Vol. 461 No. 2
8 Dr. O'Hanlon asked the Minister for Finance the action, if any, he proposes to take to safeguard jobs threatened in view of the continuing appreciation of the punt against sterling; and if he will make a statement on the matter. [2547/96]
20 Mr. Clohessy asked the Minister for Finance his views on the threat to jobs in Irish export companies caused by the continuing weakness of sterling; the measures, if any, he proposes to take to alleviate this situation; and if he will make a statement on the matter. [1571/96]
39 Mr. E. Byrne asked the Minister for Finance the plans, if any, he has to conduct a study measuring the impact of recent currency movements on employment in particular the rise of the punt against sterling; and if he will make a statement on the matter. [2638/96]
51 Mr. B. O'Keeffe asked the Minister for Finance if he intends to introduce measures to alleviate the problems being experienced by exporters in this country in view of the current rate of exchange. [19174/95]
I propose to take Questions Nos. 8, 20, 39 and 51 together.
I am conscious of the concerns of exporters to the United Kingdom about the impact of the higher exchange rate of the Irish pound against sterling, which is due to the weakness of sterling in the international markets. As I indicated in reply to questions in November last, this higher exchange rate of the Irish pound has come about despite the different evolution of interest rates here compared with the UK over the past 18 months or so, such that Irish interbank rates are now about 11 per cent below corresponding UK rates. In fact in overall terms the Irish pound has appreciated only modestly over the past year, while sterling has weakened against the Irish pound the Irish pound has weakened against other currencies such as the DM. The weakness of sterling should be providing offsetting benefits for some exporters, in terms of lower import costs, while the fact that the Irish pound has depreciated against the Deutsche Mark and certain other currencies is of advantage to exporters with markets in various EU member states other that the United Kingdom.
I do not propose to conduct a study of the impact of sterling's weaknéss on employment. It is difficult to relate developments in employment to exchange rate movements, and many other factors, such as inflation and interest rate levels, sectoral changes and the overall economic climate of the country of destination are likely to influence such developments. My Department monitors economic trends, including employment trends, on an ongoing basis: in this context I would point out to Deputy Byrne that according to the most recent labour force survey data, for April 1995, total employment has increased by 143,000 since 1989 and by 50,000 since 1994. In addition, the number of redundancies notified to the Department of Enterprise and Employment for 1995 as a whole was, at 13,246, the lowest yearly total since 1980 and was 13 per cent lower than the 1994 figure.
I have no plans to introduce special measures to aid exporters to the UK. The responsibility for protecting companies against currency fluctuations lies primarily with the companies themselves. There are many products available on the financial market to enable them to take such precautions. In any event, implementing any such measures would involve a significant commitment of funds at a time when the Government has set itself a tight ceiling for expenditure. In addition, it is likely that the European Commission would, on competition grounds, refuse to agree to the implementation of State-funded measures specifically aimed at helping exporters.
While it is primarily a matter for exporters themselves, along with their employees, suppliers etc., to cope with the economic environment in which they find themselves, the Government has a role in helping to make this environment as conducive as possible to economic activity, including exporting. I would point out that the economic environment in Ireland is characterised by sound public finances, high growth, low inflation, interest rates at historically low levels, a high level of investment under the national development plan and moderate wage developments in line with the Programme for Competitiveness and Work. All of these are of benefit to exporters.
My 1996 budget contained measures, including improvements in income tax, PRSI and corporation tax, which were aimed at improving the economic climate for industry, including exporters. These measures built on the progress made in the 1995 budget and included the reduction of the employers contribution in the standard rate of PRSI from 12.2 per cent to 12 per cent and in the lower rate from 9 per cent to 8.5 per cent.
Before calling Deputy O'Hanlon I would remind Deputies that we have 15 minutes in which to deal with five priority questions. I aspire to accommodate all Deputies concerned and perhaps Deputies would co-operate.
Is the Minister aware of the number of job losses and the number of jobs threatened not only those involved in the export market but due to imports from Britain? Indeed, he referred to the lower import costs. There is also a hidden figure for jobs that could be created. I am aware of food industries in the Border area who are ready to establish new industries but have not done so because of their concern about currency fluctuations. Will the Minister outline the Government's policy to deal with the food sector, especially in the Border areas, and the low profit margins on mushrooms and poultry which are labour intensive jobs? At what stage will the Government intervene? The budget measures to which he referred did not have a major impact. For example, the improvements in PRSI mean a reduction of £20 on £10,000 so that the reduction from 12.2 per cent to 12 per cent is not a major reduction. What measures has the Government in mind and when will they be introduced?
I am conscious of the request for brevity. However, I would not wish my brevity to be concluded as a poverty of response. I recognise there is a problem but it is almost impossible to quantify at present how many jobs have been lost as a result of the shift in the currency ratio, an approximate appreciation of 4p in the pound or 4 per cent overall. We cannot segregate that from the figures. If anything the figures indicate there is little or no problem because with redundancies at 13 per cent — the lowest since 1980 — an objective view would be that there is no problem. Because of the information brought to my attention by Deputy O'Hanlon and others I recognise there is a problem in specific sectors.
Whether we can introduce specific measures to help those sectors, such as the market development fund which was introduced by a previous administration in 1992-93, the answer is an unequivocal no. That measure was objected to at the time by the British authorities and, by and large, its objection was upheld by the Commission. We were allowed to operate it on a temporary basis. The Deputy's colleague, Deputy McCreevy, had responsibility as Minister for Tourism and Trade in 1993, and he will know precisely the type of pressure we came under from the European Commission when the market development fund was phased out.
On the question of what we can do and if the Government has a policy, we are trying to reduce the competitive cost disadvantage between Irish exporters into the UK market and British based competitors. We have tried to reduce the producer cost base in areas such as PRSI and so on. We could go much further and I would like to move much further. We are lacking in overall information in this area on a sector by sector basis. For that reason, and because of the currency fluctuations and the possible shifts in exchange rates generally between different European currencies, I have commissioned — as announced in my budget speech — a fairly substantial study which is being dealt with under competitive tendering procedures, to the ESRI. We will then have a better focused picture which will enable me to answer some of the questions the Deputy has tabled in a matter of months.
Can the Minister offer any support to Irish exporters, particularly those in the high labour intensive low profit industries? Will he consider reducing employers' PRSI? This would not be in conflict with European law or the British viewpoint.
Let me outline what the Government and its predecessor have done in support of such industries. The rate of inflation has been reduced considerably below that in the United Kingdom. It now stands at 2.3 per cent as compared with a figure close to 4 per cent. Interest rates are 1.25 per cent below the base rate in the United Kingdom. Labour cost increases are also lower. As compared with the position in 1992, the employers' PRSI contribution has been reduced from 12.2 per cent to 8.5 per cent on incomes of £13,000 or less for labour intensive industries which traditionally have supplied the UK market.
These positive measures should be placed against the negative measure of an appreciation of 4 per cent in the exchange rate of the Irish pound against sterling. Some industries, for which we will try to do more, will remain vulnerable, but we have made a considerable move. This is recognised by some, but perhaps not all in the industries affected.
