Joint Committee on the Secondary Legislation of the European Communities debate -
Wednesday, 16 Apr 1980

Community Aid for Infrastructural Development.

Senator Mulcahy

At the outset I should say that the subject matter of this draft report was examined jointly by Senator Robinson's Sub-Committee and my own. I find it very difficult to summaries the draft report quickly. It is a comprehensive review of the workings of the Regional Development Fund, with emphasis on funds for infrastructural development. It shows how the policies and procedures for handling grants and loans in the EEC are changing. To get an understanding of it, we had to examine how the existing funds are being operated and how the new facilities for providing loans and subsidies work so that we would be able to assess the impact of the use of loans, as opposed to Regional Development Fund grants, on future infrastructural development. We had to take into account that EEC transport policy is a feature of this development and that there has been some doubt as to whether the general intention of the EEC to develop a transport policy to open up the Community in terms of access to the more extreme geographical regions would work, given the present financial supports being provided.

As I have said, the draft report deals extensively with the application of the Regional Development Fund for infrastructural development, the new methods of financing and, from our end, what we have been doing in cross-Border projects and the Government's ten-year plan for road development. Because of its comprehensive nature, I propose to deal with the draft report under each heading. Decisions will be taken in January 1981 which will be central to these issues and therefore we hope this draft report will help to inform Members of the Houses of the Oireachtas about what is happening so that they can give their views as we move towards next January.

Acting Chairman

The 1981 review will be in relation to the operation of the Regional Development Fund?

Senator Mulcahy

Yes. There is a growing appreciation that the definitions as to what constitute suitable projects will have to be changed. Infrastructural development which makes a broader contribution to the development of a region will qualify, rather than having it directly linked, as it is, with artisan projects and so on. I will deal in detail with some of the issues involved.

In paragraph 2 of the draft report we draw attention to the three sources of finance not normally taken into account when considering regional development. There are loans from the European Investment Bank, the "Ortoli Facility" and the system of funding by way of interest rate subsidies which came into existence when Ireland began to participate in the EMS. These instruments are new schemes which can also be used to finance infrastructure.

Paragraph 4 covers the amendment of the Regional Fund in 1979. The Fund was devided into Quota and Non-Quota Sections. The non-Quota Section represents only 5 per cent of the Fund. A more flexible definition of eligible infrastructure was introduced and an increased intervention rate from 30 to 40 per cent was brought in for certain infrastructural projects. More important, certain administrative improvements were introduced, including accelerated payments, so that the cash flow would be improved. Instead of having approvals awaiting funds, the money will be made available smartly.

The new infrastructure provisions are outlined in paragraph 5. It will be seen that the old definition was unduly restrictive, particularly from Ireland's point of view, insofar as the provision of adequate infrastructure is a necessary prerequisite to the attraction of industry to less-developed areas. The widening of the areas to which the Fund can be applied is a good thing.

Paragraph 6 refers to a situation where there is a contribution to the development of the region or area in which the project is located. There is a very broad definition and it means that it will not be necessary in future to establish a direct industrial link.

Paragraph 8 points out that the next review of the Fund regulation is due by next January. Paragraph 10 states that Ireland's share was 6 per cent of the original Fund and paragraph 11 shows that it has now been increased to 6.46 per cent under the Quota Section alone. Paragraph 13 refers to the cross-Border aspect which we will deal with more fully in a moment. There are funds available now for cross-Border projects.

Paragraph 15 covers the Non-Quota Section. The proposals relate to a five-year programme for 1980-85 and it will be seen in respect of the Irish Border Projects that 16 million units of account are proposed for Ireland and eight million for Northern Ireland. Paragraph 16 elaborates on this. This special five-year programme is very exciting. Its economic objectives are in the field of tourism, communications and artisan enterprises. It will cover Counties Donegal, Leitrim, Cavan, Monaghan and Louth in the Republic and the council districts of Londonderry, Strabane, Omagh, Fermanagh, Dungannon, Armagh, Newry and Mourne in Northern Ireland, the programme to be financed jointly by the two Member States and the Community, with support from the Fund. Page 8 of the draft report lays out in detail what each project will entail. Support will vary from 50 to 70 per cent, depending on the project in question.

That brings us to the question of transport infrastructure. It is dealt with in paragraph 17. Until now, the common transport policy has been concerned with freeing transport operations from restrictive regulations. It has been seen that that policy will not achieve the objectives defined for it in the Treaty unless it relates more to transport infrastructure. So there is an opening up of possibilities under the new proposals.

Paragraph 18 states that the volume of traffic between EEC States is growing twice as fast as national traffic. This clearly points to the need for a cross-boundary transport policy. The paragraph spells out the fact that if any Member State did a cost-benefit analysis of transport development which did not take into account its impact on other countries it would be wrong. That is what it amounts to.

We say in paragraph 19 that the Commission believe that the Community's interest in transport infrastructure is reinforced by its impact on the economic, industrial, regional, environmental and energy policies of the Community. It is a very important paragraph. It says: "In relation to regional policy it points to the Community objective of counteracting the centralising forces of the Common Market by distributing economic activity more evenly over the territory of the Community." We have all been saying this over the years, about the need for a better regional development policy but here is a specific dimension on which to hang that. Again, in the Commission's opinion, "the less favoured regions must have an internal network of communications appropriate to their present and future needs" and also that "they must be opened up to the main centre of the Community by rapid modern routes to reduce as far as possible the handicap of distances." So, obviously, we can see the implications there for contributions to the opening up of our own roadway network amongst other things.

Acting Chairman

Have you any indication from the Commission as to the plans they would have? When they say that roads must be opened up and linked to the main centres of the Community where rapid modern routes reduce, as far as possible, the handicap of distances, are they referring to outlying areas, for example, Ireland or are they referring to the——

Senator Mulcahy

This is covered in paragraph 21. It says:

In its recent memorandum the Commission, while suggesting that removal of bottlenecks should have priority, provisionally identifies some links which merit particular attention these being international rail links—

and if you look at item (b)

links with peripheral regions, e.g. in Ireland links with the North (Dublin-Belfast-Derry) and with the West (Dublin-Cork-Galway).

This, I think, answers your question. You can see that there is an exciting new development going on in terms of the interpretation of what the common transport policy can do to contribute to infrastructure and development.

The next section in this draft report looks at Community loans. Paragraph 22 shows how the European Investment Bank works in relation to this and it shows that the Bank's loans do not exceed 50 per cent of fixed assets. Paragraph 23 shows how the New Financial instrument, also known as the Ortoli Facility, established in 1978, is designed to provide loans for energy projects and also for investment in infrastructure projects, projects which contribute to convergence and integration. Here, again, you see this new instrument making a contribution to convergence and integration taking into account regional and employment effects. This frees us to some extent from the limitations of the Regional Development Bank which is not a sizeable fund and about which we have always been complaining. You can see from paragraph 23 that the Ortoli Facility is to be 1,000 million UA. The Council has already authorised the taking up of the first tranche, that is 5,000 million EUA and, of that, 250 million EUA are to be devoted to infrastructure. The Committee thought this was very attractive. The Commission will decide on the eligibility of the projects in accordance with guidelines laid down by the Council and of course the European Investment Bank will decide on the terms and conditions of the loan.

The next source of funds is under the measures designed to strengthen the economies of countries participating in the EMS. You can see there that Ireland can draw on loans of up to IR£225 million each year through the bank. A 3 per cent interest subsidy rate applies to these loans which amounts to a subsidy of IR£45 million a year. We know this would happen when we went into the EMS and it is important that a new method of financing came into existence as a result of the EMS constraints. This subsidy is paid as a lump sum in the first year of the loan period. That again is a cash input each year. Over a period of five years Ireland stands to get IR£225 million as a subsidy through this.

The loans and grants to Ireland are summarised in paragraph 25. You can see that item (i) concentrates on infrastructure so that is in effect a loan of IR£172.6 million and that the loans under item (ii) were mainly global ones to ICC and ACC for on-lending. Loans under (iii) were for infrastructure and energy projects. The net total comes to IR£226 million.

Paragraph 26 shows that IR£41.7 million in grant aid was committed to Irish projects of which IR£21.9 million was in respect of infrastructure. You can see the comparison in amounts. The loan method and the Ortoli Facility are a much more dominant way of getting an injection into infrastructure than the European Regional Development Fund. Actual receipts from the European Regional Development Fund were only IR£25 million.

Paragraph 27 on page 14 shows how the grants that are paid to local authorities for road improvement have moved over the years 1975 to 1979. It shows how the road projects got support from the European Regional Development Fund. You can see in paragraph 28 the total amount of aid from the Regional Development Fund amounted to £11 million or roughly 30 per cent of the total expenditure put forward. It is good but it is a very small amount in terms of the big money we mentioned earlier. Ireland has taken up its full quota of aid in relation to that so the putting forward of more projects would not have got money from that Fund. That does not mean that putting forward projects for assistance under the other instruments would not be on. It is all very well to talk about getting loans but it depends on the borrowing capacity of the country as well whether we take up these loans or not. That is another matter. My view is that as long as we operate within the EEC we should not be tied down too much on that. That opens up wider questions of economic policy.

Acting Chairman

They are fixed rates?

Senator Mulcahy

They are.

Acting Chairman

What are the rates?

Senator Mulcahy

Whatever the going rate is. The European Investment Bank will borrow at whatever the going rate is and then it will fix on that. The loans given to us under the EMS are subsidised to the extent of 3 per cent. That is why we are getting this subsidy of IR£45 million per year. In fact it is a cash subsidy.

Senator Conroy

Are you working out the IR£45 million on the basis of a 3 per cent subsidy?

Senator Mulcahy

I assume it was the going interest rate subsidy at the time we settled on the deal with the EMS. Therefore you can see that the Regional Fund in the past was not making a great contribution. We knew that. But there is some hope because, as paragraph 30 points out, the Regional Fund over the three-year period 1978 to 1980 of 1,725 million Irish pounds is a significant increase in the original fund which was £531 million. There is some hope there as well. Ireland's actual receipts in 1979 under this Fund were IR£25 million which amounts to only 2.5 per cent of the expenditure on the Public Capital Programme here which is not going to make a great contribution.

In paragraph 31 we are saying that we believe that the method of administering the Fund could be simplified. You see on page 17 that local authorities are now subject to four audits, namely an internal audit, a Department of the Environment audit, a Commission audit and an audit by the Board of Auditors. You wonder if this means jobs for EEC civil servants coming backwards and forwards to Ireland to see how we are building our roads. The Committee is recommending that this be simplified and we are supporting any measures that come up in that regard.

Paragraph 32 shows that the Regional Fund is due for review before 1 January 1981. We hope that the review will result in a radical reform, the matters of prime importance being the amount of the Fund, that the grants will go to the more needy areas and that the system of handling them should be simpler. That is basically our message.

In paragraph 34, we note that the EIB and NCI loans make a much larger contribution to financing investment in in-frastructural development than the Regional Fund. However, recourse to loan facilities depends on ability to service an increasing public debt, and we as a committee welcome the new in-frastructural policy because it indicates a whole new approach to how it will be financed.

In paragraph 35 we express the Committee's belief that the Commission are correct when they claim that the objectives of the Common Transport Policy will not be achieved unless the EEC involves itself much more with transport infrastructure. Paragraph 36 deals with the Irish road development plan which has been laid before both Houses of the Oireachtas. In their discussions, the sub-committees met officials of the Department of the Environment and went over the ten-year plan and talked about the need to accelerate the development of the roads in the plan. It was pointed out to them that a more aggressive approach might be taken in the matter of getting funds so as to hasten the development of the roads which open up to the west, the north and the south.

We should like to see cross-Border co-operations being continued. Before I finish I should like to acknowledge the tremendous help we got from the Economic and Social Research Institute, An Foras Forbartha and the Departments of Finance and the Environment. The Committee owe a particular debt of gratitude to M. Jean Jaeger of the Directorate-General on Regional Policy, Commission of the European Communities. At the invitation of the Joint Committee M. Jaeger met the Joint Committee's sub-committees in Dublin and the Committee wish to record our thanks to him for the informative briefing he provided.

Senator Conroy

This is a very comprehensive report. A great deal of work has gone into it. One can only be pleased with the support for our road infrastructure and for cross-Border co-operation, but I have a slight anxiety that it displays support for this country purely as a poor region of the Community which needs financial help from Brussels. I am not saying we should not gladly accept this help and make use of it, but if one were sitting in a finance ministry in the Federal German Republic, or France, or Holland, one would be inclined to say: "These are reasonable requests of the Irish; I must give them some money."

However, there is nothing here which is of major importance either for this country or the Community as a whole—there is nothing communitaire about all this infrastructure support. I wonder if it would be possible to suggest for inclusion, for example, the removal of the Shannon barrier which at the moment prevents development of the Shannon estuary in the way one would hope it can be developed for navigation by large vessels, especially of the type that carry ore, and other commercial shipping. This could be of great importance both to that region, to the country as a whole and the Community.

At present, the situation is that within the Community there is effectively only one deep water port, Rotterdam. There is no reason why we in Ireland should not have an economic deep water port. Apart from the difficulty of the bar across the Shannon, which means that ships of more than 40,000 tons cannot approach, this would be a major development which would need financial assistance from the Community, but it would be of benefit both to the Community and ourselves.

Deputy Donegan

Killary Harbour is there, the deepest port, possibly, in these islands, but there is not any money there for its development.

Acting Chairman

I am not quite sure of the object of these points. Are you proposing amendments to the draft report?

Senator Conroy

I am proposing that consideration be given to this, now or when we debate this report in the Houses of the Oireachtas.

Acting Chairman

The precedent here has been, and being Acting Chairman only, I will stick to precedent, that amendments which are not of a minor nature should be proposed by way of notice, and we have not had notice.

Senator Conroy

I have no intention of departing from precedent. This is a fairly major matter. In regard to Killary, it was used by the British high seas fleet during the 1914-18 War. However, it is rather different from the Shannon industrial region which already has considerable shipping and industrial development, plus an international airport. My suggestion would involve a major development for the region, the country and the Community.

Deputy Donegan

I would not put up Killary as against Limerick, but we have a natural asset there which lends itself to development, with aid from Brussels.

Acting Chairman

Coming from the mid-west region I would not have the slightest objection to the development of Limerick.

Deputy Leonard

This report holds out great hope for a number of areas. I have reservations about our road plan, which we discussed here earlier. I suppose that in the Border region the Quota and Non-Quota Sections will be of great benefit. The emphasis there is on tourism, access transport and accommodation etc. In the Border regions the committees have been working continuously since 1976. In the mid-Ulster region where the meetings are held in Enniskillen, covering Leitrim, Cavan, Monaghan, Fermanagh, Tyrone, they met with a fair amount of success. Even the local authorities there set up their own private team of consultants to draw up projects and the EEC in turn have provided about £90,000 to carry out a study. Now the study is almost completed. It would have been completed prior to Christmas. Some of us on the Committees were not satisfied with some aspects of it and we asked that it be re-examined and re-assessed. So, it will be ready about the end of this month. They will be in a position to avail themselves of that type of money. Certainly, as far as I am concerned, I think this report has a lot of hope in it for our area.

Deputy Quinn

With all due respect, I would really like fundamentally to disagree with Senator Conroy on his suggestions for two reasons. First of all, I think the report can be seen to be extremely communitaire in so far as it is trying to harness the effect of a very limited financial facility, the Regional Fund and the Ortoli Facility, with a view to achieving the objective of convergence within the Community and there is nothing more communitaire than the idea of convergence.

Secondly, since we do not have the money to build a second bridge over the river Shannon within Limerick the idea of removing the Shannon barrier to provide for larger volumes of cargo ships to come into the port—for example, in the context of shipping ore—could be seen as a weak one when we do not have the infrastructure to take the ore out of the area. However, I would be getting into the details of the regional planning of the Limerick area which is not as such the essence of this report.

I would like to suggest, with due respect to the joint authors of this report that, since we do not have the facility of amending it, the effect of this report would be all the greater if we had some precise recommendations that we can have proposed and moved on the floor of the Seanad or the floor of the Dáil. What I think it lacks is a certain number of precise recommendations.

Acting Chairman

Project recommendations?

Deputy Quinn

No, recommendations with a view to calling on the Government, for example—I mean, it is all there. It is really only a question of drafting. One could have at the end of it a series of recommendations which we do not, as such, have now. I know why we do not have them, because it is very difficult to make them very precise, because it is a complex area, but I would like to think, and perhaps Senator Mulcahy could respond to this, first of all, that this report would be debated in both Houses. It is of fundamental importance to a lot of the work of the Government in relation to obtaining the maximum benefit from our involvement in the various kinds of financial instruments open to this country through the EEC. I would like to think that this Committee could put on the floor of the House a report which we would ask the House to take note of and that that report would have specific recommendations. If we get this debated in its present form by both Houses, there are no specific recommendations as such in it. Senator Mulcahy may take a different view of this. I do not think we have firmed up hard enough on it. We have observed a number of things, for example the bureaucracy involved in the assessing of projects and the auditing procedures that Senator Mulcahy rightly pointed out. We have observed the possibility that the Commission's communication on transport policy, for which Commissioner Burke is responsible, might be used to maximum advantage in, say, getting three or four projects lifted out of the road development programme for the eighties. In your view, through the Chair, is there some way in which we could attach to this report, a series of specific recommendations which would then make it much more worth while for debate in the House? We have reviewed the process of work that has been gone through by the two sub-committees fairly well and I think it is a good report. But I think the object would be for us to debate it in the Houses and I would like to think that we would have specific recommendations in it.

Acting Chairman

Before we adopt the report, you suggest that we have these recommendations at the end of it?

Deputy Quinn

Not necessarily. I think it is a drafting proposal and I have no new contributions as such to make in it. I am simply saying that we should extract from it a series of specific recommendations that could be attached to the report so that, when it is debated in both the Seanad and the Dáil, if the Dáil takes note of it or if the Seanad takes note of it, it will also take note of its conclusions.

Acting Chairman

I would like to make the point that it is open to us, if we so decide, to postpone adoption of the report and I presume in those circumstances amendments will be received before the next meeting of the Joint Committee.

Senator Conroy

May I come in briefly? I think, through my own fault, there is a slight misunderstanding of some of the implications of my remarks. Limerick has been mentioned several times around the board. If one is able to bring large vessels up the Shannon it does not just affect Limerick; it transforms the entire mid-west region—Kerry, Clare, Tipperary. Secondly, as regards the communitaire approach, I think perhaps we are more ad idem than at first appears. The Regional Fund as at present constituted, as I am sure you would agree, through the Chair, is totally inadequate. One of the reasons why it is totally inadequate is that one does not have major communitaire projects of which this could be one type which would enable these other countries to agree to far more money.

Senator Mulcahy

I would have no objection, as joint author of the report, to not adopting it today and to allowing people time to look at it again, and perhaps to try to firm up on some crisper recommendations. Certainly, I would support having it debated but we may find it difficult enough to get agreement in an all-party committee on specific recommendations particularly if we start to get into issues about Killary Harbour versus Shannon and so on. I must agree with Deputy Quinn. I feel that the paragraphs are too long. We are broadly agreeing that the EEC should continue to clarify their position and saying: "Please come out with lots more money and an easier way of handling it". Maybe we could get it a little crisper there. I certainly would not mind postponing it in order to do that.

Part of the difficulty, too, if I might make an excuse for ourselves, is that we had to rush through the last stage of our examination of the matter and many people were not at that meeting. So we were not able to have a detailed discussion on it and so I thought it better that something broader get agreement.

Senator Conroy

It is an excellent report.

Acting Chairman

I want to go back to paragraph 18 on page 9 where you refer to the fact that the volume of inter-Community traffic has been growing twice as fast as the volume of purely national traffic. I think one of the great hopes we have for the Irish Road Development Plan is via machinery like this for our basic resources. I would be very interested to know if that is an average figure throughout the Community. What is the rate of inter-Community traffic coming into this country?

Senator Mulcahy

Speaking off the top of my head, imports are growing at 26 per cent or so and exports are growing at something like 21-22 per cent. So, you can just take an estimate from that.

Acting Chairman

But what I am really getting at is that I am fairly sceptical about Commission proposals in relation to the Regional Fund because in the past it has frequently been loudly hailed but has never really met anything like the hopes that we in this country have for it.

Senator Mulcahy

This is a matter of the Regional Fund. It is just emphasising that the policy that they had in the past of each member state handling its own transport policy and its own road policy is inadequate in the light of the facts that inter-State traffic is growing twice as fast as traffic in any one State. Therefore, a case is made for a convergence policy. In my book, if we got money into making decent roads, say from Dublin to Athlone, from Dublin to the airport——

Deputy Donegan

What about Dublin to Belfast?

Senator Conroy

There seems to be a contradiction. Something on the lines of the other suggestion would not only benefit us but the Community as a whole. The two could complement each other. It would be far more important for the Community to support us in our road and rail links if there was a major amenity port on the Shannon.

Senator Mulcahy

I do not disagree with Senator Conroy. I am saying that the contribution from the Regional Development Fund is small—£25 million in total over a period. To do the things we should be doing would require massive funding. It is a question of priority, whether we do the west or the south road first or engage in exciting major communitaire projects. There is a limitation on those funds and on this country’s ability to fund the borrowings.

Deputy Leonard

Most people are satisfied that there has been a falling off in rail passenger and freight transport with a consequent heavier load on our roads. Therefore, our road infrastructure is the most important thing.

Acting Chairman

We can postpone adoption of the report, and it will be open to Members to propose amendments.

Senator Conroy

I am not objecting to the report. I think it is excellent. The sooner we can debate it in the Seanad the better. I will be making the same points there, without necessarily suggesting that we amend the report.

Acting Chairman

Deputy Quinn suggested—and Senator Mulcahy and I have sympathy with the point he made—that we should have summarised the main recommendations at the end of the report. The only way we can do that is to amend the report, and that can only be done by postponing its adoption. Is that agreed?

Ordered: That further consideration of the draft Report be postponed.