We now come to No. 2, a briefing session on the renewed Lisbon strategy for growth and jobs, including the national reform programme. I draw witnesses' attention to the fact that members of the committee have absolute privilege but this does not apply to witnesses appearing before the committee. A briefing note was circulated to members of the committee containing a copy of the national reform programme. We have representatives from the Departments of the Taoiseach, Finance, and Enterprise, Trade and Employment, Mr. John Shaw, Mr. Tony Gallagher, Mr. Tom Murray, Mr. Aedan Hall and Mr. Niall Monks. I thank them all for attending. I ask Mr. Shaw to commence.
Lisbon Agenda for Growth and Jobs: Discussion.
Mr. John Shaw
I am pleased to have an opportunity to brief the joint committee on the Lisbon Agenda for jobs and growth, specifically the national reform programme, 2008 to 2010. I propose to provide a brief outline of the overall process based on the briefing note circulated, after which my colleagues from the Departments of Finance and Enterprise, Trade and Employment will briefly discuss several of the key elements in the draft national reform programme, which is being finalised this week.
The Lisbon Agenda is a shared effort between Departments. While the Department of the Taoiseach co-ordinates the agenda, specifically interaction with the social partners as part of the social partnership process, the Departments take the lead on the three main sections of the reform programme. Officials from the Departments will be pleased to say a few words about their responsibility in this regard.
As Deputies will be aware, the Lisbon strategy, which commenced in 2000, was an ambitious, multifaceted strategy to make Europe the most competitive and dynamic economy in the world. It was, however, extremely broad and was not regarded as successful. In 2005, the European Council reviewed the strategy and agreed to refocus its efforts on jobs and growth and establish a much more streamlined process for delivering and seeing through the process. As part of this change, it required each member state to prepare a national reform programme setting out what it would do on the basis of a series of guidelines on which the European Council had signed off.
The intention was for member states to take some ownership of the actions that were required at national level and to do so in a way that ensured stakeholders at national level were more involved in the process. For that purpose, member states were required to have a national reform partnership. This was agreed during Ireland's Presidency in 2004 and was strongly based on ideas associated with social partnership in Ireland. In Ireland's case, social partnership acts as our national reform partnership and we use the social partnership structures in Towards 2016 as a mechanism for consulting social partners on the national reform programme.
The first national reform programme was produced by Ireland and submitted to the Commission in 2005, with annual progress reports being submitted in 2006 and 2007. The Commission produces an annual assessment of progress by member states. The assessment of Ireland in 2006 and 2007 was positive and we were in the top tier of member states in terms of the Commission's assessment. At the 2008 spring European Council it was agreed to have a further cycle of the Lisbon process leading up to 2010 and using the same integration guidelines as previously, with an emphasis on implementation of the existing guidelines rather than production of a new set of guidelines and criteria. Member states were required to submit a new or updated national reform programme by the middle of October.
We have circulated to the joint committee the draft of the national reform programme, 2008 to 2010, as it was at the end of last week. The document, which is still be being worked on, will be finalised in the coming days and, I hope, submitted to the Commission by the end of the week. We received an extension of a couple of weeks from the Commission on the basis that the budget had been brought forward and it made sense to include budget 2009 in the reform programme.
The national reform programme is essentially a description of the policies of the Government across a broad range of areas. In the current climate, with events moving at such a rapid pace, it is a difficult task to encompass all issues effectively. As I stated, the draft available to members is a work-in-progress which we hope to be in a position to submit to the Commission by the end of the week. We are trying to include recent developments in the document. Its contents are wide ranging. While the officials present do not claim to be experts on all the detail, we will be able to provide an overview.
In accordance with the guidelines, three main areas are covered in the national reform programme. I propose to ask the relevant person from each Department to say a few words about the relevant sections. The first is macroeconomic policy. I will ask Mr. Tony Gallagher from the Department of Finance to say a word about that. The second is microeconomic policy and structural reforms. Mr. Tommy Murray from the Department of Enterprise, Trade and Employment will cover that. The final matter is employment guidelines and labour market issues, which Mr. Niall Monks from the Department of Enterprise, Trade and Employment will cover. I will hand over to Mr. Gallagher.
Mr. Tony Gallagher
As Mr. Shaw said, the main areas with which our Department deals are the macroeconomic policy objectives. Six guidelines come under that heading. The first is to guarantee economic stability for sustainable growth. Despite the rapid turnaround in the economy from gross domestic product growth of 6% last year to a fall of 1.3% this year, the Government refers in the plan to its commitment to ensuring the competitiveness of the economy so that it will be well positioned to benefit from the global recovery when that begins.
The commitments under that heading focus on investment in productive infrastructure and in education at all levels, maintaining a low burden of tax on capital and labour, maintaining a flexible, resilient economy, and working with the social partners to ensure all economic agents have a shared understanding of the short-term challenges.
The second guideline is to safeguard economic and budgetary stability as a prerequisite for more jobs. The focus of this guideline is a range of initiatives that have been put in place to meet anticipated long-run fiscal pressures. Under this heading the Council signalled a point to watch by urging Ireland to speed up progress in formulating a framework for longer-term pensions policy. The Government is developing a response to the consultation process following the publication of the pensions Green Paper last October. It is expected that the framework will be presented before the end of the year.
The third guideline is to promote an efficient allocation of resources geared to growth in jobs. Initiatives are in place to assess the relationship between public spending and the achievement of policy initiatives. Those will be built on and developed under the national reform programme. Priority will be given to developing better and more effective public services, getting value for money for all public spending and continuing to invest heavily in public infrastructure through the National Development Plan 2007-2013. Regarding the NDP, the first annual report was published last July and showed the plan was on target.
The fourth guideline is to ensure the development of salaries contribute to macroeconomic stability and growth. The national reform programme reaffirms the commitment to ensuring the pay improvements for public service workers continue to be linked to delivery and verification of agreed improvements in public services. The national reform programme also highlights the deterioration in Ireland's competitiveness in recent years and the importance of controlling costs and wages to reverse that trend. The importance of increasing productivity is also emphasised in the plan and measures are set out to support the drivers of productivity.
The fifth guideline is to strengthen the consistency of the macroeconomic structure and employment policies. The guideline covers reform across various markets — product, capital and labour — and in regard to public finances. Among other areas, it covers the public service reform agenda and refers to the task force that was established following the publication of the OECD review of the public service, Towards an Integrated Public Service. The task force's action plan for the public service will inform the next phase of the modernisation process in the public service.
The sixth guideline is to contribute to the dynamism and smooth operation of economic and monetary union. Although Ireland has been a consistently strong performer under the Stability and Growth Pact, the immediate prospect is for deficits in the public finances. Nevertheless, budget 2009 set out the Government's commitment to reducing the deficit sustainably below 3% of GDP and, in turn, to meeting, on a phased basis and as soon as possible, our medium-term objective in light of the evolving budgetary and economic decisions. This is to avoid damage to the economy.
Mr. Tom Murray
As my colleague said, the Department of Enterprise, Trade and Employment has responsibility for both the micro-economic elements and the employment guidelines of Ireland's NRP under the Lisbon Agenda for growth and jobs. I have specific responsibility for co-ordination in respect of the micro-economic objectives in part 3 of the report.
The document is a comprehensive summary of the range of measures pursued by my Department and others in the context of the Lisbon Agenda. It is probably useful for me to highlight the key areas of emphasis in the micro-economic area of the programme. Investing in knowledge and innovation is a key area for competitiveness, both now and in the future. The vision of the Government's strategy for science, technology and innovation, as contained in the national development plan, is that, by 2013, Ireland will be internationally renowned for the excellence of its research and will be to the forefront in generating and using new knowledge for economic and social progress within an innovation-driven culture.
The key objectives are to strengthen Ireland's enterprise base, move the country towards a knowledge economy through human capital investments and maximise the return on investment in research and development in respect of Ireland's economic and social development. My Department is committed to reaching the target of 2.5% of GNP by 2013 under the strategy for science, technology and innovation. The national strategy for higher education will contribute to developing our third level institutions into world leaders in research and development.
We published, at the end of June 2008, a broad innovation policy statement and we will be working on key elements thereof in respect of both non-technological and technological innovation. On the non-technological innovation elements, we are currently focusing on extracting innovation from key areas such as public procurement, competition and cluster policies in collaboration with our European partners. This is in keeping with the roll out of the Lisbon Agenda. This is the first area of focus.
The second area of focus is the business environment. Achieving an appropriate balance in how we regulate, tax and assist companies is very important in the business environment. In each of these areas, the Department is working to ensure that we have the very best operating conditions for business. Although the level and burden of regulation are not perceived to be onerous in Ireland compared to elsewhere, we nevertheless have a programme to simplify rules, reduce duplication and improve efficiency for business, in particular small businesses. This all goes hand in hand with regulatory impact analyses and the modernisation of the complete Statute Book.
In line with European Council commitments being driven through the Lisbon strategy, Ireland has set a target of a 25% reduction in administrative burdens arising from domestic legislation to be achieved by 2012. The national reform programme documents some of the programmes agencies such as Enterprise Ireland and the county enterprise boards have developed to support enterprise. The importance of competition and the services sector is also highlighted in the report.
The commitment to the small business sector has brought about substantive changes through the implementation of the small business forum's report. These are also highlighted in the national reform programme. The 2009 budget announced tax relief measures for new and start-up businesses by way of remission in corporation tax and capital gains tax in their first three years. These measures should also help to grow small companies and promote an entrepreneurial culture.
The third area covers infrastructure with a particular focus on energy and energy efficiency. Climate change and the development of environmental goods and services are also highlighted as key factors in moving towards a highly efficient, innovative and low-carbon economy.
The strong message is that Ireland continues to be open for business in spite of the current economic difficulties being shared worldwide. Key priorities in the current economic climate are to enhance the reputation of Ireland as a location for foreign direct investment, to continue to support indigenous companies and continue to be an attractive location particularly for services, high-tech manufacturing and research and innovation activities. The supports outlined in the national reform programme to accelerate international success are strong. They are geared towards helping Irish business to turn globalisation challenges into opportunities and for investment by our companies in overseas markets.
Mr. Niall Monks
I am responsible for co-ordinating the employment and labour market part of the national reform programme.
The labour market priorities for 2008 to 2010 will remain largely the same as the previous round of the Lisbon Agenda. They involve sustaining a high level of employment and low unemployment, ensuring an adequate supply of skilled labour to meet the needs of the economy and enhancing educational and qualification levels at all stages of the life cycle to ensure the availability of a high-skilled and adaptable workforce.
While these priorities remain unchanged, the economic environment in which we operate has deteriorated. This presents us with new challenges in the context of rising unemployment. To meet these challenges, there will be a greater policy emphasis on activation and training for the unemployed while ensuring an adequate supply of skilled labour to meet the economy's needs.
The employment section of the national reform programme covers the spring European Council priority action on improving employability through flexicurity and several points highlighted in the Commission's strategic progress report on the Lisbon Agenda for 2007.
Flexicurity is about balancing flexibility with security. It is designed to increase employability and provide people with an incentive to work. It is based on four pillars that comprise flexible and reliable contractual arrangements, comprehensive lifelong learning strategies, effective labour market policies and modern social security systems. There is no one-size-fits-all approach to flexicurity and it is up to each member state to determine a balance of security and flexibility policies best suited to its situations and traditions. In Ireland, objective flexicurity policies are embodied in our well developed social partnership process. Objectives set out in the most recent agreement, Towards 2016, are closely aligned to the aims of the Lisbon Agenda.
Under successive agreements, labour market policies have been successful in sustaining a high level of employment and ensuring an adequate supply of skilled labour to meet the needs of the economy. Tax and welfare payments together with employment and training initiatives have reduced inactivity and unemployment and facilitated the move towards better-quality jobs.
The Lisbon Agenda sets a number of targets to be achieved by 2010 in the context of employment which Ireland has, to a large extent, achieved and in some cases exceeded, particularly in the areas of female employment and the employment of older workers. The Commission's strategic progress report for 2007 on the Lisbon Agenda was generally positive in its comments about the progress made by Ireland. The report noted, however, that it would be important for Ireland to focus on the following challenges for the future in the area of employment and these are essentially known as the points to watch: accelerating progress in increasing labour market participation; establishing a comprehensive child care infrastructure; further development of the policy framework, the labour market and social integration of migrants; and placing particular emphasis on support to older and low-skilled workers.
In the area of accelerating progress and increasing labour market participation, greater focus will be given to activation and participation in an integrated approach across programmes including national and local employment services, the preventative process and the social and family support service. These processes and programmes will increasingly focus on the long-term unemployed, the employed in the 16 to 24 age group, people who have completed the preventative process but who remain unemployed and those furthermost from the labour market, including young parents and people with disabilities. The national child care strategy 2006-10, which is broad ranging and ambitious in its targets has now reached mid-point. It includes the national child care investment programme, NCIP, and the national child care training strategy. The strategy seeks to improve co-ordination and integration at national and local levels between key players including the local planning authorities and county development boards. A target of 50,000 additional child care places has been set for the NCIP and it is anticipated that the target will be achieved in the context of the strategy.
A comprehensive audit of qualifications held in the sector, training needs and current training provision has been undertaken. Following consultation with the sector, policy proposals to underpin the further development of a quality child care infrastructure will be proposed. In the area of migration, a Minister of State with specific responsibility for the development of integration policy was appointed in 2007. A major priority for the office was the development of a policy document on integration and diversity management. This document, called Migration Nation, was published in May 2008. The document sets out a framework for achieving migrant integration and outlines the key principles which will inform and underpin State policy in this area. The Employment Permits Act 2006, which became operational in February 2007, gave expression to a new flexible, responsible managed migration policy. The promotion of training and upskilling of employees, particularly for low-skilled older workers, will take place to enhance employability in the context of the impact of globalisation. The preventative process has been extended to those aged 55 to 64, to facilitate unemployed older workers remaining attached to the labour market. This has taken place in tandem with the phasing out of the pre-retirement allowance. In addressing the points to watch, the employment section of the national reform programme provides a narrative on recent progress and the strategy in these areas for the new round of the Lisbon Agenda.
Mr. John Shaw
There is a question as to what happens after 2010 when the Lisbon Agenda has run its course. The European Council last spring decided to initiate a debate on the follow on to the Lisbon Agenda and held a number of meetings hosted by the previous Presidency and the Commission on this issue. There will be more to come and the debate will take place over the next couple of years. The current president of the Commission has signalled his desire for a follow-on process of some nature, but that should not take away from implementation in the short term.
We are happy to take any questions or comments. The reform programme is a pulling together of policies and actions across a large number of Departments and areas. While we are happy to respond to any questions, we may take some comments back to our colleagues in the different Departments as we finalise the document over the next few days.
I thank the representatives of the three Departments for their impressive document. I imagine that 99% of it was written prior to the middle of this month, when the budget arrived on the scene. This transformed the document from a fine piece of research over the past year to a work of fiction at the moment. It is based largely on the growth in the economy over the last few years up until 14 October. That is very much in tatters now. The Stability and Growth Pact means that we are supposed to have spending within 3% of GDP, but we are spending 6.5% of our GDP. The public finances are haemorrhaging at the rate of nearly €1 billion per month. The whole basis to the Lisbon Agenda, which was about partnership and working together, would seem to have been breached by the terms of the budget. The budget took a hatchet to what was engaged upon and delivered over a period of time. The national reform programme contained a national reform partnership, but that no longer exists because every sector of the partnership is up in arms at the moment. It will be very difficult to go over to Brussels and say we have a national reform programme that has been agreed through a national reform partnership.
I know that the witnesses have great difficulty and I appreciate all the good work they are doing and the fact that they are representing their country to the best of their ability. However, there seems to be a serious discrepancy between what is presented here and the reality on the ground over the past few weeks. It seems to me that the statement on the macroeconomic issues mentioned by Mr. Gallagher is very difficult to stand over, as is the statement on the microeconomic issues by Mr. Murray and the statement on job creation by Mr. Monks.
We have breached the Stability and Growth Pact. I would like to know the exact figure for our national pensions fund. The witnesses claimed it was €19 billion by the middle of June, but what is it today? I reckon it is about €15 billion at best. The public finances are in rag order and there is no proper reference to this.
Is there a realistic possibility that we will reach the 2.5% figure to which Mr. Murray referred by 2030? We are 1.56% of GNP at present, which is half what is requested by the EU. I note that in the budget, the research contribution by the Exchequer to the third level institutions has been reduced by a colossal amount, either 20% or 30%. We do not seem to be going in the right direction.
We are entering a consultative phase on broadband. The former Minister, Deputy Dempsey, had been doing this for the previous six years but the new Minister, Deputy Ryan, has decided to create the wheel all over again. We are behind on broadband. We know what must be done but we will begin consulting on it in the foreseeable future with no prospect of delivery.
There is €252 million for ICT in schools. This scheme has been in place for some time but the schools are complaining that there is no mechanism for delivery. What will happen in this regard? When will it be rolled out?
Is it not the case that the Celtic tiger is finished, we are in a recession, we are not competitive, not manufacturing and not exporting, and the construction industry has collapsed? I cannot see where any of these issues are addressed in the presentation.
I noted from the European Council meeting which the Taoiseach attended last week that there was a commitment by the Heads of State to produce €30 billion in new funding to the small and medium enterprise, SME, sector. I do not see this included in the deliberations before us. It seems this is an ideal way to get necessary credit facilities into an area where credit is largely unavailable from the financial institutions at present. We should be making the most of the €30 billion the EU will make available to the SME sector. I hope the witnesses will refer to this issue.
In terms of employment and the comments of Mr. Niall Monks, I agree that the four pillars of flexisecurity are a good approach in the long term. However, we must get our house in order first. There has been a huge amount of concern and anger in the trade union movement with regard to agency workers and the race to the bottom and the fact that this was not addressed over the years. Ireland has been to the forefront in opposing the EU directive that was initially produced in 2001 and it opposed it to the end. That was a despicable approach from the Government throughout those years, when it could have been providing proper equality of treatment for workers throughout the EU in the context of the basic pillar of the free movement of labour.
The budget has hit hard with regard to child care and redundant workers. A person must now wait two years rather than one to get the jobseeker's allowance and nothing is available in terms of the back to education allowance. We have lost 80,000 workers in the past 12 months and the ESRI projects we will lose another 100,000 in the next 12 months. There is no social integration of migrants, who are hit hard by the budget. This makes a mockery of policy on this issue.
This would be a fine document were it not for the fact that it does not reflect the reality, post-budget. We must be more modest in assessing our future capabilities in terms of the Lisbon Agenda. We were very much in the premier league until last year. Now, however, we have gone from the top to the bottom. Our programme should reflect to a greater degree the challenges we face and the solutions that may be forthcoming.
I thank the delegates for their contributions. Events of recent weeks illustrate how quickly the economic situation is changing. For example, in its document, the National Economic and Social Council refers to the sharp contraction of the domestic construction sector and the global credit market squeeze. These problems persist. However, the council also refers to greatly increased energy and commodity prices. Since the document was written, the price of a barrel of oil has decreased from $145 to $60. All commodity prices are in free fall. Likewise, the references to the strength of the euro may no longer be accurate, with the yen now making the greatest gains. The European Central Bank's recent decrease of half a percentage point in the interest rate is expected to be followed quickly by another decrease of the same magnitude. In other words, all the economic fundamentals are shifting.
Will the delegates comment on the recent speech by the British Prime Minister, Mr. Gordon Brown? It was an important speech which focused specifically on the Keynesian nature of Government borrowing in the United Kingdom, with a view to keeping the economy, particularly small businesses, afloat until such time as the recession in the private sector is over and the surpluses enjoyed in the good times can be modulated to repay the additional borrowings necessary in the bad times. What are the delegates' views on our capacity to borrow given that we have the lowest debt ratio of the major economies in Europe?
I thank the delegates for their presentation. I agree with Deputy Costello that the document does not reflect the current situation. Every page includes the proviso that projections may be subject to further editing and revision in the light of budget 2009. The budget has shot a hole in the Lisbon Agenda proposals as presented to us in this document. Mr. Gallagher referred to measures to improve productivity being considered by the task force on reform in the public service. The reality, however, is that the horse has bolted, with benchmarking leading to little improvement in productivity in recent years.
We have been hearing for years about improved provision of information and communications technology, including broadband, in schools. When will those commitments be delivered? We hear constantly about the improved availability of child care services. Wonderful facilities are being constructed but grants for staffing are being reduced, thus rendering some of them ineffective. The draft plan looks wonderful on paper but it will require extensive editing in the wake of the budget. When will the edited and revised version be made available to members?
The witnesses have happened by on a bad day as members evidently are highly exercised by what they had to say. A few points also have occurred to me. Much is based on the partnership agreement, Towards 2016. As members have noted, changes have taken place and some revision is required. Reality must take over and there must be a realistic update in respect of the points just made by members.
Another issue that comes to mind and which has come up repeatedly is the field of telecommunications. The point was made that in respect of knowledge-based industry, Ireland should be to the fore by 2013. Members have already asked what has been done in this regard. Is this still an aspiration or has some groundwork been laid down? What is happening? Ireland has not been to the forefront for several years; six to eight years ago it was much closer and was in the leading coterie. However, we have slipped back and to address this issue and achieve such an objective in future, some indication must be given as to what is intended and what will be done. Otherwise, this document is of no value, which is the exact point made by members. It will not achieve its objectives because it is based on a false premise.
Another point that comes to mind is that the word "competitiveness" was mentioned several times. This has been a subject of great interest to me over the past six or seven years in respect of the industrial, manufacturing and exporting sectors in particular. This issue has been brought home to everyone by the departure overseas to low-cost economies of manufacturing jobs. Moreover, some enterprises that have remained here have complained about the costliness of their Irish bases. There must be some explanation for this and attention must be given to addressing such issues. It already has been stated that members merely reflect what they know, read and see for themselves.
It could be stated that the document before the joint committee is seriously dated. This issue was discussed in Brussels a couple of weeks ago at the Friends of Europe conference and great emphasis was placed on updating the document. Obviously there is recognition throughout the European Union that for reasons unknown, matters did not happen in accordance with the projections. I do not believe the projections have been revised either adequately or sufficiently frequently. One cannot commit something to paper, return to it five years later and then state it still is the gospel. This document cannot be the gospel any longer because circumstances have changed dramatically, as was reflected by the comments members have just made.
I seek inspiration from the witnesses' responses to demonstrate awareness that the situation differs from what it was five to seven years ago. For instance, in common with other Deputies, I have tabled numerous questions in the Dáil about the competitiveness of our economy only to be informed that Ireland now was a high-wage economy and was different. However, I am unsure of that. The reason we had a high-wage economy was because we were obliged to have one due to high construction costs that resulted in high house prices, which in turn forced everyone into the so-called high-wage economy. Where stands the high-wage economy at present? What actions are being taken to address the issues that arise therefrom?
I will make two final points. Much emphasis has been correctly placed on the reduction in bureaucracy and administrative burdens. However, and I am sure my colleagues have similar experiences, I have never seen growth in any economy to match that within the administrative economy recently, in which copious documentation can issue to various sectors of the community. While obviously this affects the private sector, to a great extent it also affects the public sector. Documents are shifted forward and back and the public sector must respond, leading to the duplication and, in some cases, the quadruplication of documents.
Taking local authority housing loans as an example, a person must send a document to the Revenue Commissioners for stamping. Some of us believe that, to economise, one could send photocopies of the document to the affordable housing section, the loan section and perhaps another section. However, one would be told that this was not acceptable and that one should send a separate document in each case. It is an outrageous interpretation of the law and regulations and serves no purpose other than to burden the public and private sectors with added administration. It is not based on any objective.
The Lisbon strategy must reflect the current economic and social climates. Otherwise, it is not addressing reality, as members stated. This is not a criticism of our guests. Rather, it is a fact of life that unless someone somehow somewhere comes to grips with updating projections to reflect reality and putting in place measures to address the situation, we are wasting our time. We are accountable to the public, who will take revenge if we do not do our jobs. I apologise as this is not a personal criticism of our guests. Rather, members have indicated that it is time to take account of the stark reality.
Mr. John Shaw
I will respond to a few of the general comments before passing over to my colleagues to address some of the more specific issues. Regarding the document being up to date in terms of the budget, we have indicated that the former has been redrafted since it was circulated to the committee at the end of last week to take account of the latter's implications for different programmes. This work is ongoing and will continue through the remainder of the week before we submit it to the Commission. There are timing issues in terms of our ability to appear before the committee, our need to send the document to Brussels and the budget. Since it is an evolving document, I accept that aspects of it must be updated.
Our deadline was extended, but we face the challenge of submitting the document to the Commission this week. Given the pace of change in the real economy and the responses being taken nationally and internationally to it, preparing a document is difficult. I accept that further work is required to ensure that we take on board the realities as best as possible. Equally, we will not capture the changes and developments in national and international policy responses that will inevitably occur after whichever close-off point is chosen. To a certain extent, the document reflects where we are at a point in time. However, I take on board comments to the effect that we should reflect and emphasise the gravity of the challenge and the difficulty of the situation more clearly. We referred to these.
We consulted the social partners on the negotiation of the Towards 2016 review, the transitional agreement and the draft text. We engaged intensively with the social partners in this regard and are continuing to take on board their comments. Whether the Towards 2016 agreement will be ratified will probably not be clear until the middle of November. We are working on the basis of a draft agreement recommended by all the relevant executives, but we must take account of changing circumstances.
Given the scale of the challenge we face, we do not intend to put a good foot forward so much as to recognise the increased importance of the agenda. At a time of increasing unemployment and negative growth, the type of policies here and the attempt to pull them together coherently is more important than ever. This provides an opportunity to focus on the agenda more than in the past. In that context, there must be balance between different objectives in the programme. In terms of decisions, investments in different structural or employment programmes must be balanced against objectives in the growth and stability pact, in terms of the macro-economic part of the document. Choices must be made in respect of that balance and how it can be correctly achieved.
Reference was made to Gordon Brown's comments, which are part of this debate and part of the judgment to be made, on the extent to which Governments can borrow in a period of economic turmoil and the balance between urgent, immediate action and postponing action and doing it over a more sustained period. This judgment must be made in the round, taking account of macro-economic and other objectives including competitiveness and structural investment, which the document covers.
Regarding the draft, we are working on the document this week and we must submit it to the Commission at the end of the week. We are happy to give members a chance to see the final draft and return to discuss it if that proves useful. The Commission will undertake an assessment of all the national reform programmes before the end of the year. That will be published and we will engage with the Commission on that and it will be discussed at the European Council next spring. This will be an evolving debate as the economy and the responses to the economic situation unfold. We are happy to take comments on board and accept the validity of the comments regarding the urgency that must be reflected in this document and the scale of the challenge. It is a useful and fair comment.
Mr. Tony Gallagher
There is not much left to say because Mr. Shaw has covered much of the ground. The key message in the national reform programme is that the deteriorating and uncertain outlook domestically and internationally emphasises the importance of proceeding with the initiatives in the national reform programme. Although the outlook is uncertain, we must push ahead to ensure the economy is well placed to take advantage of the economic upturn when it comes. That will not change.
Wage competitiveness is now more important than it has been. In a period of strong economic growth with high productivity in the economy, it was not as important as it is now. In changed circumstances, there must be greater emphasis on all costs, including wage costs. The terms of the agreement under Towards 2016 should make an initial contribution in improving our competitiveness.
Regarding Gordon Brown's speech on supporting enterprise, the budget made provision to support business. The comment was made, in the introductory remarks, that Ireland is open for business. We are maintaining, for example, a low tax regime and that, of itself, should be of considerable help to businesses.
Deputy Costello asked for the updated figure for the National Pensions Reserve Fund but I do not have that information to hand. However, I will supply it forthwith.
Mr. Tom Murray
I agree with Deputy Costello that the situation is quite fluid and has, to some extent, become a moveable feast. We obviously must take on board what committee members are saying and redirect some of the comments back to the NRP before it is submitted. I am also convinced that the reports of most member states are probably out of date now, especially those that have been submitted to the Commission. We are all in for a very challenging, if not torrid, time with the Commission when it comes to making its final report on all member states' national reform programmes in spring 2009. We await that judgment with interest.
With issues that pertain to other Departments, such as broadband, we will have to consult the relevant Departments to see how we can modify or amend text in the NRP.
The target of spending 2.5% of GDP on research and development is on track as we speak. We must remember that we are running very fast to keep up with competitors. As instanced in the report, the first assessment of the first two years of the strategy for science, technology and innovation is quite good and suggests that we are on track to meet the 2.5% target. As the saying goes, it is an ill wind, and ironically, as the economy contracts, we will have a far better chance of reaching that target and perhaps even exceeding it by 2013.
As Mr. Gallagher said, with the national reform programme we must put our best foot forward in terms of Ireland and its position vis-à-vis other member states. That programme will be on the European stage right through the spring and will be reviewed, assessed and peer-reviewed. Other member states and the Commission will analyse and assess our reform programme, as we will theirs.
As a country, we still continue to be an attractive location for services for high-tech manufacturing, research and innovation activities. Within the OECD, Ireland is a leading location in terms of internationalisation, openness and freedom of movement for companies, people and investment. This is one of our strengths and will continue to be so.
We are examining other areas of the economy which have the potential to generate greater export levels, particularly services. At present, 43% of our exports are in the services area and that figure is growing by the day. We are the tenth largest exporter of services in the world. The Department recently published a new strategy for services and is examining the potential for further opportunities in that sector. We are also continuing to encourage internationalisation in the services area, despite the economic downturn. We have asked the enterprise agencies to carry out in-depth sectoral analyses to identify export opportunities, especially in the services market. We are moving forward, although one could say we are taking one step backwards to take two steps forward. Nonetheless, we are progressing.
As long as we are not in reverse, that is good.
Mr. Niall Monks
We certainly cannot dispute Deputy Costello's comments on rising unemployment and the collapse of the construction industry. In conjunction with FÁS, my Department is endeavouring to improve the employment mobility of people in the construction area by retraining them in the installation of sustainable technologies, environmental activity compliance and regulatory work. We are also providing short training programmes with a view to returning them to the labour market. However, these are not easy tasks. FÁS is one of the few bodies to have received additional funding in budget 2009, which emphasises the importance of focusing on these issues over the coming years.
In regard to agency workers and flexisecurity, these issues come under the auspices of social partnership. As far as I am aware, agency workers form part of the proposed agreement and the issues arising in this regard will be addressed in the context of legislation. I do not think a particular time was set but it will be dealt with in that context.
Will FÁS's budget be increased to address that issue?
Mr. Niall Monks
In relation to training for the unemployed, yes.
The jobseeker's allowance is a matter for my colleagues in the Department of Social and Family Affairs, with whom I would have to consult. I gather, however, that certain anomalies have arisen in respect of part-time workers who benefit greatly from the allowance by becoming unemployed. I understand the intention was to address that issue but I can revert to the committee with further details if members so wish.
We would have to pursue the matter of the social integration of migrants with our colleagues in the Office of the Minister for Integration.
We have given the departmental officials some food for thought which I hope they will incorporate in their final document. Perhaps they will refer the document back to the committee when it has been agreed because I am sure members will be anxious to revisit it.
I strongly disagree with the prediction that services will compensate any losses Europe and Ireland might make in the area of manufacturing. How does one address the issue of a major insurance company deciding to relocate its operations from Dublin to Bangalore? That would be an up-market and high technology service industry and, one would presume, an employer on the higher rungs of the job ladder. Are further measures required or have costs gotten out of hand? Is there a need for initiatives which would ensure we do not see the relocation of service industries and, if so, what initiatives are likely to be taken both in Ireland and at European level? The European Commission and the Council can only operate on the basis of the documentation presented to them by member states and will ultimately reflect the objectives and aspirations contained therein.
Mr. John Shaw
In regard to the big question of services migrating to eastern Europe and Asia, that is happening now and the danger arises that the migration will pick up pace in the future. It reinforces the importance of the investments in the knowledge economy, science and technology, so Ireland can create sustainable competitive advantages through levels of skills, quality of infrastructure or research-based jobs that are not as readily moveable to other parts of the world. It reflects the scale of the challenge that Ireland and Europe face regarding marking out sustainable competitive advantage for themselves in the years ahead. It underlies the original Lisbon strategy and the effort to try to upskill, enter the knowledge economy and identify, through investment in research and development, higher skills and better infrastructure, competitive advantages that will allow us to compete effectively for services and high-end manufacturing jobs. While that was one negative story, a large number of service jobs were and are being created in Ireland and Europe, for which we compete. What was the second question?
It was on how the documents as compiled by each member state will reflect Europe-wide thinking. The European conclusions are only as good as the ingredients.
Mr. John Shaw
Every year the Commission pays a number of visits to Ireland during which it interrogates different Departments on the progress under the different aspects of the NRP. When it comes here it meets the social partners and that informs its assessment. It draws on sources of knowledge and information across the range of policy areas so it does not rely solely on this document. It has plenty of sources of information which it pulls together internally across the different directorates. So in getting information on, say, our Stability and Growth Pact, our reports through other Commission directorates are used to inform a whole-government assessment of each member state. It also has commitments regarding the Lisbon Agenda and initiatives it must take at community level to try to reach the targets set. As my colleagues have said, there is extensive dialogue in the employment and competitiveness Councils and ECOFIN on many of these issues and the progress made by member states, which all feeds into the ultimate Commission assessment and the conclusion of the European Council next spring.
I thank the delegation for a most informative discussion. Members will want to return to it and I am sure the delegates will want to address the issues raised.