As the Seanad has agreed that there will be only an hour and a half to discuss this motion it is up to the Senators themselves to try to make their contributions as short as possible so as to give as many Senators as possible an opportunity of contributing.
Infrastructural Development Aid: Motion.
I move:
That Seanad Éireann pursuant to the Order of the Seanad of 6th February, 1980, takes note of the Report of the Joint Committee on the Secondary Legislation of the European Communities on Community Aid for Infrastructural Development in Ireland, which was laid before the Seanad on 11th June 1980 and which contains a request for a debate thereon.
I have great pleasure in moving this motion on the report on Community aid for infrastructural development in Ireland which came from the Joint Committee on Secondary Legislation of the EEC. I would like first of all to draw the attention of the House to the fact that two sub-committees of the Joint Committee were involved in the preparation of this report, one on the finance and commercial aspects which I have the privilege to chair, and the sub-committee on social affairs chaired by Senator Robinson. I would like to acknowledge the input from that sub-committee. The Joint Committee felt that it would be useful to put this report before the House to help to draw attention to the developing thinking in the EEC in relation to infrastructural development and particularly in relation to aspects of development that we normally think about in terms of the regional development fund. Over a long period of time on many occasions Government representatives, indeed Members on both sides of the House, have expressed dissatisfaction with progress on regional development because of lack of funds from the EEC side.
This report describes what is happening now and what the intentions will be for the future and also indicates the alternative means of financing what we now know are the required infrastructural developments. Here I am thinking in terms of transport and communications and other aspects of infrastructure which affect economic and social development in the various regions of this country.
The Joint Committee considered a memorandum which was sent by the Commission to the Council on 20 November on the role of the Community in the development of transport infrastructure as well as formal proposals by the Commission for new Council regulations relating to specific Community regional development projects and also projects in the field of transport infrastructure. Senators have had the chance to have a look at the report and they can see that it is fairly complex and it needs a bit of reading. It has a table of contents which we have not very often had with reports of this kind. I prefer, as the debate goes on, to let Senators pick up aspects which they want to develop themselves. I will highlight a few areas which I think are important.
First of all there are the amendments which are to be introduced in relation to the regional fund as to the size of the fund to be determined annually. There will be some changes in amounts and Ireland will do a little bit better out of it as a result. Also one of the provisions is that the maximum rate of aid will be increased from 30 per cent to 40 per cent. Those were important changes. Another change which is of even more importance is that where in the past only infrastructures directly linked with the development of industrial handicraft or service activities could be aided, now under the amending regulation the definition of eligible infrastructure has been widened to include infrastructures which contribute to the development of the region or area in which they are located. That means it will no longer be necessary to establish direct industrial links in the case of the infrastructure involved and it can be looked at more as a broader regional development. At the moment we are waiting for a definition of the infrastructural measures to which the fund may grant assistance and the next review of that is to be held on 1 January 1981. Until such time as that happens there are some restrictions on the widening of the definition of eligible infrastructures.
The report also outlines the difference between the quota and non-quota sections, and the non-quota sections are a very small proportion of the total. On 18 October 1979 the Commission submitted to the Council proposals for regulations instituting five non-quota section measures. These relate to five-year programmes from 1980 to 1985 and they refer to operations in different areas, France, UK and Italy, and in the case of Ireland it refers to an Irish border type proposal. Sixteen million units of account are involved for Ireland and eight million for the North of Ireland. These cross-Border measures are extremely important. The proposal is for the implementation of a special five-year programme and it will have as a subject the economic activities in the field of tourism, communications and artisan enterprises. From the report it can be seen that in Ireland on the Twenty-six County side it will cover Donegal, Leitrim, Cavan, Monaghan, Louth and on the Six County side Londonderry, Strabane, Omagh, Fermanagh, Dungannon, Armagh, Newry and more and be financed jointly by the two countries. There are some very interesting dimensions to this, such as construction and conversion of tourist accommodation, establishment of development bodies, carrying out special reports and so on. I need not go down through them all but, as a cross-Border measure and as an indication of how it is possible for the Six Counties and the Twenty-six Counties to co-operate, it is very important.
The other area of the report deals with in particular the old area of transport infrastructure. Basically the report indicates that the funds that are available for this in the regional development fund are not sufficient to meet what are known as links with peripheral regions—for example, links with the north, Dublin to Belfast and to Derry, and with the west, Dublin to Cork and to Galway. These routes must be opened up to help the development of the EEC, not just Ireland, within the terms of the Treaty. That brought us to examine the difficulties of financing these. We looked at the old methods of financing and some new methods. We looked at the European Investment Bank as a source. Loans from the European Investment Bank are disbursed in several currencies and the bank operate them on a profit basis. The new financial investment which is known as the Ortoli Facility is also now available. This facility is designed to provide loans for energy projects and also for infrastructural projects and a lot of money is involved. The total facility is 1,000 million units of account on 14 May 1979. Already the first 500 have been drawn down and 250 million European units of account are to be devoted to infrastructure.
The other method of funding arose out of Ireland's entry into the EMS, where the 3 per cent interest rate subsidy, the value of which is payable in cash, was set up. For Ireland it involved £225 million each year for a five-year period. It also involved £225 million, the same sum coincidentally, in the cash payment. There are three ways—the European Investment Bank, the Ortoli Facility, and the interest rate subsidy—as alternative ways of getting funds to help an infrastructural development, as well as the normal one, the fourth, which is anything that comes directly from the regional development fund. Paragraph 25 of the report indicates how loans and grants borrowed by Ireland under these schemes were in 1979. The total comes to IR£226 million.
It is all very well to say that these are available, but have we got the capacity to borrow this amount and should we be borrowing to that extent? I am sure other Senators will want to elaborate on that aspect of it. We would all love to be building more rail links along the west, opening up E-routes all over the country and increasing our communications channels; but every time we do it through a borrowing of this kind we are adding to our fund borrowing. I am not enthusiastic about borrowing from the EEC; it is like borrowing from our own investors. But that is another matter which I will leave to Senator Whitaker to elaborate on. We felt as a result of a visit to Brussels when we conferred with the officials there, that maybe we in Ireland were not making the best use of the capacity of the regional fund. When we examined this we found it not to be so, that all the funds available had been taken up and all projects required to get release of the funds had been put forward.
We also examined the proposals by the Government for the new road plan. There was some doubt as to whether the rate of the development of the plan would be sufficient to meet the requirements for economic development. We did come down on the side that, while it was good to see that there were alternative funding methods available to pay for these propects, we could indulge in them only to the extent that the national economy could take that level of borrowing. We recognised finally that the fundamental objective of the EEC is to promote economic convergence by removing regional imbalances. We recognised also that the regional development fund, as it stands, would hardly be capable of making a big inroad on that and that some access, as has been provided already, would have to be had to these methods of funding, but we would have to be careful about it. We thought that it would be useful to get all of these facts down in one report to show what the alternatives were and to provide a basis for further discussion.
I second the motion.
I welcome this report on Community aid for infrastructural development in Ireland. I am glad to have the opportunity to contribute to this debate. The report relates to a very considerable extent to the issue of regional development and the European Regional Fund. While this report is acceptable to us, and while the Joint Committee have done very useful work and spent many hours in developing it, there is much room for reservation in this country in so far as the European Economic Community regional policy and regional fund are concerned. In the broadest terms, the Joint Committee recognise the deficiencies in the policy and seek a better fund in so far as this country is concerned. Our entry into the EEC has been of tremendous benefit to this country, but I am attempting to put the regional fund into context. It seems, from the perspective particularly of one who lives in the western part of this country, that one of the singular failures of the European Economic Community's policy has been in this area of the regional fund. We have benefited immensely from European Economic Community membership. We have benefited as an agricultural nation. We have benefited in industrial terms. We have benefited in terms of the social policy. However, in attempting to relate Community policy to the individual rather than to the nation, there have been singular failures.
One of the problems in talking about the extent to which this country has benefited from the regional fund is that when one meets people from other countries involved in the Community and when one is critical about this issue, there is a tendency when talking to the British, French, Germans, Belgians, or Dutch, to have them say, "You might not have benefited that much from the regional fund but you have benefited tremendously from the common agricultural policy and, as a consequence of that, you have benefited as a nation because the common agricultural policy is an instrument of regional policy". The weakness in that is that, on any analysis of the common agricultural policy, grants have been given on a basis proportionate to output to a very large extent where in agricultural terms the share of output is by far the largest. The Community have been supporting intensive areas, for example, in the area of the dairying sector, the south and the east. I do not begrudge farmers in those regions what they are benefiting from it, but the statistics will tell us that by far the largest proportion of funding from the Community in the agricultural sector has been going into the richest grasslands of this country. As I say, this is not in any way begrudging people in those regions the immense benefits they have got, but on a per capita basis any analysis of the input of EEC funds into this country has been very unsatisfactory in that a very small proportion of the population have had immense benefits on a per capita basis and very large numbers of people have had a minimal benefit in per capita terms. This is the singular reason why EEC agricultural policy has been unsatisfactory and why, from a west of Ireland perspective, any suggestion by Europeans that the common agricultural policy is an instrument of regional policy and for that reason they should be happy is unsatisfactory.
We see the extent to which our country has been benefiting from this regional fund. In the referendum on the EEC some years ago we went around this country, especially in the western region, and suggested that it was very much to our benefit to join the EEC because for the first time ever the indigenous problems national Governments had had since the foundation of the State would no longer obtain. Irrespective of the political complexion of Irish Governments there were indigenous problems about which we all know, such as poverty of our country, the limitations under which any Government had to support our people. Here we had a Community articulating a policy which suggested a commitment by the centre of the region to the periphery and, as a consequence of this, immense benefits would flow into the periphery which would help to offset the indigenous disadvantages. Against the background of the promises of that time the lack of commitment by the larger nations in Europe subsequent to the oil crises of 1973 and 1974 and since then has been fairly dismal. For that reason in any debate on an issue such as the regional fund we cannot be complacent and we cannot in a pat sense merely accept a report in vocational terms without being critical of the political issues involved in it.
It is pleasant to be able to welcome the fact that infrastructure which until recently was directly linked only with development industry and handcrafts services, which arrangement was unduly restrictive, is being widened to include infrastructure which contributes to the development of a region or an area in which it is located. Whereas the rate normally was a maximum of 30 per cent of the cost, this may amount to 40 per cent in the case of projects of particular importance to the development of a region, and this is also very important and significant. Even though there is the commitment to this country for 1978-80, a three-year period benefit to the tune of £1,725 million which is more satisfactory than the previous three-year term, at the same time in 1979 the receipts in this country from the regional fund amounted to only £25 million which was 2½ per cent of the public capital programme. I am speaking as a man from the west of Ireland, the region which I represented in Dáil Éireann and in which I live, about the indigenous problems that we have and the gross dissatisfaction there is in our community with the paucity of this amount against the background of the promises which were made and the immense wealth there is in the centre of the EEC.
I want to give an indication of the extent of the poverty there still is in counties such as mine, or your own in Cavan, a Chathaoirleach, in relative terms. We know that in relative terms we are better off than we were, but that is not necessarily any compliment to the EEC or to national Governments. There are the indigenous problems, the infrastructural problems, the structural problems in terms of the sectors of employment, the huge numbers of people still engaged in what is called primary employment and the problems of creating employment in other sectors.
In the west today, whilst we have been relatively successful in introducing jobs in multi-national companies, tourism, sea fishing and in other sectors, it is merely relative and there are still very serious problems. I am provoked to tell of a conference I attended in Brittany some years ago of what were termed the periphery sections of the EEC. It was a conference of sectors in the west and other regions of Ireland, the south-west of Britain, Scotland, sectors of Denmark, in Jutland, areas of France in Brittany and parts of Germany such as Schleswig-Holstein. In the western counties in the broad sense, Donegal through Cavan, Monaghan down into Connaught, down into Cork and Kerry, we have statistically the highest proportion of people engaged in primary employment which is agriculture. That in many cases means unemployment and unemployment benefit, unemployment assistance, dole or whatever you want to describe it as. At that conference of the infrastructural regions of the EEC there was a delegation from Schleswig-Holstein in Germany. They made passionate speeches about the extent of their deprivation in an EEC context and in a German context. Statistically the proportion of people in Schleswig-Holstein working in the primary sector was about 10 per cent and they held this forth as a statistic showing the level of deprivation and underdevelopment. That puts in perspective the problems we have in the western region of this country.
Involved in this is not simply an analysis of present policy by the Joint Committee, who are doing it according to their function, but a much broader consideration of the political issues involved in this and the original political commitment under the Treaty of Rome. We have to take great exception to the reluctance of the wealthier states in Europe to commit themselves to any policy that is relevant other than to pay it lip service, if they are being serious about it, in so far as the regional policy is concerned. This view of mine was reinforced recently by something I foresaw two to three years ago. We are now talking about the extension of the European Economic Community to contain Spain, Portugal and Greece and of course this is very welcome in political terms. We are talking about three countries on the periphery of the Community which have had a weak democratic structure to say the least, which are ripe for communism and for influences which are undesirable to this Community, and the Community in their own self-interest apart from any benevolence, need these countries in to ensure an extension of the democratic boundaries of the Community. Of course this creates enormous economic pressures because the admittance of Spain, Portugal and Greece, with their predominant agricultural economies and the weak infrastructures that exist there will present problems. We have problems in our country but they are only half as bad as those in the three countries which I have cited, and these place immense economic pressures on the Community.
We have made the case previously that whilst we in Ireland as a member of the Community welcome the admittance of Spain, Portugal and Greece in the broadest philosophical and political terms, we do it only on the undertaking from other countries in the Community that aid to Ireland will not be restricted as a result of the entry of these countries. It is very disheartening to note that the wealthier countries of the European Economic Community have in the broadest sense welcomed the entry of Spain, Portugal and Greece, but recently, when we are getting down to the nuts and bolts of the price that has to be paid for the admittance of these countries, there seems to be a terrific reluctance on the part of the wealthier countries of Europe to part with the funds involved in admitting thsese three countries.
I welcome the transport infrastructure section of the report. In relation to regional policy it points to the Community objective of counteracting the centralising forces of the EEC by distributing economic activities more equally through the entire territory of the Community. It says that in the Committee's opinion it is essential for the success of this policy that 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 and linked to the main centres of the Community by rapid modern routes to reduce as far as possible the handicap of distances. I would welcome a commitment by the Minister and his Government to the well-articulated report from the west of Ireland commissioned by Bord Fáilte and Monsignor Horan of the Knock Shrine which called for the development of and support for an airport in the north-west of this country. This report deals with links with peripheral regions—in Ireland, for example, links with the north, Dublin Belfast and Derry; with the west, Dublin, Cork, Galway. If you talk about transport infrastructure here you find that County Mayo has the worst rail service in the country, bar none. The standard on the train to Westport is appallingly bad. They have very good staff serving CIE on the route, but the infrastructure, the quality of carriages, the line and so on, are extremely shoddy and much less satisfactory than the links in this city with Cork, Limerick and Killarney. Recently I travelled by train to these three places and the trains were of a significantly better standard. These are the kind of things that are practical and important.
If we are trying to attract investment, it means people come in from other regions of the world taking a first look at certain parts of the country in which they may possibly invest funds. If the arteries are not open, or if the infrastructure is extremely shoddy and unacceptable, these people are not going to invest. There is a blockage at point one. Air transport is very important. I am glad to see this report talking about the supposed commitment within the Community to the subsidising of air transport. The area covered by Mayo, Sligo, Roscommon, Leitrim and Donegal is the most neglected in the country. In the south, Cork Airport provides the facility for major regions. Shannon Airport provides facilities for those in the Kerry, west Cork, Limerick, Tipperary, Clare and Galway city, which is within 50 miles of Shannon Airport. But when you come north of Galway city, to east Galway, Mayo, Sligo Donegal, north Roscommon, Leitrim and Cavan, there is a tremendous lack of this basic facility in this modern age. There has been an immense growth in manufacturing industry. There is the tourist potential. There is a certain type of tourist market to which other regions have access because charter flights can come into their regions. We miss out on these completely because we do not have an airport.
In the broadest terms there is a very strong case to be made in support of a recent survey commissioned by Monsignor Horan and by Bord Fáilte to suggest that there is an necessity for an airfield. It does not have to be of international proportions, such as Shannon or Cork Airport. If it had a sufficiently long runway, equipped for night flying, when necessary, and could facilitate charter flights of a certain size, this would suffice for the time being. I support this completely and suggest that the Minister convey to his Government the need for national support for this project and, through the suggestions of this Joint Committee and through the supposed commitment by the Community in the transport infrastructure area, that they seek Community support by way of grants and loans for the development of this transport facility for my part of the country which has been neglected and which badly needs an airport.
I am glad to note the extent to which we benefited from the Ortoli Facility, which relates to energy projects. I noted recently that Bord na Móna benefited significantly from loans from this facility. In the light of the recent commitment by the Minister for Energy in this area, I hope this will be extended to other areas.
This country's share of the non-quota sector represents about 5 per cent of the commitment. In the quota section there is a bit of horse-trading and various nations, members of the Community, look for a trade-off. In the non-quota area we are talking about that section of the fund which the Community can in a global sense dispense as they see fit, in conformity with the regional fund commitment and independent of the horse-trading area.
The west, including Donegal, represents the poorest part of the entire Community, with the single exception of the Mezzogiorno in Italy. From the non-quota section, only 5 per cent is coming into this country. This is unsatisfactory and is not acceptable. While I welcome the cross-Border note in the report and the commitment of the Community in the non-quota sector to the funding and to the grant-aiding of joint Border activities by us and by the authorities in Northern Ireland, I would welcome some type of commitment in the non-quota sector also to the western counties. Statistically, we have these problems. I would welcome if the Community would look at the west of Ireland as one of the poorest sections, in addition to looking at the cross-Border areas.
I rise mainly in response to Senator Mulcahy's invitation to me to put him right about borrowing from the EEC. Before I try to do that, might I express gratitude to the Joint Committee and to the two sub-committees for providing us with such a useful survey of the position regarding Community aid for infrastructural projects.
I would like, if I could, to dispel Senator Mulcahy's notion that borrowing from the Community is just the same as borrowing at home. That would be so if we had arrived at the ultimate goal of a monetary union in the Community, but we are very far from that goal at present. We are all individual member states trying to manage our own economies, our own currencies and, in particular, trying hard to keep our exchange rates at some fixed relationship to one another. The fact that those exchange rates are not irrevocably fixed forever, as they would be in a monetary union, exposes us to the same risk when we borrow in deutschemarks or guilders as when we borrow in yen or US dollars.
There is no distinction whatever at present in the implications for the community here of borrowing in an EEC currency as distinct from an non-EEC foreign currency. In both cases the burden of transferring the interest and repayment charges is a real burden on our current production. It is a burden which, I think, already amounts to about 1 per cent of GNP, and which is rising fast. It would rise very fast if we continued to incur foreign borrowings at the pace of 1979. The distinction between the real burden of transferring our resources out to foreigners in payment of interest and repayment of capital on an external borrowing and domestic borrowing is that in a real sense the domestic borrowing involves, as far as the interest and repayment are concerned, merely a redistribution within the domestic community. I hope I have made it clear that domestic borrowing is quite distinct from foreign borrowing of all kinds, whether the foreign borrowing be from Community sources or non-Community sources.
As I am talking about borrowing perhaps I might say that Community borrowing, as we have seen from today's announcement, usually takes place of our own volition in the currency which offers the lowest interest rate terms. When I was speaking on the Finance Bill I used the example of deutschemark borrowing to compare the effective cost, if there is a devaluation of our currency in relation to the deutschemark, with the cost of raising money at home. Senator Mulcahy rather chided me for choosing what he thought was perhaps the best case to make my argument, asking why did I not take guilders instead. I could have taken guilders but I took deutschemarks because that is what the Government were taking. The Government wanted deutschemarks for very obvious reasons—the rate of inflation, and consequently the rate of interest, in deutschemarks is the lowest in the Community. If one went to guilders what would one find? One finds that because the rate of inflation is higher the rate of interest is higher there; several points higher than for deutschemarks. One would just have to change the arithmetic slightly, but the end result would be the same. I do not think there is any escape. I hope I have not entirely destroyed Senator Mulcahy's belief in the merits of EEC monetary systems which I share. That is my immediate contribution to the question he tossed in my direction a few moments ago.
I would like to congratulate the Joint Committee on this excellent and comprehensive report. The committee's examination of the operation of the European Regional Development Fund is particularly timely in view of the forthcoming second review by the Community of the regional fund regulation.
The report, of course, goes far beyond an examination merely of the regional fund. As the report states in paragraph 2 "to get an overall picture of the part played by the Community in investment in infrastructure it is necessary to have regard...to the other Community instruments which can be used to further the development of infrastructure". I fully subscribe to this view, as it is only through a fully integrated use of the various financial instruments that the role of the Community in regard to infrastructural development can be maximised.
I should like to say a few words about the regional fund before dealing with these other instruments. The report deals with the role of the fund in assisting infrastructural development in a very comprehensive way and I do not wish to repeat what is already in the report. I would like, however, in particular to welcome the Joint Committee's view, in paragraph 29, that the fund should assist the development of social infrastructure such as hospitals, schools, technical colleges and so on. As the report states in paragraph 8, the Council, acting on a proposal from the Commission transmitted after consulting the Regional Policy Committee, is to define the infrastructure measures to which the fund may grant assistance. I can now inform the House that the Commission is at present consulting the Regional Policy Committee on this matter with a view to obtaining an early Council decision on the lists of eligible infrastructure. While it would not be appropriate for me to comment on discussions taking place within the Regional Policy Committee, I can say that I am hopeful that a fairly broad definition of eligible infrastructure will emerge, at least as far as the priority regions of the Community are concerned. In these regions, which are underdeveloped by comparison with other areas of the Community, the provision of social infrastructure such as hospitals, schools, technical colleges and so on, can be as essential a prerequisite for the attraction of industry as can be roads and telephones. It is, therefore, entirely appropriate that the regional fund should assist the provision of such infrastructure.
Of course it is true to say that even should the Council agree to such an interpretation of eligible infrastructure, the major limitation as to the effectiveness of the regional fund continues to be the size of the fund. The fund as it was established for the initial period 1975-1977 was a disappointment amounting to only about half the original figure proposed by the Commission. While the size of the fund for the current three-year period 1978-80 has been significantly increased, probably to IR£1,825 million—following a further increase recently proposed by the European Parliament—by comparison with the original endowment of IR£531 million, it remains inadequate as evidenced by the McDougall Report.
This problem is further compounded by the fact that the fund operates over such a wide area, about half of the territory of the Community, embracing more than one-third of its population. I note that the Joint Committee consider it to be essential that the resources of the fund should be concentrated far more "on the more needy areas of the Community", a view which I would heartily endorse and which I feel will become all the more urgent with the prospective enlargement of the Community.
It is hardly surprising then that the fund has done little to reduce disparities within the Community. Our receipts from the fund, which as the House is aware, are used to increase the allocations for capital investment through the Public Capital Programme, have been fairly modest by comparison with national expenditure on the programme. In 1979, total receipts from the fund amounted to IR£25.55 million or 2.6 per cent of total expenditure on the PCP. A more detailed examination as to how these receipts were utilised will show that the fund financed about 4 per cent of total expenditure on industrial promotion. On the infrastructure side its contribution to those programmes assisted by it amounted to about 7 per cent. However, this excludes a whole range of programmes not assisted at all by the fund. As I have already indicated, when the whole PCP is considered the fund's overall contribution was 2.6 per cent.
I can inform the House, however, that recent discussions have taken place at official level with the Commission aimed at speeding up the flow of fund receipts, that is to say the conversion of fund commitments into actual payment of aid. As a result of the accelerated payment provision of the amended fund regulation, the increase in the size of the fund and finally these recent discussions to which I have referred, it is estimated that our 1980 receipts will amount to IR£47 million or 4 per cent of the PCP.
I wholeheartedly agree, however, with the joint committee's conclusion, at paragraph 41, that the fund cannot "play a significant role unless the grant aid... is considerably increased". In this connection it is worthwhile recalling that the European Parliament has played an important role in securing significant increases in the fund both in 1979 and again this year. This has been possible because of the provision in the amended fund regulation that the size of the fund is now determined as part of the annual budgetary procedure of the Community which, as the House is aware, involves both the Council and the Parliament.
Finally, I must refer to the joint committee's criticism, in paragraph 31, concerning the method of administering the fund. I must confess to having some sympathy for the view put forward that the present system involves an unnecessary amount of bureaucratic activity. This is because the regional fund is based entirely on an individual project approach. Prior to the last review of the fund regulation we suggested that a programme approach would be a better one. This would be consistent with the proper role of the fund which is to support the regional policy measures taken by the member states. In the event our suggestion was not taken up.
However, the regulation is again to be reviewed by 1 January 1981 by the Council acting on a proposal from the Commission. While the Commission has not yet submitted its proposals I can say that it has indicated that it is examining the possibility of introducing the technique of financing programme agreements in place of the current method of financing individual projects. While our attitude cannot be determined until such time as the details of the Commission's proposals are published, I would favour the proposal, in principle, as it can only improve the administration of the fund. I am glad that the joint committee would also support in principle such a reform.
Therefore, I am guardedly optimistic that a number of the recommendations in this report concerning the reform of the regional fund will be carried out. Here I have in mind the widening of the definition of eligible infrastructure to include social infrastructure and the introduction of a system of funding based on specific and precise programmes. Unfortunately, I am less than optimistic regarding the major recommendation of the report which concerns the provision of adequate resources for the fund. Obviously this is an aim which I shall be pursuing but I feel, like the committee, that this will only be achieved by concentrating the resources of the fund in the areas of greatest need in the community. It remains to be seen whether the Commission's proposals will initiate such a radical reform.
Before leaving the regional fund, I should perhaps say a few words about the new non-quota section. Discussions on the draft regulations instituting five non-quota section measures submitted to the Council by the Commission, have been in progress for some time. One of these measures is intended to contribute to the improvement of the economic and social situation of the Border areas of Ireland and Northern Ireland.
Adoption of the draft regulations was delayed because of the wider problem of the British contribution to the Community budget. Now that a solution to this problem has been found, I am hopeful that the draft regulations will be adopted without further delay.
A special programme implementing the special Community measure in the Border areas is at an advanced stage of preparation in my Department and will be submitted to the Commission as soon as the regulations are adopted by the Council. While the resources of the non-quota section are extremely modest, the allocation to this country for the border programme amount to about IR£10.7 million over five years, the total cost of the programme being about IR£30 million. Nevertheless, it does demonstrate Community concern for these areas which are amongst the most severely deprived in the Community, particularly when viewed in the context of other Community measures, for example, the cross-Border drainage measure approved by the Council in February 1979.
I would like to turn to other aspects of the report concerning other Community aid for infrastructural development. Of particular significance to the financing of capital investment through the Public Capital Programme are the Community's loan facilities. The report is again very comprehensive on this matter. However, I might point out in this context that the introduction of EMS subsidies and the New Community Instrument or Ortoli Facility in 1979 resulted in a three-fold increase in our borrowing through the European Investment Bank as compared with 1978 when borrowing through the bank amounted to IR£78.5 million.
The report contains a useful breakdown of our 1979 borrowing under the Community loan instruments, paragraph 25. Senators may be interested in hearing that the sectoral breakdown of this borrowing was as follows: Infrastructure, IR£139.3 million; Energy, IR£69.3 million; Industry, IR£17.5 million; Total, IR£226.1 million.
While these Community loans are more significant in financing capital investment than the regional fund, nevertheless as the report quite rightly points out recourse to loan facilities depends on our ability to service an ever-increasing public debt. Obviously grant aid is very much more attractive than loan finance which has to be repaid.
At present, however, availing of the Community's loan facilities has the added attraction of the subsidy arrangements made as part of our entry into the European Monetary System. As these subsidies are paid in capitalised form, availing of these loan facilities results in our attracting the subsidies in the form of a grant. As the report points out, this subsidy amounts to a grant of about IR£45 million each year for a five year period. In 1979, we were able to secure our full EMS capitalised interest subsidy with subsidised borrowings from the EIB and Ortoli Facility of IR£172.6 million. I might also mention here that we have already secured also 50 per cent of our 1980 subsidies.
Thus in 1979 the EMS capitalised subsidies of IR£45 million were 76 per cent greater than our receipts of IR£25.55 million from the regional fund. Together this grant aid amounted to about 7 per cent of expenditure on the Public Capital Programme. This year the EMS subsidies which will be about the same as our estimated receipts from the fund. Together they are expected to account for about 8 per cent of estimated expenditure on the PCP.
It is against this background that the Joint Committee's view, paragraph 34, regarding the necessity for further Community measures designed specifically to meet the requirements of infrastructure policy must be considered. I can only endorse this. It will become all the more essential if the size of the regional fund is not increased to a level commensurate with the tasks it was set up to accomplish. In this context the Commission's discussion document on the role of the Community in the development of transport infrastructure is obviously of great interest. The Joint Committee's interest in the document and in other Commission proposals in the area of transport infrastructure is apparent from the report. Of particular interest, of course, is the draft regulation for aid to projects of Community interest in the field of transport infrastructure submitted to the Council by the Commission in July 1976, paragraph 20.
When this regulation was considered by the Council of Transport Ministers in November 1978 the Commission was requested to prepare by 1 January, 1980 a document on the main bottlenecks in transport infrastructure in the Community. This "bottlenecks" document has not so far been published and until it has been published and examined it is difficult to form a view as to the scope of the draft regulation, the kinds of projects to be eligible, the financial arrangements to apply and so on. I am sure that the house will share my concern that any aid to be made available under this scheme should not be confined to major infrastructure undertakings such as the proposed Channel link but should also assist the development of transport infrastructure in less developed areas. I might mention also that the Council of Transport Ministers has been meeting in Luxembourg this week and I would hope that some further progress will result from their discussion. I note that the Joint Committee believe, paragraph 35, that it may be in this country's interest to support the adoption by the Council of the proposed regulation. I hope that when the Commission's intentions regarding the application of the regulation are spelled out more clearly it will be of interest to us and that our Road Development Plan for the 1980s for example will be eligible for aid. However, as I have said we are not yet in a position to arrive at a firm view.
I would like to conclude by once again congratulating the Joint Committee on this report and for the excellent work carried out by its sub-committees under the chairmanship of Senator Mulcahy and Senator Robinson. The report will be of interest to all of us who are concerned with economic and social development in this country and the Joint Committee's recommendations will support our case for seeking Community aid for the improvement of our infrastructure which is a prerequisite for such development.
I should like to add my praise to the praise of others in regard to this Committee. Committees of the Oireachtas are working well. During the years we argued that that was the way we should develop. With this Committee dealing with the secondary legislation of the Community and, might I add, one Committee of which I am an interested member, the Joint Committee on State-sponsored Bodies, new directions are being explored and very useful material is coming out. Certainly from this Committee we get a large amount of material and it is excellent. Clearly, in addition to the general guiding hand of Senator FitzGerald and the subcommittee guidance of Senators Mulcahy and Robinson, there must be a first class back-up staff. The documents show that the input from the back-up staff is really good. Having said these words of praise I would urge that in addition to the table of contents, which is useful in this report, some sort of precis or setting out should be considered. Whoever does the drafting should give more attention to the readability of the excellent material and I think the presentation could be slightly improved. I only say that because the material in it is so good.
About the contents, perhaps I will say the kind things first. The modifications of the fund set out in amendments to the regional fund in page 2 paragraph (4), are all in the right direction and nobody could object to them. They are welcome obviously. Far beyond the commitment of resources, the development across borders is welcome. In many ways, and I am going to go on doing so later on in my speech, I am a fairly bitter critic of the Community but the recognition that areas have to be planned regardless of where borders either historically evolved or imposed borders, may happen to be is a great recognition. What the Community is doing in this area is very worthwhile and in Ireland's case it is a unifying thing.
Secondly, the recognition of the need to plan transport at Community level is absolutely right and wise. I refer, for example, to page 23 where it is stated, "the Committee supports the Commission's view that the aims of a common transport policy calls for direct Community involvement". I think that is right. It is inescapably true and it is important to say, because the danger for us as we get into the EMS, as we get free movement of goods, capital and labour, is that the inequality in development becomes exacerbated and the places that are already rich and developed take over certain functions from us. We can only have a fair and balanced transport system on the basis of planning at Community level because the truth about what happens inside a market economy, which is a euphemism for inside capitalism, is that in the absence of very powerful planning instruments in central policy the tendency to inequality is what dominates. That tendency to inequality is seen in the Community because in the years since we joined it, income levels have diverged not converged. The observations on transport policy are right and welcome.
Similarly in regard to the Ortoli Facility, there is the inclusion of energy. I will just make this one point. We are at the beginning of having an energy policy in Ireland—long overdue but welcome nonetheless. We have had disadvantages in the past but if you take the west, the disadvantaged place that Senator Staunton was talking about, there may be oil in the sea—my own conviction for some time which I have put on the record elsewhere is that there is oil there—but there is also a lot of marginal land which is useful for the production of biomass. There is also the incoming ocean current from which one can obtain both tidal and wave energy and paralleling the ocean currents there are the strong incoming winds on the west coast. So you have the possibility of wind power, tidal power, biomass power and wave power all in what is traditionally a disadvantaged area. Bringing together the Ortoli tranche, the Ortoli Facility moneys to which we will have to contribute ourselves, that interesting situation is very well worth looking at from an energy point of view. Those are the positive things.
However, there is one sentence with which I have to disagree sharply. On page 22, paragraph 41, entitled "Conclusions of the Joint Committee", the opening sentence is as follows:
One of the fundamental objectives of the EEC is to promote economic convergence by removing regional imbalances.
It is not so. It is naive, with respect to all the eminent people involved in this committee, to simply say of the EEC "One of the fundamental objectives of the European Economic Community is to promote economic convergence". It is not. What we see is economic divergence. It is a professed objective but it is not a practised objective. When you profess something for a long time and do not practise it you simply indict yourself of hypocrisy. This is what I believe the Community is doing in regard to regional policy.
Let us quantify it a little. I refer here to page 15, paragraph 30, and to the amounts of money mentioned. If we are concerned with ending regional imbalances we are concerned with wealth transfers across national boundaries. The total fund over three years is £1,725 million. Let us annualise it at a flat rate. It comes to £575 million a year. Then you apply Ireland's tranche to that, which is something over 6 per cent, and you get something over £37 million a year for Ireland. The receipts in 1979 were less than that: they were £25 million. It is not all transfer because each country contributes to the Community roughly in proportion to somewhere between its Community share of imports and its Community share of GNP so you must subtract something. Let us say we take that net £25 million and let us be kind and subtract only £3 million or £4 million. That brings it down to £22 million—net receipts of £22 million in 1979. Compared to the public capital programme it is 2.5 per cent.
That 2.5 per cent is small but you can still see it. I ask why compare it to the public capital programme? That is where the money is spent but £1 equals another £1 in the total budget-making and if you cannot spend it one place you can spend it another place or if it is spared one place you can use it in another place. The significant thing to do is to ask how big is that wealth transfer, that real wealth transfer of about £22 million under the regional fund in 1979, in relation to gross national product? It is of the order of a quarter of 1 per cent. One quarter of 1 per cent is so trivial in relation to the economic activities of a nation that all you can truthfully say about the regional fund is that it is window-dressing and that it is not even in the ball park of making a significant contribution to wealth transfer.
In 1972 we had a referendum. We were all told, and I was interested to hear Senator Staunton on the other side of the argument say so, about the great central commitment to equalise inequalities, that there was going to be tremendous wealth transfer across the national boundaries. Yet, here we are seven years later and the divergence in income in the Community nation to nation is greater than it was then and the lip-service to convergence is still peddled but we are too old to go on believing it. When the scale of the wealth transfer is a quarter of 1 per cent of GNP then that is humbug, that is hypocrisy.
Much as I am interested in the detail of what you spend it on and in the reforms of the fund, I think the clear message from this admirable study has to be to the richer countries of the Community. We should tell them "That was humbug, you conned us and now if you are serious you have to have a regional fund on a quite different scale". It is not a matter of increases of a few per cent because look what is happening. Inflation is raging on and the incoming people, the Spaniards, Portuguese and Greeks all have desperate regional problems. In that context this sort of fund is simply not serious.
I applaud the reference to inadequacy. I was interested to hear the Minister put his formal imprimatur on the statement deploring the inadequacy of the regional fund but there are inadequacies and inadequacies, and this is so inadequate in my view as to be offensive. It is so inadequate in the light of the past representations, particularly at the time of Ireland's accession negotiations, as to lay the richer, old original six member nations, who are now the richer core of the Community, open to very serious misrepresentations. When we see the sort of increases that are now discussed for the next three years, when we see the expansion on the horizon and when we see the rates of inflation, it seems to get to the stage of bad faith. I have no pleasure in saying those things. I would like to be wrong about the regional fund. I would like to see it real because it is desperately needed but at the moment it is window dressing without substance.
To argue as Senator Keating has done, that the sole measurement of the advantages to this country of membership of the European Community is to be found in the scale of the regional fund, is to apply what Senator Keating must know is a totally false test.
I have not argued that.
It is quite reconcilable with my position as chairman of the Joint Committee that I should sign a document which contains as it does complaints about the inadequacies of the regional fund and inadequacies of the organisation of the existing transport provisions and generally about the need for investment in the infrastructure of this country and, at the same time, hold the view which I do, which is that Senator Keating is wrong if he tries to imply that in relation to the benefits this country gained through membership of the Community that the six countries with whom this country entered its treaty acted in bad faith, if I understood the word that Senator Keating applied to them.
Senator Keating does not need an economic lecture from me and it is well that he does not because I could not give it to him in the few minutes that I have but he will well know from his knowledge of the history of these matters that the Community decided to have as its task the establishment of:
a common market that is progressively approximating the economic policies of member states to promote throughout the Community a harmonious development of economic activities, a continuous and balanced expansion, an increase in stability, an accelerated raising of the standard of living and closer relations between the states belong to it.
I am quoting the 1957 treaty which I got from the Library after Senator Keating's last few remarks. In the protocol to the Treaty the objective of the Irish Government was recognised. The objective was a policy of industrialisation and economic development designed to align the standards of living in Ireland to that of the other European nations, to eliminate unemployment while progressively to even out regional differences in levels of development. All I am concerned to say is simply that there is a treaty structure, there are juristic provisions entitling us, we have rights in this matter. We have, in fact, benefited. It is most unfortunate that Senator Keating did not clip off the last three or four sentences of his contribution and let it stand as it was. If he wishes directly to attack the EEC and all about it, splendid, at least we will know what he is doing. But to get up and to welcome what we have done and to come in with the voice of Jacob and the hand of Esau, is not the way he is going to get my blessing.
It is a curate's egg, excellent in parts.
An Leas-Chathaoirleach
Two Senators are offering, Senator Brugha and Senator Kilbride and Senator Mulcahy comes in to speak at 4.55 p.m. If the House is agreeable to allow the debate to run, say, two minutes over the time I do not mind.
I certainly will not take more than a couple of minutes. I should like to go on the record of the House as welcoming this report and the work that the Committee have done. I would like to make a couple of brief general comments. I do not think any of us is naive enough, and certainly I am not having been in the European Parliament, to think that the aims of the Treaty of Rome are going to be achieved and the undertakings in it are going to be carried through in a short period. I say that particularly in view of what I may describe as the strain that is developing now and will be developing further with the acceptance of new members who have a lower GNP than we have.
We have a problem here about developing the economy and about spreading that development. I think the problem that some of the European Community members are faced with is something similar to the problem of any administration here. You can go so far with your taxpayers and electors but you have got to bear in mind, as I think the Germans have to bear in mind, that it is not that easy when it comes down to what you are asking your own people to make sacrifices about. While we should be reasonably critical of the inadequacy of the regional fund we should, on the other hand, appreciate that we have got benefits since 1973 out of it that I believe we could not have got otherwise. Certainly we have in the western part of the country.
I think it is going to take a long time for the Community to develop along the lines on which we would like to see it develop. But, leaving aside the economic arguments, our own involvement in that Community is something that we should feel is an obligation because of the advantages of the Community in other areas in the matter of stability and because of the advantage that it gives to us as a very small country being involved in an area that I do not thing anyone earlier this century thought would be the case. In that sense I think that the progress report of the Committee is a useful one and it gives us an opportunity to make a couple of comments such as I have made.
I do not intend to detain the House very long on this matter. First of all, I wish to welcome the report of the Joint Committee. I think it is fair, purposeful and objective. In regard to this country and grant aid from the European Economic Community, I think we would be reasonable in saying that the country did benefit considerably from our association with the EEC. The trend of events as recently affecting our nation makes us feel the need to avail of the opportunity of grant aid to a better extent and to seek it more extensively still. Towards that end I think that the Joint Committee are purposeful in what they have set out.
I would go along with the submissions of Senator Staunton in regard to what is necessary in Ireland and where the need lies to the greatest extent. First of all, I would say that it has been generally accepted at home and in the EEC that the real need for development is in the west of Ireland. The barometer by which we might be able to accept that would be in-the context of or on the basis of the extent of emigration in the various parts of Ireland in the previous ten years. In that regard I would say that Leitrim and Longford, which is my own county, suffered most. These are the areas where aid for infrastructure is of vital importance. We should not lose sight of the fact that the real wealth of our nation is in the young people of Ireland and that the areas which they have had to abandon are the ones that require grant aid for infrastructure.
The county council in my county have schemes of very ambitious proportions and are very determined to carry them out. We are depending on borrowing form the European Investment Bank at the present time. We are not in a position to do what we thought we should do a couple of years ago because of the economic difficulties at present. I would emphasise that the Committee in the final debate and submission should be able to extend the application of grant aid in a greater measure and through the provision for infranstructure in roads, water and in the amenities for industry to an extent which would make these counties that have suffered so much in a position to retain their youth and provide employment.
I should like to thank all the Members of the House who contributed to the debate. I note the kind of things they said about the work of the committee and I express my appreciation on behalf of the chairman, Senator FitzGerald, and Senator Robinson. I want to refer to one or two points that were raised.
The question as to whether the EEC is a good or a bad thing was raised. It was defended by Senator FitzGerald and by Senator Brugha. There is no doubt that there are imbalances. It may be an indication that the regional fund system is not working as well as it should. The fact is that half the land in the EEC and 40 per cent of the population qualify for regional development fund grants. We are talking about nearly 100 million people. There are problems. That is what this report is about, to provide some data to enable people to understand these issues and make themselves felt when they get an opportunity.
I welcome what the Minister told us, that there is a new approach to be adopted. Incidentally I hope that this business of having four audits might go out the door as well. Funds sometimes do go astray, but it is hardly necessary to have four audits and all the associated visits that go with it to check on the funding. On the other hand, there was the visit of M. Jaeger from the directorate of regional development who came and discussed this report in Brussels. That kind of visit is helpful and positive.
I cannot let the occasion go without giving some extra information to help to counter what Senator Keating had to say about the value of the EEC. We do not measure the value of the EEC in terms of the regional development fund only. There was a big problem over the past six months, when Prime Minister Margaret Thatcher was dissatisfied with the UK contribution. What she was getting at, in effect, was that the UK was contributing £25 per person. My memory is that we are receiving £145 per person so that the flow to Ireland is of the order of £400 million. That is a significant proportion of the GNP. To bring it down to the amount of the regional fund——
We were discussing the regional fund——
The Senator was discussing whether it was a good thing to go into the EEC or not. Once he did that he widened the base on which he had to deal with it.
I think the Senator is misrepresenting me. I refer him to the record.
We will depend on the record then. Senator Whitaker came back at me on the borrowing. This argument between Senator Whitaker and myself will go on forever. He talked about the fact that the interest rates for guilders was different from the interest rate for deutschemarks but he did not go on to point out that what we are trying to protect against is the exchange rate. Since the EMS provides us with a more solid base for the exchange rate, then you cannot compare working within the EMS and the currencies of the EMS and the yen, for instance. My contention is that if we had borrowed in guilders we would not have lost as much, despite the fact that it would cost us a bit more because of the higher interest rates, because the exchange rates between the guilder and the IR£ did not change over a period of two years. I must put that on the record for the Senator to answer when the time comes.
An Leas-Chathaoirleach
It is a good note to finish on.
I wonder since you went a little bit over the time, would it be possible for Senator Robinson to say something?
An Leas-Chathaoirleach
It puts to Chair in a bit of a spot. The time allotted is now past.
I appreciate the offer, but I came in to listen to the end of the debate.
Question put and agreed to.
The Seanad adjourned at 5.05 p.m. until 2.30 p.m. on Wednesday 2 July 1980.