We have no difficulty in welcoming and accepting this proposal. The Minister said it is heartening that there should be this volume of response to the Adaptation Grants Scheme. It is a somewhat belated response. It indicates the merit of having a deadline of some kind which makes people think very seriously as to what they should be doing. The fear of missing the opportunity of getting State aid for adaptation and modernisation makes people consider their situation more seriously than when they feel they can postpone indefinitely consideration of their position. The Government were right to have the deadline. Its effectiveness is demonstrated by the response it has secured.
One must be concerned at the lumpiness of the flow of investment implied by this response. Assuming that these applications are fairly serious and that the proportion approved will be fairly high, the volume of industrial investment implied by this figure is very great indeed. One must in some degree be concerned that, in these circumstances, one is liable to get a very sudden jump in industrial investment in a period of a year or so of a somewhat temporary character with perhaps a falling-off in that respect afterwards. This type of distortion in the trend of investment could impose strains on the economy because of the sudden demand for investment in a short perod. It could impose, also, considerable strain on the Government's capital programme. Assuming that these grants are of no smaller order than preceding grants, the scale of investment required in the years ahead could be very great indeed.
What is the total sum involved in the 757 grant applications? On the assumption that the proportion approved is the same as it has been in recent years, what will the total investment be and over what period is this investment likely to be undertaken? Does the Minister feel that, once these grant applications are approved, investment will take place immediately or have some been put in in order to get approval while the firms concerned may not proceed with the investment for some time to come?
Is there any requirement under the legislation or in the administrative system which the board is applying which will necessitate this investment being made in a relatively short time or, having sought approval and got this approval for these grants, can firms postpone the investment for some years? How soon do they have to carry out the investment in order to secure the grant? The sooner they carry it out the better, if it is sufficient investment to merit the payment of Government grant.
If all this investment is made together, I think it could impose certain strains. What is the Minister's policy? What total sum will be required in respect of Government grants if the same proportion is approved as was approved in the past? How big a sum will have to go into the Capital Budget, approximately, in the year ahead or in the following year to cover this? The Minister must have assessed what the scale of the investment is likely to be. I think this House is entitled to know how much is involved.
I have the fear, which I believe to be quite widely shared in industry now and for some time past, that there has been a certain over-emphasis on these adaptation grants. Because adaptation grants are capable of quantitative measurement, because this is something that one can add up, so and so many hundred grants were approved and this relates to so many hundred firms which are such and such a percentage of the total number of firms in the country, there is a tendency to regard these grants as a measure of the performance of Irish industry in preparing for the freeing of trade. But that is only one aspect of the preparations for the freeing of trade, an important aspect but one which should not be taken out of context. Indeed, there is a danger in the Minister's own Department and in An Foras Tionscal that concentration on handling these applications, which is, of course, a huge job administratively, will divert attention from more fundamental approaches to the whole question of adaptation.
There has been a tendency in statements from his Department and I think from himself personally, although I would have to go over the record to be sure of that, to equate or to imply the equation of industrial adaptation grants with preparations for the freeing of trade and seemingly to suggest that if only 20 per cent of firms in a particular industry have sought those grants that the industry is not getting ready for free trade or if 80 per cent have applied that the industry is well prepared. In fact, of course, in all our industries there are firms which will not need adaptation grants, which are already prepared for the freeing of trade or which will not suffer stiffer competition in free trade conditions because of the particular circumstances of what they are producing or where they are producing it. At the other extreme there are firms which could not survive the freeing of trade no matter how much money was poured into them and in between there are firms which are capable of surviving but do require a considerable investment in modernisation and in those cases these grants are useful.
However, it would be a mistake to concentrate too much on these adaptation grants and to appear to equate the proportion of firms applying for them with the proportion of firms preparing for the freeing of trade and the general degree of preparation of Irish industry to meet free trade. There is much more than that required and a much more sophisticated approach is required to the whole problem. One of our difficulties has been that our whole approach both to fresh industrialisation — the setting up of new industries —and the adaptation of existing industries to free trade has been unsophisticated to a degree. No adequate appreciation has existed, to my mind, in the country as a whole, in industry or, indeed, in the Minister's Department of the fundamental character of the changes in the structure of industry that will be required to meet the freeing of trade. All of us have made the mistake, the CIO, in which I myself participate, the Department and industry itself of thinking in terms of each individual firm doing a bit of modernisation, doing a bit of re-equipping and then selling what it is now producing in the export markets or competitively in the home market as a result of this slight adjustment when, in fact, what is required is in many cases nothing less than the complete restructuring of industry.
What is required is that the existing structure of industry, orientated towards the domestic market, concentrated on the production of a very wide range of goods at a relatively low degree of economic efficiency, perhaps technically efficient but economically inefficient because of the wide range of goods produced in small numbers, be re-orientated to the production of a narrow specialised range of goods, the vast bulk of which would have to be sold in export markets. The restructuring of industry will mean the merger of many existing firms, the disappearance of some firms, the creation of new ones. We have all taken much too unsophisticated a view of this problem and I fear that in An Foras Tionscal and in the Department there has not been a sufficient appreciation of the magnitude, extent and depth of the changes that are required and that there has been a tendency to think we can meet this problem by tinkering with it. I do not think the Department or An Foras Tionscal are to be blamed particularly for this. I think we are all to blame.
Those of us who are involved in industry in any capacity, involved in committees like the committee on industrialisation, the NIEC and all those who have been even peripherally involved in this matter, have tended I think to take this problem in too simplified a form. We have failed to appreciate sufficiently the degree of technical and economic expertise that will be required to achieve this restructuring of Irish industry and in the Department and An Foras Tionscal and the IDA I do not think enough has been done to ensure that we have the level of expertise necessary to tackle these problems. What is required here is something which cannot simply be tackled by administrative civil servants without business experience, without the assistance of people with experience in this field or in the consultancy field. I feel we have to consider a vast strengthening of our administrative forces by the introduction of expertise of a business character if we are to tackle this problem effectively. It is all too easy to set up a system of adaptation grants with firms applying for them and churning out the grants where firms meet certain minimal requirements, but not taking the problem as a whole. If I may take an example, you get a case of an industry in which there are half a dozen or a dozen firms producing exclusively for the home market.
In that industry there is, perhaps, over-capacity. I am thinking of a particular industry, though I do not propose to name it. It is clear to everybody in the industry and, indeed, would be privately admitted in the Minister's Department that only three of those firms are likely to survive or, to put it another way, that it is unlikely that an industry comprising more than three firms could be competitive. It might even be thought that only one firm could survive because the scale of activity would be such that to have more than one would be to operate below a minimum economic level. I wonder what has An Foras Tionscal done to evaluate that situation. My own limited experience has been that they have not found it possible to tackle this effectively, that faced with that, they have attempted, not very effectively, to press on the firms that they should get together and sort out what, in fact, would be the economic size of the industry and how many firms there should be in the industry for it to be effective but that if there is an unwillingness to agree as to which is to commit suicide they have simply ladled out grants to all six or eight or ten firms in the industry though they know and the industry knows and everybody concerned knows that of these grants a significant proportion — perhaps the majority of them — are going to be ineffective because they are simply pouring money into firms which everybody knows will not survive in free trade. I do not make this criticism in a carping way because I fully appreciate the difficulty of the situation. My own experience as chairman of two adaptation councils has convinced me that for anybody who is not extremely expert in the industry to attempt to make the decisions involved as to how many firms will survive and which they will be is, in fact, impossible. Personally, I would not be prepared even with the insight which I acquired in regard to particular industries to make that kind of evaluation. I have not got the technical expertise to do so or, indeed, the business experience and I can quite understand why the administrative civil servants in An Foras Tionscal or in the Department dodge that decision. If I were in that position frankly with my limited capacity in that field I would feel obliged to do so also. I would not feel with my limited knowledge I had the right to decide which firms should get grants to survive and which should not. However, I do not think we should dodge the issue simply by saying we are not competent to decide. One must accept the fact that those decisions have to be taken and if some of us are not competent to take them we should ensure that people are employed who can give the expert advice necessary to ensure that money is not wasted because we have not the necessary competence in the matter.
I hope the Minister will take what I am saying as constructive criticism. I do not think I am being unfair to the Department or to An Foras Tionscal. The people there are doing an excellent job in their own way but they have not got the business experience to take the kind of decisions that need to be taken any more than I have or any more than the Minister has and I do not think we have taken this seriously enough. In Italy, in Britain or France the relevant organisations responsible for industrial adaptation or rationalisation — the IRC in Britain, the IRI in Italy and the equivalent organisation in France and other countries — are highly equipped to deal with these problems. They employ people with business experience, people with great experience in the merging of firms, in the rationalisation of industry. They employ them to help in this work of ensuring that a competitive structure of industry emerges from the work of adaptation, whereas here in this country we are content to leave this task to administrative civil servants who have not business experience and who should not be asked to undertake something which they are not in a position to do. Even if I suggested bringing in economists it would not help either because this is something which goes beyond the range of experience which an economist or a civil servant has.
We have not approached this problem properly. I should like to see a radical restructuring of the existing system so that it would be capable of coping with these problems and that we would get away from the present arrangement under which effectively An Foras Tionscal have very little alternative but to give an adaptation grant to any firm which makes in its own right a reasonable case even though eight reasonable cases individually will add up to one unreasonable case altogether. Every single individual firm could make a case that if it gets this grant it will survive but if you give the grant to eight firms you are giving it to five firms, perhaps, which are not going to survive.
An Foras Tionscal is not geared to take that kind of decision. I do not think much can be done at this stage. All they can do at this point in time is to process the remainder of the 757 grant applications as rapidly, as effectively and as efficiently as possible, as they have been doing. I think extra staff has been drafted in there and I feel that this is very necessary to get this job done in time because it is bad that those applications should be left hanging over for a period. Industry may be a little bit impatient at the moment at the slow speed with which the applications have been dealt with but I think industry accepts, nevertheless, that if industry itself is going to shove in in a few months as many applications as in the previous four years industrialists cannot expect them to be dealt with as rapidly as if they had put them in more smoothly and in good time. It is their own fault that they have come in in this form and that it has taken so much time to deal with them.
The Minister I think has taken steps to try to speed up this process and it is clear from the Bill that he expects the job to be done within six months. That is a reasonable target and I do not think we can fault him for having to look for this extension, the extent to which industry lags behind in putting in those applications. The volume of applications that occurred in the last couple of months was much greater than one could reasonably anticipate and he could not possibly have geared up An Foras Tionscal to cope with this unnatural flow with the same speed and efficiency as they were doing previously. Some time lag is inevitable and the time lag that is involved in this Bill seems reasonable to me and I would not fault him on that.
I accept it is not going to be possible in the middle of this crisis of handling the applications to adopt a more sophisticated approach. I would press on the Minister that he would try to get away from the traditional approach under which those matters are handled by people who have not got the experience of business, of mergers, of the industrial rationalisation required in this kind of work and that we adopt a more sophisticated approach to this matter, otherwise we simply will not be prepared for free trade. We will have many firms with adaptation grants, many firms with new machinery but not firms which can survive. In fact, it has been the case in the past that in certain industries at certain periods Irish industry far from being under-equipped and lacking modern equipment has had too much.
I myself was involved in a survey of one industry in which it was clear that the industry had over a long period of about ten years or so equipped itself with modern equipment. Nobody could complain that the industry was badly equipped. There were, of course, many individual firms who had not moderised but, on the whole, the level of modernisation of the industry compared favourably with other countries but they had, if anything, over-bought. Every firm had modernised on a one shift basis, whereas, of course, we could not operate efficiently and economically without working at least two shifts. They had, if anything, twice as much machinery as they needed. If half the volume of machinery they had were concentrated on half of the firms working on a two shift basis it would be far more economical than the over-equipment.
We can place too much emphasis on the simple business of modernising equipment. There is more to it than that. The industrial adaptation grant system, while it was desirable in its time, was certainly useful in generating additional industrial investment, had the defect of over-concentrating attention in this particular area and not concentrating enough attention on the structure of adaptation, which is the fundamental concern.
Irish industry has largely been founded since 1932. In fact, it is relatively modern by the standards of other countries except countries whose industry was wiped out in the war and which modernised since the war. Our problem has not been that we are a very old fashioned industry. It has not been long enough there to be old-fashioned. Our problem is that its structure is entirely inappropriate to modern trading conditions with free trade. Adaptation is something which will not be met, and can even be confused, by excessive re-equipment in too many individual units with machinery suited to a large number of small units quite unsuitable to the type and scale of activity that will be required in the years ahead.
I would, therefore, ask the Minister to look at the whole approach to this problem and to be prepared to take drastic steps to review the administrative structure that handles our whole industrial adaptation programme or else we will find that we are left behind and we will find that Irish industry, which is really capable, if properly adapted, of surviving in the free trade conditions and in which I personally have confidence despite what is said by many of its critics in different camps, will face very serious difficulties which need not occur if the problems had been approached and tackled in a more sophisticated manner.
It is not that we have an industrial structure which it too young, too new, too small or basically too weak to survive. We have an industrial structure, much the greater part of which will survive under free trade conditions if it is adapted to the very different marketing conditions of free trade. That adaptation is something which it can only undertake if it gets assistance and help from the Government, not only assistance in the form of grants and help for adaptation but assistance and help in the form of a lead, in the form of the kind of lead which has been given to industry in England by the Minister in question, by the IRC recently in regard to several major industries where the direct intervention of the Minister and the IRC have led to mergers which have greatly strengthened English industry, mergers which would not have taken place without that intervention.
This is where the State can play a useful role in intervening to rationalise the industry and not be pushing people around and telling them how to run their business but in employing people with the necessary expertise to point to where there is a particular change that could be made, a restructuring, a merger, a rationalisation that could achieve results, then to use the negotiation skills of those people or the Minister himself to bring together people who hitherto have not been prepared to work together, to bring them together effectively to achieve those results.
I do not believe we have begun to attempt this yet. There is a good example beside us in Britain. There is a good example also of much that has been done in Italy which has, indeed, faced, because it is the poorest of the Common Market countries, problems very similar to ours and from which we could learn a lot. I do not think we have begun to face up to this adequately here.
This is an opportunity, when we are now coming to the end of this adaptation grant scheme and when as the Minister has said other arrangements are in contemplation, to revise this radically. I hope the new arrangements the Minister will come to us with before long and to which he refers here today are likely to mature at an early date, will be ones that will follow along the lines I have indicated. I can say now if they do and if they provide a radical breakthrough in this matter than the present totally inadequate administrative structure, then they will be welcome on this side of the House. If they do not, I shall be repeating in much more stringent terms the criticisms I have been making now, criticisms which I do not press beyond certain points at the moment because we are learning as we go along.
We are learning from those lessons now and there is no good looking to the past and saying it should have been done years ago. Everything should have been done years ago but none of us appreciated the problems fully. We appreciate them now. There are enough people now who understand those problems and I do not think there is any excuse for failing to solve and tackle them now. If the Government do not come forward with radical proposals along those lines they can and will be faulted and will be strongly criticised from this side of the House. I hope that the Minister who has now had long enough in his Department to come to grips with the very many and varied problems there will look at this problem in a fresh way and will not be hidebound by precedent, will not feel he has to carry on with the existing structure, will not consider that the present arrangements must not be disrupted because there would be personal inconvenience of some kind or because people will object to changes of this kind but will be prepared to make the necessary changes. If we can take such drastic, and, indeed, in some respects absurd decisions concerning the policy making functions of Government Departments in towns a long way from the capital city where the policy making functions should be concentrated, we can certainly take the necessary decisions to restructure our organisations operating in Dublin in this field, even if this means some disturbance of some individuals in the kind of work they have been doing. We must let nothing stand in the way of doing it. Too much is at stake. People have too many jobs at stake here for us to allow the convenience of administrators, to allow the present administrative structure, to stand in the way of radical reform. We expect from the Minister, therefore, a radical approach to this problem within the next few months. If he shows signs of that he will certainly receive our support and if he does not he will receive our very severe criticism.