Much has been said and written in the past week about the shortfall in expectations of EC funding. Perhaps it is time to focus for a while on what is being achieved in regard to the National Development Plan. We are guaranteed, as a minimum, an allocation of the order of £2,000 for every person in this country. This is well ahead of the allocations being made to the other so-called cohesion countries, Greece, Portugal and Spain. The comparable figures for those member states would be approximately £1,600 for Greece, £1,550 for Portugal and £1,300 for the Objective 1 regions in Spain. We are being given an unrivalled opportunity to improve the capacity of the economy for the longer term and to provide jobs that are so badly needed.
In the heat of the argument about precise figures let us not lose sight of what has been achieved and the obligation that is on all of us to ensure that the funds under discussion here are used to the best possible advantage. In doing this we will be building on the successes that have been achieved through the use of the Structural Funds in the past. The present Community Support Framework has been independently assessed by the Economic and Social Research Institute as making a significant and lasting difference to living standards in Ireland. The short-term demand side effects of the EC aid will raise GDP by 2.5 per cent and GNP by 3.5 per cent in 1993. The long-term supply side effects of the EC aid element will build up over a period and will raise the level of GDP by 0.8 per cent and GNP by 1.1 per cent by the year 2000. This is estimated as representing a real rate of return of between 7 per cent and 8 per cent on the investment of the EC resources. This is an extremely high rate of return. The EC aid element is estimated to give a demand-side effect of 30,000 jobs in 1993 and to lead to a long-term supply side benefit which would raise average employment by 10,000. These results compare very favourably with the position in other Objective I regions of the European Community.
This debate is about how close we can get to an EC aid figure of £8 billion. A year ago, just before the Edinburgh Council, there were many critics who ridiculed our ambition and forecast that Ireland's share would be very far short of £6 billion over a five year period which was our target at the time.
The centrepiece of the National Development Plan is employment. I would remind the House again of the figures. We have a target of up to 200,000 jobs gross. After making provision for job losses this will translate into net nonagricultural job growth of between 70,000 and 100,000 in the period up to 1999.
The central objective of the National Development Plan is to ensure the best long-term return for the economy by increasing output, economic potential and long-term jobs. It is further designed to reintegrate the long-term unemployed and those at high risk of becoming so into the economic mainstream.
The plan sets out the Government's strategy to achieve the national and European Community objective of greater economic and social cohesion. The basic elements of that strategy are first, investment in the growth potential of the economy in industry, in tourism and services, in agriculture and natural resources; second, investment in the country's productive infrastructure to improve the capacity and competitiveness of the economy; third, investment in the development of the skills of our people through education and training in order to increase productivity and growth capacity; and fourth, a special increased emphasis on harnessing local community leadership and local initiative.
This strategy will be given effect by a wide range of carefully selected development measures. These include the extension and development of existing programmes of investment in areas such as transport, industry, agriculture, forestry, fisheries, tourism, water and sanitary services, education and training, all of which are of importance to the economy. The plan also includes a number of areas of new and increased emphasis including a new local development programme targeted at areas of high long-term unemployment, greater support for the development of indigenous industry, a major programme of investment in the food industry, new initiatives in the tourism sector, including developments in culture and heritage, tourism angling and marketing, substantial progress on the implementation of the Dublin Transportation Initiative, upgrading of the national rail network, increased investment in regional and county roads and strategic investments in the energy and communications sectors.
A key feature of the plan will be the integrated development of areas of high long-term unemployment economic marginalisation and social exclusion through a new local development programme. This will be targeted at areas where these problems are most acute.
This new programme will mobilise the energies of local communities, with support from public agencies, to rebuild their economic potential, create new local job opportunities, develop local enterprise and produce a substantial improvement in the community life and the physical environment of the areas concerned.
As the Plan was explained in detail in the debate a fortnight ago I do not propose to go back over the same ground. The plan will be implemented in full and there is no intention or no necessity to revise it. Let us remember that it provides for a total spending programme of £20 billion. The guaranteed contribution from the European Community is lower than we had a right to expect but the amount in contention is only a relatively small proportion of the total expenditure and we should keep this in perspective.
We should bear in mind also what happened on the last occasion when I was a member of the negotiating team. Even though it was agreed that we would receive £2.85 billion we eventually received £3.4 billion. At that stage the outside figure was probably £3.6 billion. The most important point, however, is that the EC guarantee is only a minimum figure. In a public statement last week the President of the Commission acknowledged that the opportunity is there for us to achieve an increase in this allocation. He also indicated that he considers the plan to be "excellent and full of promise for Ireland's economic and social development". Earlier this week the President confirmed that it is possible for Ireland to achieve more than the minimum figure on the basis of the past performance and good programmes in the plan.
What the European Commission approved last week was not just a precise figure for Ireland but rather an indicative allocation. In layman's terms this means effectively a range. We are assured of the minimum, provided of course that we submit good quality projects that meet the criteria laid down for disbursement of Structural Funds. We are used to this; we have done so, successfully, on a number of occasions. However, the possibility of improving on this is open to us and this has been acknowledged by spokespersons for the Commission. This reality has been largely overlooked in recent debate. In his public statement the President of the Commission said he hoped that Ireland's allocation would be increased in the light of the results achieved on implementation of our programmes. Halfway through the period of the plan there will be a review by the Commission of the operation of Structural Funds programmes in the various member states. The Commission will make adjustments, where appropriate, and it will have the authority to make transfers. This is of major significance to us. I was responsible for five years for the distribution of the money received under the European Social Fund and was aware of the many advantages that would have been gained by this country if the Commission had authority during the period 1989-93 to make transfers. It now has that authority. This fact has been overlooked even though it represents a major change. The Commissioner for Regional Affairs has also acknowledged that the opportunity is there for us to improve on the minimum.
In short, the bottom line is the quality of the programmes that comprise our plan and our ability to negotiate with the Commission. Our record is very good. Over the period 1989 to 1993 the high quality of the Irish programmes resulted in an outturn which exceeded the initial indicative allocation. The original Community Support Framework allocation in 1989 was £2.85 billion and with Community initiatives the total EC aid would have been forecast at just over £3 billion. In fact we received £3.4 billion in current prices. I am confident that we can repeat this performance and, indeed, better it. I am confident that the proposals in our plan can be fully realised and that they can provide the basis on which Ireland can achieve the maximum of the range settled by the Commission.
We are now finalising the operational programmes which are the implementing mechanisms of the plan. The Minister of State and I are taking action in this regard. These will be submitted to the European Commission shortly. There are outlines of the programmes in the plan. The present Community Support Framework has 12 operational programmes plus a number of programmes approved before 1989 and Community-wide measures in the agricultural area which were not programmed. We are proposing to streamline things in the next round and are proposing ten operational programmes. The details of the programme structure are a matter to be discussed with the Commission services and both sides will be striving to ensure that the most efficient and practical structure is put in place. Negotiations will get under way with the Commission in the immediate future towards settling the Community Support Framework for Ireland. The CSF will be, in effect, the agreement between the Commission and the Irish authorities on the various expenditure profiles in relation to the different sectors of activity. It will be the guideline to determine the precise amounts of funds that will flow to Ireland under each heading. I cannot put a definite time limit on the conclusion of these negotiations; the general expectation is that they will be concluded at the beginning of the new year. There will be no delays on transfers of funds and Deputies can be assured that we will be in a position to draw down our full entitlement for 1994.
In regard to the indicative allocation for the operational programmes the point has been made that there is no substance to the plan which will be examined this week by the Commission. In regard to the Community Support Framework we will put forward our plans and try to convince the Commission that these will be of value for those areas which have been excluded, agriculture and the environment. If we can do this successfully we can reach the figures. That is how we managed to receive an extra £600 million on the last occasion. That is how we will do it this time. Under the various headings we have a far better case than any other member state and particularly the Cohesion states. It is a pity that that has been conveniently forgotten. I recall the former Taoiseach, Charles Haughey, saying in this House at the end of 1989 that at the end of the programme we will have achieved about £3.5 million. He is not here to say it now, but that is what was achieved.
I do not anticipate any undue difficulties in the negotiations with the Commission. For the greater part these will be conducted at official level. I cannot say to what extent ministerial involvement will be required but both I and the Minister of State, Deputy Fitzgerald, will be on hand and fully involved when we are required.
The plan is more than a vehicle for EC funding. It is a development package that covers the whole economy and it includes a substantial investment from the private sector. Its success is not dependent on EC funding alone. The impression may have been created, in recent days in particular, that the plan is about EC funds and no more. There is, as I said earlier, a total expenditure of £20 billion. Perhaps the most important influence of all in determining the success of the plan will be the overall management of the economy.
In this context I want to emphasise in particular our ability to maintain a strong competitive position. I said earlier on publication of the plan that, for every 1 per cent gain in competitiveness that we can sustain, we stand to gain an extra 4,000 jobs. This statistic alone underlines how critical it is that we be competitive and that pay policies and other policies give this priority. By comparison with our European partners our economic performance is very good. We will have a growth rate of approximately 2¾ per cent this year, well ahead of the European average. Our inflation continues to be among the lowest in the Community. Our budget outturn will be on target. These are all strong plus factors which improve the climate for creating jobs. Interest rates continue to be on a downward trend and the general expectation througout Europe is that rates will drop significantly further. This is good news.
Overall we have a very good foundation on which to maximise the opportunities that are presented to us in the National Development Plan. We have an opportunity to transform the economy and it would surely be more productive to work on this opportunity than spending our time in acrimony about the precise levels of EC assistance. The Irish public are concerned about results. They want to know what expectations can be in relation to jobs and general living standards. They are not preoccupied about the finer points of negotiation with the EC Commission.
This brings me to the sequence of events in relation to my contact with the President of the European Commission. I want to set the record straight on this. The National Development Plan was formally submitted by me and the Minister of State at my Department to the European Commission on Friday, 8 October. We made the presentation to the Commissioner for Regional Policy who has overall responsibility for the disbursement of Structural Funds. On that occason the Commissioner told us that he was having difficulty with the Irish proposal on the share-out of Structural Funds and that he could not envisage a total of £7.84 billion being guaranteed. This was not news to us. The Commissioner has been saying consistenly that there was a problem. I left him in no doubt, however, that we expected that the understanding that had been reached on 20 July would be honoured in full and that we would receive £7.84 billion as agreed.
Subsequently I attended the informal ECOFIN meeting outside Brussels. On the margin of this meeting on Saturday, 9 October, I was approached by the President of the Commission in relation to the share-out of Structural Funds. He indicated to me that figures would be brought to the Commission for decision shortly. He added that there were problems in relation to the share-out between the four cohesion countries and that this called into question the allocation expected by Ireland. He did not discuss specific figures with me.
The President was aware that our plan had been submitted the previous day and that it was due to be launched publicly at home on the following Monday, 11 October. He mentioned that the next meeting of the Commission would be in the following week and that the figures must be finalised either then or soon thereafter. I am at a loss to know why the impression was given that I suggested to the President that the decision be delayed. There was absolutely no reason for this; there was no advantage to be gained. From my point of view the question of a postponement being sought by me did not arise. Once the plan was published on Monday all the figures would be in the public domain and this would obviously precede any meeting of the Commission. It would have been far more convenient if the Commission had reached a decison between 20 July and October. Yet there was no indication from the Commission, apart from the comments from the Commission for Regional Policy, during this extended period.
In our brief conversation I did make one point to the President. I told him that our plan had been prepared on the basis of a Community contribution of £7.84 billion for the period 1993-99, as agreed on 20 July. This agreement was made in good faith. It allowed Ireland to lift its objection to adoption of the regulations on Structural Funds and the Irish Government expected that the agreement would be honoured. Before I leave this issue let me put it on record that I have always had and I continue to have excellent relations with the President and the Commissioner for Regional Policy and their staffs.
This Government has been criticised for its so-called begging bowl approach to our negotiations with the Community. This is inaccurate and unfounded. The fact of the matter is that the process of economic integration, though it undoubtedly brings very substantial potential gains for the whole area in question, also carries substantial risks for Ireland and for the other peripheral regions of the Community. With greater integration there is inevitably greater drift towards the centre unless definite steps are taken to counteract this.
We have seen that this very year in regard to VAT at the point of entry and tax harmonisation. All the difficulties we must deal with in the current financial year are part of European integration. We have taken that medicine on board and we are rightly entitled to argue for Structural Cohesion Funds to balance our position. It is our job to negotiate. I have constantly attended European meetings over six or seven years and on issues of money and concessions everybody fights tooth and nail. We would be strongly criticised if we did not do that.
The very existence of the Community funds is a practical recognition of the fact that in the absence of countervailing policies, the very processes of integration tend to worsen regional economic disparities. This arises because the central regions of the Community enjoy many advantages over the peripheral regions. Economic resources tend to cluster around the core, enabling the central regions to benefit more from economies of scale in production, lower distribution costs and easier access to ancillary services of all kinds. This is an automatic, self-repeating process which is reinforced as barriers to trade and to the mobility of capital are removed as part of the move towards full economic integration.
The reality of this process is a fact of economic life. When members of this Government and officials from the various Departments of State discuss Community funding with Community officials and with representatives of other member states, they are most emphatically not doing so on the basis of a "begging bowl" approach. They do so from a position of entitlement to share in the fruits of economic integration. The net contributing countries, for their part, recognise that such transfers are warranted by the impact of economic integration on the outlying regions. They also act out of self-interest, knowing that the tendency for resources to drift to the core leads to many problems for the core, such as overcrowded and polluted cities and roads.
It is fair to say that when the 12 member states and the representatives of the Community institutions sit down to discuss these questions, all concerned are acting from enlightened self-interest. That is what we are there for. We are not there simply to consider the overall Community in the year 2050 or to sit on our hands and wonder how our people back home, our taxpayers and our unemployed people, take it. We act in self-interest and argue our case on that basis. There is no question of funds being distributed to countries which have been "good Europeans" and there is no question of anyone holding out a begging bowl. All concerned are participating in a process which at the end of the day brings benefit to each and every participant. It is all part of the move towards a more closely integrated Europe, which the Irish people voted for last year and stongly support, and to the shared ideals which underlie our joint efforts. Certainly, there is some hard dealing and some tough talking. That, too, is part of the process and everybody concerned has learned how to live with it. Let us recall that over the years Ireland has fared very well indeed in the process, as can be demonstrated from the funding which we receive per capita.
I now turn to the National Development Plan itself. I hope that after today we can put behind us the recriminations about the details of discussion with the Commission and concentrate our energies on the real issues. This plan provides an opportunity to narrow the gap in economic terms between us and the more developed countries of the Community. It provides us with the opportunity to improve employment prospects. We do not have to wait for years to see results; we can make a definite impact in 1994. Again, I want to underline the importance of other policies. I cannot over-emphasise the significance of wage restraint and the trade off between wage increases and employment. The Government for its part is committed to continued discipline in the management of the public finances.
There is one element outside our control and this is the international environment. With some exceptions, the general pattern has been slow growth, recession and rising unemployment. Europe has been particularly bad in this respect. There are signs of decided improvement. The European Community has finally woken up to the need for growth; it has recognised the problem of unemployment as a priority. The growth initiative was discussed at the Council meeting in December. Beginnings have been made at Edinburgh and Copenhagen towards looking for a solution and the forthcoming White Paper on growth and employment will, I hope, have some positive results. It is encouraging to see German interest rates moving downwards; this has triggered a general reduction across Europe. There are distinct signs of economic improvement in the UK under practically all headings. Overall the outlook is better than it has been for some time, though I must sound a word of caution about excessive expectations. The outside world will not provide the answer to our problems. The real test is our ability to manage our affairs domestically and to work in harmony in tackling unemployment. The National Development Plan has a big contribution to make; it deserves and it needs universal support. This Government will implement it in the years ahead and will receive its due rewards for so doing.
