment they are told there are leisure-related investment possibilities, which is not their brief, but rather that of Bord Fáilte. That is another example of a bureaucratic, red tape deterrent. They contend there is no cohesive framework within which one Government Department can assume responsibility for, let us say, reducing the figure of 300,000 unemployed by even 100,000 over a five-year period.
In other sectors, such as within local authorities, job creation will have to be addressed by means of a different industrial philosophy. We will not be able to look back on the first half of the nineties with any satisfaction if there is not brought about a major change in attitude to job creation involving two separate Government Departments. It is no coincidence that the other Minister in the energy field is responsible for the lifeblood of our economy, the largest single cost factor being power supply, fuel distribution and so on. From those two economic Ministries no cohesive industrial policy has emerged. We have failed in that respect. Therefore, there is need for urgent action to be taken by those two Departments.
With the permission of the Chair, I should like to share my time with Deputy Cotter. Like other Members I should like to congratulate the Minister of State on having introduced these measures to alleviate some of the burden on many of our exporting firms which, if not done, would have led to further job losses we can ill afford at present.
It would be my hope — this matter was raised by Deputy McDaid — that the relevant moneys will be paid because such assistance is needed and is the minimum required for the purpose. I hope bureaucracy will not slow down such payments so that they would not prove to be the benefit we would all hope. After all such assistance should be of direct benefit to applicants and, ultimately, prevent possible additional unemployment.
I contend that, as long as there is a multiplicity of European currencies, there will continue to be a repetition of the kinds of problems at present being experienced. There is no point in any country, for parochial or other domestic reasons, striving to retain their pride and prestige through ties to a particular currency when it is obvious to everybody worldwide that the future of each European currency best lies in a single European currency unit. If they do not recognise that fact now there is no point in their talking about it further.
I might refer briefly also to that group of people who have built around themselves a mystique, that group of speculators worldwide who zone in on particular currencies at given times on the basis of the fluctuations they observe in the marketplace and avail of that opportunity to make very sizeable gains. There is no mystique about such people; they are just ordinary people taking chances with other people's money for which other people pay the price. The only common denominator is that they are average, somewhat greedier than most, but average people apart from that. The only way to combat such speculation is by a single European currency.
The mobile multinationals have affected us here in the past and no doubt will do so in the future. At present they employ approximately 100,000 people here. Therefore, we cannot afford to lose them. However, those who leave to improve their prospects and relocate in areas where labour costs are much cheaper should not have immediate access to the market place they have recently vacated. That movement could be regulated simply through the GATT so that whenever a large multinational corporation pulls out of an area and moves to a centre which will be in their best interests in terms of profit-making, they should not expect or be allowed to get back into the marketplace they have vacated and gain all the profits therefrom.
My last point is in regard to insurance, in particular public liability, costs and their impact on industry, job creation and firms that may be in jeopardy. Two points arise in respect of this. The first concerns those who insure against the kind of circumstances at present being experienced with some taking out such insurance cover while others do not because of the high cost of public liability insurance.
The question I tabled in the past couple of days to the Minister's colleague was not answered satisfactorily. I do not wish to travel down that road. However, I do want to make the point that we pay much more dearly here, in terms of public liability and all other insurance costs, than our European counterparts resulting in fewer job opportunities.
I congratulate the Minister on the measures she is taking. While welcoming her rapid initiative in alleviating present difficulties which will assist some industries in Cavan and Monaghan it will not be a panacea. Having spoken on the telephone to industrialists in my constituency. I must warn the Minister of State that the mushroom industry will collapse despite her initiative. I have been so informed by people at the very top of that industry. I do not take any great pleasure in warning the Minister of State, bearing in mind that she has endeavoured to respond to present difficulties. However, her response is not sufficient and will not save that sector. The Minister will have to find some way of assisting mushroom producers who have been subjected to enormous pressure over the past six months. The industry faces a £4 million loss this year. I predict that the action the Minister proposes taking will be insufficient to save that sector.
I wish to draw the Minister's attention also to indigenous poultry and egg industries in Monaghan who produce mainly for the home market. Cheaper products are beginning to filter in from the very strong sector in the North and companies here are being driven out of some of their markets. They inform me that the problem will be very serious in the next few months and they are making contingency plans to put people on the dole. There are very strong indigenous sectors in Monaghan but many of them are under extreme pressure. Some of them fall outside the terms of this initiative.
I ask the Minister to keep a close watch on what is happening in that area. I will keep her informed. I am very proud of the way Monaghan people responded in the early stages of this problem. They kept bringing to the attention of the Minister and the Government exactly what was happening. The chambers of commerce were involved and the flow of information was very useful to the Minister and the Government. I will continue to ensure that the Minister gets the information required.
The fact that 14 Deputies contributed to this debate is a fair measure of the urgency and importance with which Deputies regard it. I thank Deputies for the response from all parties and for the very constructive way in which the market development fund has been welcomed in the House and throughout the country. All Deputies have signalled their support and by not putting the matter to a vote they are affirming their approval.
Deputy Hogan was generally supportive and he was pleased that the forms were easy to read. He was particularly keen that there should be flexibility. He asked if firms would be required to repay the money. The plan is aimed at firms who are in danger of shedding jobs, firms who would be in very grave trouble without this plan. Deputy Hogan's question does not, therefore, arise.
Deputy Taylor also welcomed the scheme but he had reservations about firms making profits. The scheme is not geared at enabling firms to make profits — it is geared to help them to stay alive and to maintain employment. It is not geared towards putting money into pockets but is designed to get people over a very difficult patch while maintaining employment. Deputy Taylor also spoke about the excessive operation of free market forces. I share that point of view. He also referred to the undesirability of a two-speed Europe. None of us in this House wants to see that because it is against all our principles.
Deputy De Rossa welcomed the scheme and referred to the failure of European monetary policy. He and Deputy Hogan spoke about the alacrity with which the EC Commissioner, Sir Leon Brittan, stepped into the debate but we are quietly confident and reassured that Europe will understand the need for this measure. It is an enhancement of measures already in place in that it is a development fund.
Deputy Lowry spoke about the definition of a manufacturing company. The scheme straddles various types of company. The team working on it have been very clear about that. Tourism does not come into it. The Deputy referred to the Finance Act and spoke in detail about the various criteria. The management team are sending to each Deputy the criteria and the explanatory material. It will become quite clear that the fears he expressed are unfounded.
Deputy Kirk spoke about the needs of his own town, as did Deputy McGahon. This Chamber allows Deputies to bring forward such matters. Deputies did not specify particular firms. Deputies Kirk and McGahon come from an area which was very badly hit by particular policies in the mid-fifties. That problem was tackled in 1987.
Deputy Ellis spoke very clearly about the mushroom industry and the clothing industry. He said this scheme was designed to bridge a gap. We all hope it will be an interim measure and that there will be an end to the currency turmoil. Deputy Ellis said that help should go to firms which are diversifying into mainland Europe or other markets. That is precisely what we are doing. I was glad of his warm encouragement. An Bord Tráchtála have developed niche marketing in the countries he mentioned.
Deputy Creed wants inbuilt flexibility. That flexibility is there. He talked about the clothing sector and other industries. Deputy De Rossa was worried that the excessive need to be free of bureaucracy might lead to a disregard for proper monitoring and control. I can assure Deputies that there is very tight evaluation, monitoring and control. I am satisfied that the management have designed a system which will be quick, responsive and flexible and which will also allow for proper monitoring and evaluation. This will be very important in terms of our long term industrial policy.
Deputy McDaid talked about two categories of firm. These firms should scrutinise the criteria more closely. I would be glad to discuss the matter with the Deputy. Deputy Tunney was supportive and spoke about the administration of the scheme. In a splendidly robust performance he said what needed to be said about speculators. I do not need to add to what he said.
Deputy Garland spoke about the need for self-sufficiency and various other policies which his party put forward. Of course I received them with courtesy and listened to them. There were germs of very good ideas in what Deputy Garland said, when one stripped away the excesses.
Deputy Lawlor stressed the need for a more vibrant approach to job creation and the need for equity finance. I agree that there is need for a more direct approach to job creation. At one time it appeared that this would look after itself but that is not the case when we have almost 300,000 people unemployed. The Department have taken the initiative and have been the engine for the market development fund. I am proud and pleased that they have done so with the agencies at their disposal.
I take the point about a more vigorous approach to job creation. The Fine Gael committee identified areas in which a more vigorous approach to job creation could be taken. Deputy Durkan spoke about the fluctuations in currencies and the difficulties involved and saw GATT as a vehicle for resolving some of our problems. Deputies Cotter, Kirk and McGahon referred to the mushroom industry which is eligible for this assistance. The difficulty lies in the outreaches of the mushroom industry. Consideration is being given to how we can cope with the applications. I do not share Deputies' pessimism although I know Deputies' comments were well meant. With help and support I hope these people can be helped through a difficult time.
I thank Deputies for their support for these measures. The Department are very grateful and the Minister, Deputy O'Malley, will be grateful too. I hope the worst effects will be mitigated by this scheme.
