Joint Committee on Jobs, Enterprise and Innovation debate -
Tuesday, 21 May 2013

Effects of Black Economy: Discussion with Construction Industry Federation

Vice Chairman

I welcome Mr. Philip Crampton, president; Mr. Michael Stone, senior vice president; Mr. Tom Parlon, director general; Mr. Hubert Fitzpatrick, director; and Mr. Dominic Doheny, vice president, of the Construction Industry Federation to the meeting to discuss the effects of the black economy on the construction industry.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of a long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House, or any official by name in such a way as to make him or her identifiable.

I ask Mr. Crampton to make his presentation following which I will invite members to ask question. I ask that the presentation be limited to ten minutes in order to allow more time for questions from members. I will remind him when there is one minute remaining. I am anxious to deal with this promptly as we have another group presenting later.

Mr. Philip Crampton

I thank the Vice Chairman and the members of the Oireachtas Joint Committee on Jobs, Enterprise and Innovation for taking the time to investigate this very important subject. The construction industry in the Ireland has gone through a dramatic period of decline over the past six years. Activity in the industry had been valued at €38 billion in 2006. However, that activity has experienced significant levels of decline in the period since. In six years the value of activity in the sector has experienced a drop of approximately €30 billion. The decline in activity has had major implications for our industry. There has been an enormous decline in the level of direct construction employment. The peak of direct construction employment was reached in second quarter of 2007 when a total of 273,900 people were working in the industry. The most recent figures for direct construction employment are from the last quarter of 2012, when the total level of employment was recorded as being 103,200.

According to those figures the level of direct construction employment has declined by 170,700. We estimate that when indirect employment and ancillary jobs are added in, the decline in the construction industry has resulted in a loss of approximately 250,000 jobs.

It is also worth noting that according to Government figures, one in four persons on the live register, or 109,000 persons, is a former construction worker. The severely decreased level of activity in the sector has made the business environment extremely difficult for Irish construction companies. Many have been forced out of business, with as many as 421 and 415 construction companies becoming insolvent in 2011 and 2012, respectively. As of 1 April 2013, a further 90 construction companies had become insolvent. In the face of such difficult conditions, the competition for work has become fierce. To stay afloat, companies need to secure work. Otherwise, they will have no income to meet the continuing expenditures of their businesses. Across the industry, company cash flows and reserves have been used up.

Tender prices in the industry are ever reducing as construction companies do everything they can to ensure they secure a project. In an environment where there is a race to the lowest possible tender price, which is what is happening in the construction industry, some people look to ways in which they can gain an edge on their competition. While this can sometimes involve bringing in more efficient and effective building or business practices, there is a considerable belief in the construction industry that a number of construction companies and single construction operatives are turning to the black economy.

What constitutes black economy activity in the construction sector? Simply put, it is work that is carried out outside the scope of the relevant regulations facing the industry and with no regard to building standards, revenue compliance or health and safety standards. The most obvious examples of this type of activity involve construction work that is not tax compliant and-or carried out by individuals who are receiving jobseeker's benefit simultaneously. Unfortunately, there is a lot of anecdotal evidence to suggest that some construction companies and construction operatives are not fully meeting their tax obligations. There is a belief that the VAT on particular jobs is not being charged to clients and that in some cases taxes are being applied to the project-client but once this has been paid to the construction operator the relevant payments are not being passed on to Revenue. There is also a belief among construction companies that some of their competitors are paying their workers in cash, outside of the tax system. These examples of black economy activity are sometimes used to subsidise the work that is being carried out, allowing the construction operative or construction company to provide a lower tender price.

The misuse of social welfare payments is also a serious problem for the construction sector. A large portion of construction employment is temporary in nature. Construction workers may be employed only for the duration of a particular project. In some cases, this can be long-term but in others might only be for a few weeks or days. The uncertainty of the duration of employment makes it more difficult to police whether an individual is working or not. Many CIF members have suggested that this uncertainty is being exploited by people who are misusing the social welfare system. The anecdotal evidence would suggest that certain construction operatives are claiming jobseeker's benefit while securing work on the side, which they are not declaring. The jobseeker's allowance payment provides a subsidy to the construction operative. As it is topping up income through other means it can provide a greater margin for the project, enabling it to offer a lower tender when competing for work.

It has also been suggested that some construction companies are encouraging their employees to make use of the jobseeker's allowance payment. These workers might receive a cash payment for the work they carry out for the construction company while at the same time receiving the full jobseeker's allowance payment. The work is kept off the books, making it more difficult to follow any paper trail and stop this practice. As the workers are receiving the jobseeker's allowance the construction company does not have to provide as large a wage as might otherwise be expected. Effectively, they are using the social welfare system to subsidise their wage expenditure. This method also allows construction companies and construction operatives to avoid their PRSI and other regulatory obligations. It is also worth noting that another area whereby some construction operatives and construction companies engage in black economy activity is non-compliance with the health and safety requirements for the industry. Not observing these regulations is another way for some construction operatives to cut corners and reduce costs.

The CIF, and others involved in the construction industry, also consider construction companies that do not comply with the wage rates and other employment conditions set down under the Registered Employment Agreement, REA, as engaging in black economy activity. However on Thursday 9 May 2013 the Supreme Court found a section of the Industrial Relations Act 1946 unconstitutional. This has significant implications for the implementation of the industry agreement. Given this ruling and the uncertainty concerning the future of the REA process for determination of wage rates and associated costs, the issue of payment of former REA industry rates of pay is not addressed in this submission.

To help provide a stronger impression of the extent of the black economy problem in the construction industry, the CIF undertook a survey of its members on the issue last summer. The findings of this survey were revealing and help illustrate how much a cause of concern this activity is to our sector and how widespread the problem seems to be. The statistics in this regard are contained in the submission so I will not read them out. I will be happy to respond to any questions which members may have on them later.

The CIF believes measures to stamp out black economy activity in the construction sector should be introduced. In the current economic climate, it is important that all construction companies and sole traders act responsibly and comply with all the legal obligations. No one should be avoiding their taxation requirements or misusing social welfare payments. The CIF has prepared the following suggestions, which it believes would have a considerable impact on the level of black economy activity in the construction sector: all construction clients should advise the Revenue of the commencement and identification of contractors employed for any construction project over a certain value; payment of buildings grants, if any, and other incentives should be made conditional on the work being carried out by tax compliant contractors; a mandatory site notice displaying names of client, contractor(s), professionals, and planning reference numbers for all projects over a certain size should apply; tax assessment and relief should be contingent on the provision of a certificate of building costs, which would identify all relevant building contractors; Revenue should review all commencement notices lodged with building control authorities to ascertain the location and scale of construction activity and monitor who is undertaking the construction work; the banking system should be obliged to notify Revenue of all significant cash withdrawals or loan draw-downs processed so that Revenue can then investigate who has been paid for work undertaken; in regard to fuel laundering, a mechanism should be prescribed whereby all diesel fuel would carry the same duty levels at point of sale so that compliant trade users can recover VAT in the normal course of business; provision of a facility to enable homeowners reclaim the VAT incurred on costs associated with the renovation and upgrade of their principal private residence; provision of a facility whereby taxpayers could have their personal tax allowance increased by a proportion of the construction costs incurred in the renovation and upgrade of their principal private residence where registered contractor(s) who provide their tax reference numbers are engaged; an information campaign, similar to the insurance fraud campaign, should be undertaken by Government to assist in stamping out shadow economy activities; and finally, where a private individual or entity is to engage a company or individual to undertake construction-related work on their home or other structure, private individuals or other entities should be obliged to check if the construction company or person undertaking the works has a valid C2 for works above a certain figure, and to notify Revenue accordingly.

Feedback provided by members indicates that many of those individuals, householders and businesses who have engaged black economy construction workers have done so unwittingly. Generally, the clients who have hired these operatives are unaware that the construction workers they engage could be operating outside the tax provisions and labour regulations. This suggests these people are funding the black economy in the construction sector without realising it. To help avoid future engagement of black economy operations, the CIF has prepared the following points to assist individuals, householders and businesses to ensure they are dealing with legitimate construction operatives who are tax compliant and meet relevant construction regulations and standards. We hope that through encouragement of adoption of these suggestions, there will be a decrease in the level of black economy activity in the construction industry. People should ask for a contract or VAT number; check that the company has a C2 certificate; ask from where the construction materials came; ask if the company has certified health and safety standards; and ask if it has insurance and if it is a member of the CIF.

The CIF thanks the Oireachtas Joint Committee on Jobs, Enterprise and Innovation for the opportunity to make this presentation today. We are happy to respond to any questions members may have.

Vice Chairman

It would be good if every group who presented to the joint committee were to confine their presentation to ten minutes. This meeting is one of a number being held countrywide by the joint committee on the issue of the black economy. We are very much aware of the problem and are trying to gather as much information as we can. The delegation from the Construction Industry Federation is very welcome. The first batch of questions will be from Deputies Dara Calleary and Peadar Tóibín.

Deputy Dara Calleary

I welcome the witnesses. They outlined a number of proposals which have direct implications for Revenue's business processes. What discussions have they entered into with Revenue? Have they tabled proposals for pilot schemes directly? I welcome the proposals on grant assistance for upgrading principal private residences in light of their potential for creating employment.

Construction is probably the sector most targeted by those who sell illicit fuel. What advice does the federation give to its members to alert them to the dangers of buying illicit fuel? I understand the federation is working with the Department of the Environment, Community and Local Government on a new register of builders in order to curtail the black market. What is involved in compiling that register and will it give rise to administrative costs?

What advice is the federation giving to its members on existing REAs pending legislative clarification and what are the witnesses' views on the issue? Perhaps we will invite them before us on another occasion to express their views on REAs but what are they currently advising CIF members in regard to obligations under existing REAs, particularly in respect of payments?

Deputy Peadar Tóibín

It is clear that the experience of the industry is still pro-cyclical. In other words, pro-cyclical policies brought it to a production output of €38 billion annually but the flip side of those policies are to blame for its current output of €8 billion. Unfortunately the policies have not changed. It is interesting that we are discussing the black economy on a day that a number of multinational companies were found not to be paying taxes in this State. This is an important issue at the other end of the spectrum even if it does not directly relate to the federation. Gaps in compliance and enforcement seem to be the crux of the problem. There are regulations and standards but businesses appear to shirk their responsibilities to comply with VAT and other taxes, as well as on the pay and conditions of workers. Clearly this is a challenge for those good companies which do their best by their staff.

One of my fears with regard to the changes to REAs is that international companies will be able to tender for Irish construction projects without being required to pay at REA levels. What sort of disadvantages will that pose to the federation's members? All-Ireland harmonisation is also important in this regard. Many of the federation's members feel disadvantaged in competing with operators from the North of Ireland for tenders in the South. What advice would the witnesses give to the Government in working with the Executive in the North on equalising excise and other tax levels in order to provide a fairer playing field? In the context of enforcement and compliance, the OPW has considerable influence over the tendering process. How could it improve its services?

Mr. Tom Parlon

We have regular discussions with Revenue but in terms of policy we have made this an issue for our pre-budget submissions. We have formed a new committee to draft this year's pre-budget submission, which will focus on the impact we can make in growing the economy, creating jobs and avoiding the black economy. The Government always weighs its stimulus plans against the potential for economic leakage because it does not make sense to spend on a project if the expenditure is going to disappear into another constituency or the black economy.

On the issue of illicit fuel, construction companies have a right to use marked gas oil on site. The amounts used would certainly not be as large as in the agricultural sector. I am conscious of where I come from, however, and there is a strong view in the agricultural sector that the rebate should be retained. There is a high level of criminality involved, as well as environmental risk from dumping. This has spread to Dublin city recently in terms of washing. The CIF takes the view that if people could reclaim the rebate we would do away with criminality immediately and Revenue and the Customs and Excise could reduce the amount of resources they are required to devote to this area. This is one of the biggest issue they deal with and, in terms of the black economy, diesel laundering represents one of the biggest areas of loss of revenue for the Exchequer. These problems could be addressed with a stroke of the pen. Our right to seek a rebate would have to be guaranteed but even if the rebate was doubled there would still be savings for the Exchequer.

I will ask Mr. Fitzpatrick to deal with the register of builders but the judgment on the REAs came as a shock to us. We had been negotiating a reduced rate for the last 18 months but the machinery for negotiating deals is very slow and torturous. We were only dealing with the compliance element of a 2.5% reduction. We are considering the situation, which is new to us, and our message is that our member firms are still obliged to respect the employment contracts and agreements they have entered into with individual workers unless there is consensual agreement to alter them. We are letting the hare sit and it is steady as it goes. We are not recommending anyone to take advantage of the new situation because, even though the REAs have been struck down as unconstitutional, they are currently the basis for our employment arrangements. We want to get our own act together before we sit down with any other sector. I believe we are taking a responsible approach in letting things sit. The judgment came as a bolt out of the blue.

In regard to gaps in compliance and enforcement, there is generally an onus on clients, including the Department of Education and Skills, to award contracts to the lowest tender. Quantity surveying is an exact science and it is not a big task to work out exactly how much a school with eight classrooms will cost. Our president outlined the pressure on work. We cannot justify or explain it but member firms have tendered below cost. That is something we are trying to deal with inside the industry but clients have accepted these tenders. We do not have a magic bullet. A company that is well-financed could choose to build a school for half price in its own area if it had a mind to do so but generally we can no longer offer such largesse. Below cost projects lead to problems, such as inferior work, risk of breakdown, major delays and extra costs in finding new contractors. We believe significant responsibility rests with the clients, who should be more selective and critical in analysing the financial viability of tenders. They are obliged under law to check everything and we believe there is scope in that regard.

Deputy Anthony Lawlor

Does the federation correspond as a body with the Department in regard to State contracts given that the issue of below cost tendering is arising on a regular basis? Does it warn the Department about tendering?

Mr. Tom Parlon

We work with the other professional bodies to deal with the matter. An issue arose recently whereby it was difficult to get a bond. Generally when one wins a contract the next question from the client is whether one can produce a bond that demonstrates the financial wherewithal to complete the project. The bonds suppliers increased the value of bonds and refused to supply them at all for a period of time.

We have met with the other professional bodies, the Government's head of procurement and head of contracts and the various Departments. There is about to be a review of the Government formal contract. In recent years, our member firms found that they needed to take all of the risks. Before the current formal contract was in place, the balance was in favour of contractors. We must rebalance the risks. We are in the throes of presenting to the Department of Public Expenditure and Reform on this matter.

Deputy Dara Calleary

Is there a timeline on the review?

Mr. Tom Parlon

We expected it to be up and running by now. Departmental officials told us that they were busy with the EU Presidency and that, as soon as it was over, this would be a priority issue for them. We hope to enter negotiations immediately after the mid-year. Mr. Fitzpatrick will discuss the registered builders, as we are involved in that area.

Mr. Hubert Fitzpatrick

Questions were asked about the revenue implications of the proposals. If some of our suggested proposals were implemented, more work, for example, the refurbishment and improvement of houses, would be undertaken in a compliant industry. They would ensure that VAT was paid and construction workers were registered for PAYE and PRSI. They would encourage home owners to engage compliant builders. The proposals would not have a major impact on the Exchequer but it would lead to a greater level of compliance within the industry, as people would engage compliant contractors so that they might recover their VAT or whatever the case might be.

We have discussed a register of builders with the Department of the Environment, Community and Local Government. We hope to introduce a process for the registration of builders early next year. We want the process to move to a standards-based registration system over time. Initially, it would work on a voluntary basis with a view to it becoming statutory. We are anxious to work with the Department on a scheme for the registration of compliant builders who will commit to a certain level of training and continuous professional development to ensure that they understand their obligations fully, particularly under the building control regulations, to build to the appropriate standards and adhere to all legal requirements.

Vice Chairman

Deputy Collins and Senator Quinn indicated before Deputy Conaghan. Does he wish to ask a supplementary question?

Deputy Michael Conaghan

I want to ask a question.

Vice Chairman

I have taken note of that, but the others will speak first.

Deputy Áine Collins

I welcome our guests. For any construction industry to go from 20% of GDP to 4.5% would be a concern for anyone. There are significant job opportunities. I welcome some of the proposals, which the Government examined last year ahead of the budget. Some are onerous, others need to be refined and others still might already have been implemented, but we need a scheme whereby only compliant builders who pay their taxes are used. Tax evasion is a different issue. We have referred to multinationals that comply with tax law. It is important that the committee help the process, given the significant jobs potential.

Trainee builders and trades people present an issue. Given the number of young people being lost, there will be gaps in the trades. Are we addressing people's skills? Some people are only partly qualified and have been unable to finish. Could we propose anything to the Government that would see them finish their courses? It is a major issue for some people. All of the committee's members would be happy to work with our guests in that regard.

Last year, I carried out a great deal of work on the question of the fuel rebate. The problem is marked oil, which would also be subject to a rebate. A large quantity of the oil burned in private homes is diesel or kerosene. Whichever it is, it is subject to a rebate. We considered providing a rebate to the 120,000 farmers, but this would be a significant administrative nightmare and might not be wholly welcomed. One way around that issue was to do something in respect of marked oil for home use.

A new recording system was introduced last October, as diesel entering the country was not being recorded properly, particularly green or farmer's diesel. The results of the new system should be available in June. Hauliers have received a rebate. We must be mindful to ensure that the new system works. We are conscious of the issue, but it is important to have accurate information. It is not just a simple question of introducing a rebate. Revenue, the Department of Finance and everyone else are doing their best. For example, work on a dye is under way. Every time we come up with a dye, someone works out how to get around it. A cross-Border approach must be taken.

Senator Feargal Quinn

I thank our guests for being prompt with their explanations. To go from 273,000 employees to 103,000 is dramatic. Twenty years ago, one could not get workers in the butcher and grocery trades unless they were paid outside the tax system. Given the fact that this practice was stopped, there must be a way of stopping it in this instance.

Our guests have made a number of suggestions that seem to involve a considerable amount of red tape for businesses and small start-ups: all construction clients should advise Revenue; a mandatory site notice should display the names of clients; a certificate of building costs should be posted; all commencement notices should be reviewed; banks should notify Revenue of all significant cash transactions, etc. Start-ups complain to us about the amount of red tape. The solution offered by our guests seems to involve even more red tape. Will they comment on this point?

Regarding illegal fuels, I gather that Britain and Ireland are the only two countries that use this agricultural fuel system. Countries on the Continent, in particular France and Belgium, do not. Is there a better system than ours for enabling the identification of lower rated fuel?

Vice Chairman

Deputy Conaghan will ask a final set of questions. We will bundle all of the questions together.

Deputy Michael Conaghan

I welcome the delegation. In hindsight, the old construction economy was based on an unsustainable and unstable base. We know the consequences. Will our guests broadly sketch out the new construction economy's shape and elements? Will it be built on a more sustainable base? What impact will large infrastructural projects like the national paediatric hospital at St. James's Hospital and Grangegorman have on unemployment levels among former construction workers in this city?

Mr. Tom Parlon

Others can intervene but I will start with the last question. As the president stated, the industry is estimated to be worth approximately €8.6 billion this year, some 6% of GDP. It was unsustainable at 23%, or €38 billion, of GDP. In other countries, 10% to 12% is normal. In Ireland, that would be approximately €16 billion. Our figures suggest that a €1 billion investment in infrastructure would employ 10,000 people. As such, an extra €8 billion would employ 80,000 more people in the industry. We can support these figures. We carried out a report with the Construction Industry Council, chartered surveyors, engineers and other players.

The children's hospital and Grangegorman projects would be worth €400 million or €500 million each.

Approximately 500 or 600 people would be employed, probably for more than a two year period. It is a very substantial work opportunity. I understand that tendering is shortly going out for the design team for the children's hospital which means that construction is probably two years down the road, a long wait. There are some other big projects in the pipeline. The Grangegorman project has begun and some of the work is underway, with talk of a €300 million investment over a number of years. I was at the site recently and the team involved is very keen that local people in the general Dublin 7 area should have an opportunity of working on that site. That is something we would support.

In terms of the sustainable base, any alteration is an improvement on the current position. The industry is starved for work and money is very scare. We appreciate the pressure on the Exchequer and the attempts that will be made in the coming budget to reduce the deficit even further. We know about the efforts going on elsewhere to try to reduce the public sector pay bill, etc., but it does take money to get construction going. For the €1 billion that is spent, almost half comes back within a year in Exchequer returns, from PAYE, PRSI or VAT and everything else that goes on in the economy. When we had the REA, whose rates will prevail for quite some time, a typical construction worked paid €18,000 per year in PAYE and PRSI. If this worker signs on the dole, depending on his family circumstances, he will draw down at least that amount so there is a double whammy. There is a difference of about €36,000 between the person signing on and the person in the work situation.

Senator Quinn mentioned red tape. From our point of view, the CIF represents the compliant, fully registered contractors who are up to speed on all the different areas, with their expertise, health and safety rules, accounts departments and so on. It is galling, especially when one goes around the country, if somebody says, "Look, Tom, if you want to be guaranteed not to win a tender, be fully compliant". If it costs a bit extra red tape, or if the extra red tape is the disincentive for some of those people working under the radar to be pushed out of business, or not to qualify, we can live with that.

I wonder if there is a better system. I have spoken with Deputy Áine Collins previously, and we have had a great deal of contact with Senator Quinn. We are very keen to be as flexible as possible in our pre-budget submission. We were concerned about the great detail we supplied last year, and all the pages and material to which nobody pays any notice. Even if we have only two pages this year we want to come up with material in order that the Ministers for Finance and Public Expenditure and Reform will say we have a good idea, that they can begin to get some economic growth out of it and get more people off the live register. We are in that space and are prepared to talk to anybody about it. We have a great deal of practical experience on our side in terms of how we got to where we are.

I refer to apprentices. Mr. Michael Stone represents the mechanical and electrical contractors who still have a lot of work, in particular in the foreign direct investment sector. Some of these companies currently have more than 200 apprentices. Across the board in the other skills, however, in plumbing, carpentry, stone masonry and blocklaying, there is scarcely anybody. I believe there is one person in the entire country in apprenticeship as a tiler. So that is an issue.

The changeover of FÁS to SOLAS is taking a very long time. We are promised it will happen fairly soon and we know a new board will be appointed for SOLAS. We have been advised we will be asked to nominate a director and we want to be involved in that. A review of apprenticeships is taking place at present under a chairman and we are represented on that review. If we had a huge upswing in the morning there could be a skills shortage in no time. Yet there is a vast number of young males on the dole. We had that discussion before coming into the committee, namely, as to how, in our pre-budget submission we could come up with a suggestion on how people could be encouraged or even coerced into being involved in taking up a trade, instead of just signing on and not ending up with anything after two years. Those are my points.

Mr. Michael Stone

It is important to note, looking at the areas where there is work, that it comes from outside the public sector. It comes from foreign direct investment and areas such as semi-conductor manufacture. The food sector is also in a growth phase at present. There are skills shortages in those sectors. Recently we met the Minister to discuss this shortage and to look at retraining existing tradesmen who may not have the skills in those sectors. The problem is that during the boom time the majority of the work was in the housing, retail and commercial sectors, the areas which are currently in the biggest trouble. Where there is growth, namely, in the industrial sectors, a different skill set is required of the tradesmen. We have been looking at the tradespeople we have and at ways of setting up courses to get them upskilled and back into the marketplace quickly.

For example, there is a very large project in Leixlip that we hope will come into place. Many people will know about that. There could be a situation where up to 6,000 workers would find work on that project by this time next year and yet there will be a shortage of workers. We have a worry about certain types of trades and we urgently need to get people upskilled. We believe there could be courses of six or nine months' duration in existing FÁS training centres that would allow these people, who are currently on the live register, be retrained and get back into the market to take up those positions.

Vice Chairman

I believe Mr. Doherty wished to come in at this point.

Mr. Dominic Doherty

I think we all acknowledge that neither we nor the Government have all the answers but what we all agree is that we have a major problem, namely, the black economy. What is required here is a partnership approach. Senator Quinn alluded to red tape and he is probably right. The last thing we want to do is to over-correct this and go to a system that has too much red tape attached. A partnership approach is one to be considered. We have a lot of intellectual property, or IP, in our industry and are willing to share it with whatever kind of group might be put in place. This is something we have been talking about for many years but no correction has been put in place to pay the dividends where the Government is losing out.

Back in the 1980s, I was negotiating with an industry that was coming out of a very dark place. Most of the people I was negotiating with - plasterers, blocklayers, etc. - would have been operating in the black economy. One would agree a price with them and, on parting, they would say, "That's into my hand now, isn't it?" They had a domestic economy where they were getting a certain amount of money into their household. They did not care how they got it but they were receiving it. Then we moved into a compliant industry and had to compete with the non-compliant in the funds and wages which people were receiving, which pushed up our prices hugely. We had to gross up their net income. That is what we are facing in a couple of years' time when, as we hope, the industry will start to recover. It will drive the cost of our industry through the roof unless we start now to deal with the black economy.

As an industry, we have been lobbying for a single point of contact within Government. I am sure Mr. Parlon can talk about that in more detail. The fact we are here today and that the committee recognises we are so multi-faceted as an industry is a good thing but we still have not got that single point of contact. It is something we lack and the Government and our industry could both take advantage from it. It would be an advantage to all the various areas. We have been in different committee rooms talking about this in the past.

Vice Chairman

Are there any final comments from any of our guests?

Mr. Hubert Fitzpatrick

The non-compliant end of the construction industry is hampering those compliant members who want to deliver a service into the future. Our industry has fallen so low that we must ask if we will be in a position to provide for the future needs of the country and if we, as an industry, can cater for the needs of the foreign direct investment companies that want major premises built to high standards in the coming years. We would like to see all those matters addressed in order to enable the industry to revive and get back to a level that would be sustainable. We believe the industry should be creating 10% to 12% of GDP rather than the current low level at which it is operating.

Mr. Tom Parlon

We are inclined to poor-mouth, as do probably most people who come to these rooms. There are lots of difficulties but, on the other hand, we still have a huge industry even though we are down at €8 billion. We employ more than 100,000 people. In terms of sophisticated jobs, Diageo is building a new brewery which is state-of-the-art in terms of output. It is a cutting edge project and the company won the right to build it in St. James's Gate, rather than anywhere else in the world.

As members know, it is a big international company. There are 860 construction workers there currently working on high-tech material. There is a big deadline to finish it by July and beer will be brewed in the new place by then. They are working on approximately six different levels on the site and this project is the first I have heard of suspended scaffolding. There is no room for it downstairs so it is hung from above so as to work on different levels. In Intel, there are close to 3,000 people working in construction and if everything goes to plan, there could 6,000 people building state-of-the-art chip plants that will run the world. Glanbia has just turned the sod on a new site to build a state-of-the-art milk processing plant.

We have the capacity in the industry to do all of this. We have skills in management and the people on the ground, such as electrical or mechanical engineers. The committee might only look at the black economy but the bulk of work is in the legitimate economy. Smaller members around the country involved in house building, repairs and upgrading energy efficiency may see the white van brigade out and about. We have a figure of 100,000 former construction workers signing on currently, although the Minister for Finance used the figure of 70,000 when we last met. Many people with construction skills are signing on but wish to work.

In some ways one could ask whether we should blame people for taking a job from the next-door neighbour to do a bit of work. That neighbour may be concerned she is paying too much tax already and may look to pay cash for the job. It is a challenge and we must incentivise people back to the real economy. We have great capacity to contribute to the recovery of the economy.

Vice Chairman

Listening to the story about the next-door neighbour contacting the unemployed tradesperson, I remember when going to college in the late 1990s getting on the bus and seeing men get on with a bus pass - which I assume they had from the Department - in work gear. There is a culture in Ireland that believes backhanded payment for jobs is okay but the reality is that the State loses big time because it cannot put resources back into the country. If there are no final comments before wrapping up the session, I thank Mr. Philip Crampton, Mr. Michael Stone, Mr. Tom Parlon, Mr. Hubert Fitzpatrick and Mr. Dominic Doheny for coming here today and engaging. There is no doubt we will see them here again. The points have been noted and this is part of a bigger issue on which we are trying to work.

Sitting suspended at 2.55 p.m. and resumed at 2.56 p.m.