28 Mr. Yates asked the Minister for Enterprise and Employment if his attention has been drawn to a number of closures in the clothing and footwear sectors both at retail and manufacturing level; and the steps, if any, that have been taken by him to implement the alleviating measures that were promised at the time of the budget.
51 Mr. Cox asked the Minister for Enterprise and Employment the proposals, if any, the Government has to address the difficulties of the clothing industry arising from the increase in VAT to 21 per cent in 1993.
61 Mr. J. Higgins asked the Minister for Enterprise and Employment the number of jobs lost in the textile industry in 1993; and if he will make a statement on the matter.
I propose to take Questions Nos. 28, 51 and 61 together.
I am indeed aware of the problems being experienced by the textile, clothing and footwear sectors, which are of great concern to me. Over the past year there have, unfortunately, been a number of closures in textiles and clothing manufacturing and, since the beginning of 1993, approximately 1,400 jobs have been lost in these sectors. However, when account is taken of new jobs created in 1993, the net loss is approximately 950. The job losses are due to a combination of factors including an overall lack of competitiveness particularly when compared with exports from low cost third countries, a slow down in consumer demand due to the worldwide recession and low profit margins.
I recently had a very constructive meeting with a delegation from the Irish Clothing Manufacturers' Federation where we discussed difficulties being experienced in the clothing sector and explored ways in which they might be resolved.
It is essential, in resolving the industry's difficulties, that the key issue of competitiveness is addressed in a serious manner. The clothing sector, in particular, will need to change direction and restructure in order to take the competitive advantage it has in terms of service, shorter lead times, improved technology, quality and design. The main objective of this strategy is to develop strong companies which are able to compete in both the domestic and international markets.
On 2 August 1993 I announced two special initiatives for the clothing and footwear sectors which are specifically designed to help companies become more competitive. They are: (i) a research and development scheme which will operate under the existing R&D programmes run by the industrial development State agencies and (ii) a FÁS training support scheme. These schemes will operate for a 12-month period and a sum of up to £5 million is being set aside to meet the demands of companies that satisfy the relevant criteria. The State agencies are in contact with companies in the sectors and are actively promoting the schemes.
In addition to these schemes a review group comprising of representatives from my Department and the Departments of Finance and Social Welfare is at present examining the impact of the current rate of employers' PRSI charges on low paid manufacturing industries. It is hoped that this group will conclude its deliberations on this complex issue in the very near future.
I am hopeful that these initiatives, coupled with the agreement on overall strategy, will provide renewed confidence in these sectors.
The Minister referred to the lack of competitiveness in many Irish companies. The Larbaun plant in Westport was recently closed with the loss of 60 jobs. Is the Minister satisfied that the competition authority which was set up a number of years ago has sufficient strength and teeth to investigate allegations of the abuse of a dominant position by a player in the market? Sixty jobs were lost in the Larbaun plant because contractual obligations were not fulfilled on time. This happened despite the fact that, due to reform of work practices, absenteeism was less than 3 per cent and efficiency and productivity had more than doubled in a 12-month period. Will the Minister ensure that the competition authority is given the necessary resources and finance to enable it to do the job it was set up to do?
The Deputy has asked a number of questions relating to a specific company. As I did not have notice of his questions I do not have the details with me. I share the Deputy's concern about this matter and if he has specific information which he wishes to bring to my attention, I will certainly reply to his questions.
Thank you.
I am somewhat taken aback by the Minister's report of his meetings with representatives of the clothing industry. The Minister omitted to say that the increase in VAT on clothing has inevitably led to a loss of 1,000 jobs in that industry. A number of these job losses have been in my constituency. Is the Minister saying that he cannot offer the clothing industry any change in its cost base, which could be given by way of a reduction in employers' PRSI contributions? The industry, when it realised that the increases in VAT would remain with it on a permanent basis, called for a decrease in the level of employers' PRSI, as did Fine Gael. Is the Minister saying that the best he can offer the industry is support for research and development, which will only have a long term impact, and a FÁS training support scheme? Is that the best the Government can do for the industry? Is there no commitment to reduce the level of employers' PRSI or the rate of VAT on clothing and footwear?
I am sure Deputy Flaherty, who has had more than ten years' experience in this House, will be well aware that I, as Minister for Enterprise and Employment, cannot unilaterally announce a reduction in PRSI contributions in mid-stream, so to speak.
The Minister should give this request his support.
To suggest otherwise is to be misleading. On the contrary, I have clearly indicated——
Why has the Minister not supported this request?
The Minister without interruption, please.
——that a sum of up to £5 million is available to help the industry restructure itself during very difficult times.
Does the Minister not accept that the writing is literally on the wall for the 7,900 people employed in the textile industry and that this entire industry will be wiped out? Can he recall that he assured me in the House last March that Clare Morris Limited, a textile plant in County Mayo, would be saved? It was not saved——
Where is the Minister's social conscience now?
——similarly, the plants in Westport and Wexford. Does the Minister accept that, for example, to employ a girl as a machinist here cost £30 more than in Britain, regardless of the cost in the Far East? Does he accept that it is not high wages but the 1 per cent levy and our PRSI rate of 12.5 per cent as against 6 per cent in Britain that is causing the problem? Because of our value added tax and our high income tax rates we are literally banishing ourselves from the world textile market. A total of 7,900 jobs will be lost within the next four to five years unless remedial action is taken.
I indicated that for a variety of reasons, with which the House will be familiar, the Irish textile clothing industry will have to restructure itself in order to remain competitive in an intensely competitive world market. In that context, we are making, directly through my Department, £5 million available for research and development to facilitate that transition to the quality end of the market. That will not be easy and every Deputy knows that. We are trying to convey to the employers and employees in those industries who have the possibility of making the transition that they should take every possible course of action in order to avail——
The VAT increase finished them off. A VAT increase from 16 to 21 per cent put the final nail in the coffin.
——of the opportunities. They should move as quickly as possible.
The Minister has a cheek to make that statement with regard to the clothing and footwear industry.
A supplementary question please, Deputy.
I have a supplementary question which I have been waiting patiently to put to the Minister and I intend to do so if you allow me, Sir. The Government increased VAT to 21 per cent and coupled that with a 1 per cent employment levy on an industry that was demonstrating growth in employment but now faces 1,400 redundancies. If the Minister works with his colleagues in Government to remove the artificial barriers he has placed he need not worry about schemes and telling the industry how to be competitive.
The Deputy is making a speech. I understood he had a supplementary question to put to the Minister and I allowed him continue on that basis.
It was the Minister, and the Government, who rendered this industry uncompetitive. Would the Minister agree that the composition of the increased VAT and the 1 per cent employment levy rendered the industry uncompetitive and no new schemes will solve that problem?
Deputy Cox's question asked what proposals, if any, the Government had to address the difficulties in the clothing industry arising from the increase in VAT. The proposals I outlined such as restructuring the industry so that it can have a viable future, are accepted as being essential by the industry. The industry must restructure to cater for the quality end of the international clothing market if it is to survive because of strong competition from third countries over which we have no control. The £5 million research and development grant is a significant step in assisting the industry to make what will be a difficult transition. The problems did not arise out of the budget of last year.
They did arise from that budget.
As the Minister is aware, a restructuring of the tax system is needed.
