Bernard Allen
Question:26 Mr. Allen asked the Minister for Enterprise and Employment the initiatives, if any, he plans to support employment in the services sector.
Ceisteanna — Questions Oral Answers - Services Sector Employment Initiatives.
The Government is keenly aware of the important role that the services sector plays in creating employment in Ireland. Currently, more than 60 per cent of all jobs are in services. Any initiatives which can further improve the capacity of this sector to create additional jobs will be actively pursued.
As far as my area of responsibility is concerned, the following initiatives will, I believe, make a substantial contribution to facilitating the creation of new jobs in services.
First, the newly established county enterprise boards will fill a gap which has become apparent in the support services for local enterprise initiatives. They will bring a variety of interests together to set objectives for promoting enterprise in their area, prepare a strategic plan and provide assistance to small enterprise projects, including services projects, which can yield a cost effective return in terms of job creation.
Second, specific proposals have been developed for the software sector with a view to employment expanding from a current base of 8,000 to 20,000 by the end of the decade. A specific target of 2,000 jobs has also been set in relation to telecommunications based services. I refer to telemarketing in particular. Third, as regards international services, I would refer the Deputy to my answer to Question No. 106 which I gave to the House on 22 June 1993. Fourth, while FÁS does not operate any programmes or schemes which are specifically targeted at the services sector, it does provide support by way of training programmes and employment schemes for persons interested in setting up small businesses. Fifth, the implementation of the recommendations of the Culliton and Moriarty reports, on which substantial progress has been made under this Government, will radically improve the competitive environment for all businesses, including services, and in the process improve the prospects for creating additional sustainable jobs in all sectors.
In addition to all of these measures, my Department is represented on the Task Force on Jobs in Services, which will be submitting its report shortly to the Taoiseach. I look forward to reading its conclusions, which will be fully taken into account by me in deciding on any further measures needed to improve the opportunity for creating additional sustainable jobs in services.
I am disappointed that the Minister has announced no new specific initiatives despite his participation in the task force. Is the Minister aware that the cost to the Industrial Development Authority of creating a job in international services is half the cost of creating a job in manufacturing? Yet, only 8 per cent of the budget of the Industrial Development Authority is targeted at this important sector. Would the Minister agree that we need to redirect our efforts dramatically and concentrate on creating employment in the services sector rather than in manufacturing? Would he agree with the recommendation of the taxation commission some years ago that the services sector should pay corporation tax at a rate equivalent to the personal rate of income tax? Does he realise that if we take together the 21 per cent VAT rate which applies to most services, the 21 per cent PRSI rate and the 40 per cent profits tax out of every one pound spent by the consumer on services 60 pence goes to the Government and we are lucky if 5 pence is left for business?
I do not accept that the Government is not focused on the potential for job creation through the services sector. As the Taoiseach outlined in some detail earlier today, the Government is not only aware of the potential for sustainable job creation, it is taking specific action in this area and the report of the task force will become available fairly soon.
In regard to my own activities and those of the IDA for which I have responsibility, the IDA has been active for a number of years in the area of internationally traded services, the tax regime for internationally traded services is as favourable in many respects as it is for manufacturing industry. Within the context we have identified an area of considerable potential benefit to the economy, specifically, software where the link between the intellectual infrastructure of our third level institutions can be combined with international computer companies. We had great success in recent times in attracting major players to this country in that regard.
As I indicated earlier, telemarketing has the potential to create at least 2,000 jobs in the first instance. It should be understood that the cost of providing services jobs in the telemarketing sector must take into account the massive capital investment this State made through Telecom Éireann in the telephone system, the infrastructure within which such services jobs can be provided.
I welcome the initiative the Deputy's party has taken in respect of services. We share Fine Gael's concern about the potential in this area.
The concern Fine Gael always had.
It is ironic that Fine Gael is coming forward with a proposal in this area when our task force is just concluding.
It is nice to see the Minister acting robustly.
It is nice to see the Deputy awake.
Let us hear the Minister without interruption, please.
The Minister is confirming what I believe. He is hijacking services for Dublin.
I welcome the interest Fine Gael indicated in its recent publication and the rich vein that the service sector provides for the economy. I assure the Deputy we had already analysed that potential, we are working on specific proposals, details of which I will bring forward to this House in due course in addition to those to which I referred.
I welcome the Minister's remarks. In regard to the services sector he mentioned the county enterprise boards and his initiatives in regard to software etc. There has been a lack of recognition of the services sector. I compliment Deputy Richard Bruton on his comprehensive document relating to this area. In the past many small industries were prevented from getting off the ground because the IDA or SFADCo felt there were already sufficient resources in that area. Will the county enterprise boards give support to such ventures?
Will the Minister agree that the services sector needs a boost? As a businessman said to me during the week, they are made to feel like criminals for being in business; they are harassed by high taxation, PRSI, social welfare etc. What succour can the Minister give those business people nowadays beyond what he already stated?
I refer the Deputy to the work my colleague, the Minister of State, Deputy Brennan, is doing on behalf of small businesses generally, the work of the task force on small businesses and the charter soon to be published which might surprise even Deputy Carey.
More red tape.
I compliment the work already done by Minister Brennan. Many of the concerns mentioned to Deputy Finucane during the week will be identified, quantified and, I hope, addressed by the Government during its term in office. In regard to job creation in the services sector State capital will, for the first time, be available for the creation of service related employment throughout the economy through the county enterprise partnership boards for precisely the type of employment that employs one, two, three or four people. This was not the case previously. Proposals with the potential to create ten jobs or more in the manufacturing area will automatically be referred by the county enterprise boards to Forbairt, the domestic successor to the IDA at local level. All other projects, including service jobs and manufacturing jobs below that employment threshold will come within the remit of the county enterprise partnership boards and there are substantial resources available to provide the kind of support that was not there in the past.
What is the present position in County Galway where we seem to have at least three or four boards, including a board set up in November 1992 by the Minister of State, Deputy Treacy, of which I am supposed to be a member? There is a proposed board for the city and one for the county and we still have the county development team. What board is responsible in County Galway for the creation of much needed jobs? How many boards will be in existence after 1 January next year?
It is a separate question but I am prepared to answer it now, if the Chair will allow me. The position is that there is one county enterprise partnership board in County Galway, the Deputy as former Mayor of Galway City is well aware of that.
I only read it in the paper.
The Deputy is very active and I have no doubt that he is intimately aware of the situation. One county enterprise partnership board was set up during the transition from the previous administration to this one and from 1 January 1994 there will be two boards.
So the board as set up will exist until 1 January 1994?
That is correct.
That is news to me.
If the Minister read our document on employment in May 1992 he would have noted that we planned the extension of many incentives to the service sector, our commitment to that has been constant. Will the Minister agree that the services we are committed to providing for small indigenous industries are as important in the service sector where there is potential for export earnings? Tourism apart, we run a massive trade deficit on service activities. Will he also agree that there is a need to extend the type of services available through the IDA and the other State agencies to the service sector? That has not been included in the national plan. Will the Minister reconsider so that at this stage we could get a commitment in the national plan to extend such services to that sector?
I share the Deputy's concern about promoting the extension of internationally traded services' activities from companies based in this country. However, there is a problem in regard to the dividing line between the international component of such traded services and the domestic component where we could be open to the legitimate accusation of fostering displacement between one service company and another, we would not wish to do that. I am sure the Deputy, as a professional economist, understands the significance of that far better than I do. We are anxious to ensure that the international trend in increased job and wealth creation in the service sector, as against manufacturing industry, is something to which the economy would have regard and relate to as quickly as possible to ensure that we maintain the momentum of economic growth and job creation.