Dáil Éireann debate -
Wednesday, 18 Oct 1995

Vol. 457 No. 2

Adjournment Debate. - Government Assistance to Exporters.

Mr. McCreevy

Thank you, a Cheann Comhairle, for the opportunity to raise this important matter on the Adjournment. It has been appropriate at various times to stand back and see whether policies of the past which have been successful are being pursued to the present day. In the last couple of years I have queried the way we measure a successful economy. By any objective yardstick, whether economic growth or fiscal management, we have had a successful economy, with high growth rates and public finances under control, yet approximately 280,000 people are unemployed. I am not the only person in the developed world who questions the way we measure success on the economic front. It appears that if we continue to measure success in the way we do we will have the most successful economy in the world but practically everybody will be unemployed. However, that is a matter for another day.

Irish firms who trade in the British market are under considerable pressure. I acknowledge the significant achievement by successive Governments and Irish industry over a long period in reducing our dependency on the British market from a total dependency in the late 1960s to about 30 per cent today. At least 45 per cent of Forbairt assisted companies export to the United Kingdom. Those are generally the most labour intensive companies with low paid workers — during my time as Minister for Trade it was estimated that perhaps more than 50 per cent of employment was created by those firms.

It is not a coincidence that since the Irish pound broke parity with sterling in April this year unemployment figures have been increasing. There may be other factors involved, and I am not blaming the Minister for Finance for the problems in that regard, but it is not a coincidence. With the rate continuously increasing Irish firms have no profit margin with which to trade and that impinges on jobs. Furthermore, I believe the position will become worse.

Various calculations have been made of the number of job losses in the food sector, which has been badly affected. In the mushroom industry which provides employment in my constituency, people are being laid off. It was believed that the Minister for Agriculture, Food and Forestry had proposals in hand to make changes to assist these firms and I urge him to meet the commitments he has given in this regard. Something needs to be done.

Mr. Quinn

Such as?

Mr. McCreevy

I will deal with that later. In 1992-93 when we faced problems arising from the exchange rate the then Government introduced the market development fund. I am aware that the advice to this Government would be that a reintroduction of that fund would be outlawed by the EU. However, it should not be above the ingenuity of civil servants to devise a scheme to alleviate the problems facing Irish firms. If companies in France and Germany were faced with similar problems something would be done about the matter.

I know the Minister is open to suggestions in all aspects of economic policy and the time has come to consider initiatives to help firms in this position. Otherwise we will have a wonderfully successful economy in objective terms but increasing unemployment, which is unacceptable.

Minister for Finance (Mr. Quinn)

I accept the bona fides of my colleague, Deputy McCreevy, who is trying to address a real problem. However, he has made no useful suggestions. In his truncated remarks he suggested a form of intervention — permanent, ongoing subsidies — which is not only illegal in European terms but goes against everyone of the economic tenets and principles in which he believes. I am amazed that a person of his rigorous intellect would propose a measure that offends all the values and views he has so eloquently portrayed here, on "Question and Answers" and elsewhere.

Mr. McCreevy

I did not say that; I said that ingenuity should be used.

Mr. Quinn

The Deputy requested another form of market development fund, which is a permanent, ongoing subsidy that is not only illegal but, if I understand the Deputy's consistent political position on economics, offends all the principles which he espouses. As a socialist, I suggest other measures can be taken to assist the firms to which the Deputy referred. The Irish pound has appreciated above the value of sterling since March this year and has been consistently trading at about £1.02 per pound sterling. That creates a problem for Irish companies trading in the traditional markets. While we have no accurate statistics on the extent of dependence by the Irish sector on the UK market, I would not dispute the figures put forward by the Deputy — allowing for a 10 per cent margin either way, they are accurate.

What we have done for the firms involved is much better than that suggested by the Deputy, it is legal and does not offend or distort the internal rigours of a market to which we are committed within the European Union. As a result of the prudent management of our finances our inflation rate, projected at 2.25 per cent for 1996, is virtually half that of the UK at just under 4 per cent. The interest rate payable on business loans is 1 per cent lower than that paid by our competitors in Britain. In addition, the small business loan fund which I introduced last year and which my colleague, Deputy Richard Bruton, has extended this year to a sum of £208 million will provide business loans for small businesses, including the service sector, to a minimum of £20,000 at a fixed rate of 6.5 per cent. It provides to that indigenous traded sector a measure of sustenance and relief which it previously did not have.

The Deputy asked what am I doing in this regard. He put forward one proposal which is illegal and offends every economic principle to which I formerly thought he was committed. I am outlining the measures we have implemented. However, these firms will still experience difficulties in their operations. In addition to the two major instruments I have described already, in last year's budget we raised the threshold for PRSI contributions and exempted the first £50 for labour intensive indigenous firms with traditionally low profit margins, whose employees would be paying the full rate of PRSI. As a consequence the total cost of their wage bill, that is what they have to pay to their workers in addition to the employer's PRSI, has been reduced. We have devised a mechanism that is legal, whereas what the Deputy is proposing is not legal within the context of the European Union. Second, it is effective. I measure that effectiveness in the following way — reported redundancies this year are 19 per cent lower than they were this time last year. In the period to which the Deputy referred, 1992-93, the redundancy figures soared. The message from those statistics was borne out by anecdotal evidence that exposed fragile marginal companies trading traditionally into the UK market were haemorrhaging and virtually closing down. The Deputy's colleague, Deputy Lawlor, who has a very close knowledge of these affairs, will be aware of some of the matters to which I am referring.

I recognise the problem and we are doing something about it. What Fianna Fáil has proposed is not only illegal but offends the very economic principles which the current Fianna Fáil management advocates and supports. The way we are approaching the ongoing difficulty which some sectors of the Irish economy are experiencing is the best way open to us and the only way that will ensure their ongoing economic survival.