Industrial Development Bill, 1981 [Certified Money Bill]: Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time."

Minister of State at the Department of Industry, Commerce and Tourism (Mr. D. Gallagher)

Because this Bill, and the Industrial Development (No. 2) Bill both deal with changes in industrial development legislation, I propose, if the House agrees, to do as I did in the Dáil last week and cover both Bills in my speech. As I pointed out in the Dáil, the principal provision of this Bill is to raise from £750 million to £1,500 million the aggregate amount of grants and payments of a capital nature which may be made by the authority and the aggregate amount of grants which may be paid to the authority for this purpose out of moneys provided by the Oireachtas. The total amount of capital issued to the IDA at end April 1981 was almost £724 million and the authority's capital allocation for 1981 is £196 million. This new limit will permit the IDA to carry out its functions after the end of this month, for a further three to four years. I am also proposing in section 2, subsections (2) and (3) of the Bill an increase from £100 million to £125 million in the aggregate amount of loan guarantees which may be given by the IDA.

The Bill provides that the IDA may pay grants and interest subsidies, give guarantees and take equity, without prior Government approval, up to the following limits:—

(i) Total amount of grants in respect of fixed assets (purchased or leased) and the cost of factory rents for new industry, £2.5 million; (ii) Total amount of training grant, £2.0 million; (iii) Maximum loan guarantee in respect of fixed assets for new industry, £750,000; (iv) Maximum loan guarantee in respect of restructuring, £750,000; (v) Maximum loan guarantee and interest subsidy (in the aggregate) the authority may give in respect of moneys borrowed for working capital under the Enterprise Development Programme, £300,000; (vi) Maximum research and development grant, £250,000; (vii) Maximum equity participation in a particular company, £1.5 million.

These new limits take account of the erosion of money values since limits were last increased under existing legislation.

I would like to take the opportunity today to deal with two aspects of industrial policy which will play an increasingly significant role in the coming years, that is research and development, and the small industry sector.

Research and development are very important in ensuring the viability of any undertaking, small or large. Overdependence on one product or a limited range of products can make firms vulnerable to market or technological changes. The new limit of £250,000 will, I am confident, lead to a much greater number of companies undertaking research and development programmes. I would particularly enjoin Irish owned companies to maximise the use of this valuable incentive. It is in their own interest and in the long-term interest of their employees to do so. Grants up to 50 per cent of total costs of research and development are available to all companies.

While talking of research and development, it is worth while to mention two important developments in the past 12 months—the establishment of the European Research Institute of Ireland and the innovation centre for small industry.

The European Research Institute of Ireland, which is now established in Limerick, is a contract research and development service based on large scale high technology projects. The institute, a non-profit research company, will be run on strictly commercial lines. It will actively market its resources and undertake research on behalf of clients in Ireland and throughout Europe. It is aimed at accelerating research and development activity in Irish industry and it will be a major incentive in attracting high technology research and development programmes to Ireland and in developing international research and development markets.

Last July I announced the establishment of an innovation centre for small industry. This centre is currently located on the campus of the NIHE in Limerick. It will be relocated later this year in Enterprise House, which is now under construction at Castletroy, County Limerick. The function of the innovation centre is to introduce technology-based product opportunities to existing firms and to potential entrepreneurs. Though primarily focussed on the mid-west region, the centre's facilities and systems are available nationwide and companies throughout the country should not be slow in availing themselves of its services.

In 1967, the small industries programme in Ireland was launched to complement our efforts in attracting overseas firms to locate in this country. Its major objectives were to generate new small industries, particularly those promoted by Irish entrepreneurs, and to help existing industries expand. The success of this programme, and its increasing importance within the overall industrial development strategy can be measured by the fact that in 1967 projects approved under it had a job potential of something less than 400, while in 1980 the number of jobs approved was 11,500. The importance of the contribution of the small industry sector can also be gauged from the fact that in 1980 the sector accounted for approximately one-third of all job approvals.

There is need for a closer relationship between the overseas firms locating here and local small industry. Most of these overseas companies are committed to purchasing in Ireland and it is up to local small industry to meet this demand. Indeed, the IDA's Project Identification Unit, in 1980, identified by product £70 million of imported materials / components required by manufacturing industry and, as a consequence, business worth more than £11.5 million was placed with Irish companies. The result of this activity led to the setting up of 56 new projects, with potential of over 1,000 at full projection.

Another aspect of industrial development with which I would now like to deal, relates directly to the second of the two Bills before the House. To be successful in the job creation game, it is not simply a question of offering large amounts of soft money. Such a policy might have an immediate impact, but the type of investment we would get as a result could be very short-term indeed. Rather it is a question of utilising our natural advantages effectively and gearing our incentives to those areas where sound industrial and commercial growth will take place. Accordingly, any new policy for job creation, to be successful, must be formulated on the basis of the following guidelines:

—the expected direction of that future industrial and commercial development with the greatest growth potential;

—the natural advantages available to help exploit these new areas; and

—the incentives required, if any, to boost the overall effort.

Current developments in the manufacturing area, particularly in the computer sub-sector, together with changing patterns of employment in industrialised countries, indicate that the technical services sector will play an increasingly important role in the industrial and commercial life of this country. While the services sector in Ireland represents about 50 per cent of total employment, the corresponding figures in the United Kingdom, the Netherlands and the United States are 58 per cent, 62 per cent and 65 per cent respectively. Consequently, there is room for considerable growth here. More important, however, is that we have now achieved a situation, thanks to the industrial development policies of the last 20 years, whereby some of the world leaders in high technology industry have manufacturing plants here. The time is ripe for the exploitation of this manufacturing capability and for bringing it a step further.

As I pointed out in the Dáil, the growth prospects in the technical services sector are great. But missing out on this growth will not simply mean that we stand still. The sorry truth is that if we fail to build up the capability of providing technical services of the highest standards, we will soon put at risk much of our high technology industry. So it is not just a case of maximising the spin-off benefits, but also a question of protecting the manufacturing base.

The second guideline which I mentioned—natural advantages—indicates an Irish capability which did not exist 20 years ago. The two crucial aspects in the development of the services sector are skilled—in the broadest sense of the word — employees and communications. Our young people can thank us for providing them with the educational opportunities which enable them to become the best educated and most skilful generation in our history. Not that they are any more talented than any other generation—they are simply afforded better opportunities. They will not, however, thank us if we do not have the foresight to provide them with worthwhile employment in Ireland commensurate with their skills. What greater challenge do we have than to see that their ambitions are fulfilled? What more damaging course to future generations can we follow than to deny our young people the chance of working at home? Furthermore, why let others be the principal beneficiaries from the massive investment in education made in this country over the last 20 years? On the communications front, the Government's huge investment in dragging our 19th century telecommunication system into the 21st century is being pressed ahead with great speed. The result is that the two critical components of a dynamic service sector are, or are almost, in place.

The third point for analysis is the question of incentives. Lest it be thought that, as was the case with capital grants to manufacturing industry, we are "leading the way" by introducing incentives for the services industry, I should point out that competition for international mobile investment in service projects is just as intense as it is for manufacturing projects, and possibly more so, since the services sector is regarded internationally as having very strong growth potential.

While we could not hope to match the incentives being offered by richer countries, even if we wished to do so, it is necessary to provide some incentives which complement our natural advantages. When the IDA introduced their pilot programme for service industries in 1973, the incentives available were capital grants — which are not particularly appropriate or effective because of the low capital base normally associated with service industries — training grants and, in certain cases, export sales relief. As the House will be aware, export sales relief has ceased to be offered from I January, 1981. The IDA's service industry programme achieved a fair measure of success, with an annual average of 1,000 service job approvals between 1975 and 1980. Over 2,000 jobs now exist in IDA backed service industries. However, with the new incentive package which is the basis of this Bill, the Authority confidently expect annual job approvals to rise to 5,000 by 1985.

This Bill provides that the Industrial Development Authority may make employment grants available to service industries which, in their opinion, contribute significantly to regional and national development. The essential difference between an employment grant and the normal capital grant is that the payment of employment grants relates directly to job creation and not to the acquisition of fixed assets. For the initial year of the scheme, the level of employment grants has been fixed at an average of £5,000. Half of the employment grant approved will be paid when the job is created and the balance will be paid one year later on certification that the job continues to exist. A five year contingent liability period will apply to employment grants paid. The Authority will have to respect the financial ceiling relating to aids for job creation stipulated for Ireland in the Co-ordination of EEC Regional Aid Systems — which is about £9,000 per job. The average figure of £5,000 per job is estimated to be about half the annual salary cost of the type of person to be employed in an assisted service industry. The aid is, therefore, being concentrated into the first two crucial years in the development of the project. As training is a vital aspect in the development of service companies, training grants will continue to be used by the IDA as a major part of the incentive package for this sector. The use of training grants has the added advantage that 55 per cent of these grants are normally recoverable from the European Social Fund.

Before service industries can be approved for employment grant assistance by the IDA, it would be necessary for me to specify, by order, the service industries to which such grants may be paid. EEC Commission approval for the scheme is required and accordingly the necessary orders will not be made until this approval, which has been sought, is received. Furthermore, projects will have to be commercially viable, will have to have sound market growth potential and would not have been developed in the absence of employment grant assistance.

Since the object of the scheme is to create high quality employment of a professional and technical character, this will determine the service industries which will be specified by order. As about 85 per cent of job approvals in the existing but limited IDA service industry programme came from the engineering, architecture and computer services industries, these services will be specified by order and will continue to be intensively promoted. Other target sectors for the IDA will be:

— headquarter operations,

— commercial testing laboratories,

— medical care,

— contract research and development services.

This list is not exhaustive, but merely reflects initial priorities. Other worthwhile sectors can be added later on.

This Bill marks, I believe, the first step in a new phase of the development of our country. When the pioneers of industrial development in Ireland laid plans for the promotion of manufacturing industry by way of grant assistance, they had precious little else available other than, perhaps, a willing but unskilled population which tended to equate the prospect of prosperity with emigration. Given that starting point, we can see how successful our policies have been. Our starting position under this new scheme is very considerably stronger, in that we have a high technology manufacturing base, we have a highly educated young workforce and our infrastructure is rapidly being brought into line with the requirements of the international service industry world. The strides which we have made in manufacturing industry demonstrate what we are capable of achieving and I am confident that we are on the threshold of development and expansion in service industries on a scale which could not have been contemplated five years ago. This advance cannot be regarded as a luxury but as crucial to the orderly and well balanced development of our economy.

Mr. Staunton

I welcome these two Bills and I want to assure the Minister that both of them have the support of the Fine Gael Party, as they did in the debate in the Dáil. They are not controversial in any sense, in contrast to the previous debate in relation to Nítrigin Éireann Teoranta.

Essentially, there are two sections in these Bills. There is the run of the mill section relating to limits under legislation which have to be updated, the principal provision of which is apparently the raising from £750 million to £1,500 million of the aggregate amounts of grants and payments of a capital nature which may be made by the Authority. This is obviously necessary because since the end of April, apparently, the IDA had expended £724 million under a legislative limit of £750 million, with capital allocated for this years running into practically £200 million. It is completely accepted that this new limit should run from three to four years without the necessity of the Minister in some Government—it may not be this one—coming into this House again. The other sections, again, are run of the mill. Loan guarantees being increased from £100 million to £125 million is acceptable. On total grant in fixed assets to an individual company, the limit having been £1.25 million under the IDA Act 1978, the proposed increase to £2.5 million is acceptable, the clear reason being escalating costs of capital equipment. Much of the business of the Cabinet may have been taken up in giving the necessary approval in this area, because the limit was unrealistic in this age of rampant inflation. The training grants limit increase is acceptable. The loan guarantees rates increase from £½ million to £¾ million is acceptable.

There is not much, in that sense, that we can contribute to the debate in so far as these matters are concerned and we are in agreement. The loan guarantees under the enterprise development programmes, the increase of £300,000 and the research development section, and the question of ITAX, for the same kind of reasons that relate to the maximum capital grant for a company are acceptable.

The interesting part of these two Bills is not so much the run of the mill matters to which I refer but the question of the speech of the Minister of State who was with us and the speech which the Minister, Deputy O'Malley, made in the Dáil and his approach to where our industry is going. There are just one or two points which I would like to make. I agree completely with the innovation of the very important commitment to help the service sector. My already recorded criticism is simply that this, and the previous Government, did not do this many years ago. For a great many years Governments in other countries have been chasing after major corporations which had the potential to expand in the service sector, which is quite unrelated to industry and has nothing to do with manufacturing industry, capital investment or fixed assets, but which has to do rather with technology, with personal skills, with human development.

With the recent development in technical education in the regional and technical colleges and the National Institute of Technical Education, it is quite obvious that we have the skills. Because we use English, an international language, and are a base between Europe and North America and for all kinds of reasons, it is an extremely interesting sector in which major developments of a startling nature can occur'. It is true that other countries had been offering incentives in this field before this, which we had not been doing to any great extent. I approve completely of this introduction.

The other point that I would like to make about this service sector has to do with population. The country is appalled at much of what is happening in Dublin today. There is rampant rapid development and an increase in population which the infrastructure is not able for in all kinds of ways, with roads and telecommunications clogged up and all that goes with them. In this city a huge proportion of people are working in this sector in which we are now going to encourage further developments and investment from outside. There will be a normal gravitation to service jobs, as opposed to manufacturing industry which might have a more regional base for other reasons, to our major cities. The only caveat I would put on the thinking of the Industrial Development Authority in so far as this service sector is concerned, is that if the Government, through the IDA, are going to give grants to this sector, which I applaud, the danger is that unless there is some thought given to a regional basis for this grant aid, and if it is going to be done, for example, on the basis that the company coming in automatically get so much per job, which is what we are talking about here, a limit of £5,000 per job, and if automatically a company could choose to come into this city to do that, the danger is that undesirable developments could happen because you could get this rolling effect of a further escalation of the problems of this city without the provinces being given the opportunity to get into the question of balance. I accept that in many of these service sectors we are talking about an area where a measure of sophistication is involved and it may very well be difficult to get them to go to very small towns or villages or to places that are isolated, but in the provinces we have the cities of Cork, Waterford, Limerick and Galway, for example. A mistake will be made unless the Authority make some attempt to load the incentives to a degree in favour of the companies we are attracting getting out of this town and into the provinces.

The Minister was thinking aloud in his Bill about the industrial development of this country, the past record and the present circumstances and the number of jobs which it is proposed should be created. I suppose I can afford myself the same luxury.

The only other singular issue I should like to mention is the question of energy. It is a matter about which I have had some personal experience in the past year or so. One of the critical factors today in everything that is happening is energy. Some industries are going to the wall because of the escalating costs of energy, for example, the grassmeal industry and industries other than State companies which are prepared to use taxpayers' money to bail them out. The grassmeal industry has gone to the wall because of the cost of fuel used to dehydrate the four or five tons of wet grass necessary to produce one ton of grass meal. Equally, other energy-intensive companies are in critical circumstances at this time.

The only point I want to make in relation to energy is that without ever talking about oil or about coal we have in the bogs of this country an energy resource which, independent of the importation of oil or coal, could float this country for 40 years in terms of all of its energy needs. Of course that is not going to happen. But the basic point I want to make in so far as the Industrial Development Authority are concerned is that there are new methods of using peat. There are methods of burning milled peat in its raw state, without going through a manufacturing process, in boilers and furnaces for the purpose of fuelling industry. There are other manufacturing products from peat such as pellets and other items.

There is a very strong case for a move to be made by the Industrial Development Authority to push outside this country to attract energy-intensive industries to come here on the basis that we have a native resource in these bogs. In France and in other countries I know of companies that are located alongside bogs where they have their resource at first cost, without even going through the manufacturing process, being fed in to fuel these industries, which establishes a kind of viability in an energy-shortage age which is very significant and which can lead to major developments. Very interestingly, nationally as well, it is an exciting idea, because where this country is concerned and where energy is the critical issue, the energy of which I am speaking is in the parts of this country which successive Governments have found it hardest of all to develop in the sense that we have this midland belt which is tending to have a lesser level of industrial development than have much of the east and some of the west of the country. Yet we have this resource energy in this midland area. In many parts of the west of Ireland there is blanket bog — from Kerry down to West Cork and which, again, is an energy base.

It is time, in terms of this energy, to question to a degree what we are doing with this resource in the sense that in a previous age it was very sensible to develop it for electricity generation. In a previous age one could hardly get rid of peat by giving it away. But the coin has turned full circle and today the peat is at a premium because it is a fundamental energy. The generation of electricity today, many people would argue, can more rationally be done by major plants such as the one being built on the Shannon with the importation in bulk of coal at reasonable prices and that is what electricity generation should be doing. It is not altogether in the national interest that where the production of milled peat in Irish bogs is concerned, as much as about 80 per cent of that valuable fuel resource, which can be used indigenously alongside the bog for industry or for domestic fuel, is going into the power station to generate electricity. There is a national issue here.

Again, a Leas-Chathaoirleach, you have been very generous and have allowed me to go a little wide of the brief. The issue in so far as the IDA are concerned is that there is this resource and these new methods of using it and it is an issue which can be capitalised on outside this country to attract energy-intensive industries which would be absolutely viable in those very parts of the country in which we are trying to stimulate development. I particularly welcome the service sector of the Bill and I would greatly appreciate if the Minister of State would convey my remarks about the problems with which I am sure he will personally be very much in sympathy.

Ruairí Brugha

I should like to welcome these two Bills and the Minister's comments on them. It is refreshing, following the debate on the last Bill on the difficulties of NET, to be listening to the details spelled out by the Minister of the successful development in the work of the Industrial Development Authority. Indeed that authority, who are, of course, a State body but not a profit-making one, have a very good success record. It is not necessary to stress the emphasis the Minister places on the creation of jobs in the services industry having regard to the need for jobs for young people. The Industrial Development Authority are to be complimented on the results arising from their project identification unit which identified products being imported and which subsequently created fresh business, creating an additional 1,000 jobs. The difference which the Minister mentions between the percentage ratio of those employed in the services industry is very interesting. In Ireland it is 50 per cent whereas in the United States and elsewhere it varies from 58 to 65 per cent. This probbly relates to the sophistication of the respective economies, but it does indicate prospects of a greater job potential in these service industries here.

I would agree with the comment made on the regional basis by the preceding Senator. As we know, on the regional basis for allocating grants, prior to 1972 there was an exclusion of grants within the metropolitan area. In the case of service industries there is a difference as I see it as against major industries. The problem that the Industrial Development Authority have always had is to get the industry to site in Ireland, anywhere in the State. Therefore the authority were up against the difficulty that if a major manufacturing industry wanted to site in a particular area, it was better to have it sited there than not to have it at all. In the case of service industries, they are being created as a result of the major industries and therefore they are going to be here anyway. Therefore the Minister might consider the question of whether it would be permissible and justifiable to identify areas other than major industrial areas in the context of the grant aspect for the creation of new jobs in service industries. I welcome the two Bills and again congratulate the Industrial Development Authority on their success.

Mr. Harte

I welcome the two Bills and particularly I am interested in seeing the development of the services side of the authority. This is a very essential step. Any effort to assist the development of the economy must be welcomed, particularly so when we are faced with a very serious unemployment situation. In dealing with the question of the IDA and the moneys that go towards them, we must hold out hope to the many thousands of young people who are to come on to unemployment as well as to those at present on the register and to the many people who have suffered because of redudancies. What we have here is a hope situation, and therefore it must be welcomed.

Having said that, I wonder if it is possible to engage in a total analysis of what might be the real job creation or what might be the cost of the creation of each job. I say this in the context of making an argument against the IDA, because without the full facts I would not attempt to do it, but at the same time it would be no harm if we talked about the matter a little. I should like to mention, for example, the sort of situation in the west where prior to Wranglers being there and prior to their having decided to pull out, other people were in occupation of that factory premises. So far as I can recollect, at least on two other occasions other people were in occupation there and were there with the assistance of IDA. Again, here we have a situation where Wranglers have decided to pull out and where the assistance of the IDA is going to be invoked. Somebody who works in the factory, who has first-hand knowledge of this development says that the workers have been trained twice or three times and are now about to be retrained again for some other sort of industry. Someone like myself, an ordinary Joe, looking at things from the outside, is entitled to be a little sceptical as to whether it is possible for the IDA in their present state and with their present policies to create jobs that are really secure.

I do not take the example of the Wranglers in isolation. There are examples elsewhere. One swallow does not make a summer but from the point of view of the ordinary man in the street, it is difficult to understand the whole situation whereby the IDA create a certain number of jobs but because people decide to pull out the Authority are called in again and create the same number of jobs in the same plant and so it continues. This is why I speak of a full detailed analysis of exactly what value are we getting out of the money invested and what is the cost of the jobs that we can call secure jobs arising out of the investments that we make. A factory worker would be justified in being sceptical about the whole thing.

While I say that and while I say that it points to a lack of confidence by the actual incumbents of the factories that have closed down, I am not making the case of over all failure and I would not like to go on the record as such. I am, however, making the case that I have to be convinced that excessive dependence on foreign investment or foreign development by private enterprise is the answer to the question of full employment. I have said this, and people will probably say that I am on my hobby horse again, but I make no apologies for that. I say it out of a life of experience. I did not get it out of books or anywhere else, but I still clearly believe that private enterprise cannot provide the answer to the question of full employment. I do, however, submit that it can provide half of the answer, and despite the reservations by the Government and possibly by some of my associates in Fine Gael who might have reservations about my views in this regard, I believe that there is no way in which it can provide the full answer, and for that reason I believe that public enterprise must provide the other half. I can say this with all sincerity and make no apologies for it. I will repeat it over and over again because no one has been able to prove to me that the private enterprise system since the setting up of the State in Ireland has been capable of creating full employment. The State in these circumstances must in my view be taken out of the supportive role and play a more effective role.

Since I am anxious to see the Bill passed I do not propose to develop this line of argument but given the opportunity on another occasion I will go deeper into the matter. I propose to do that because it is a question which needs to be tackled on every occasion possible. Perhaps many of us are afraid to face up to it. However, I know the Minister himself has been through some very difficult situations with State-sponsored bodies and State enterprises and that, consequently, he may be cynical about my remark that private enterprise only provides half of the answers and that the State will have to be taken out of its supportive role and provide the other half.

I really believe that there is an emergence of new attitudes towards the role and purpose of public enterprise and the creation of new institutions such as a State development corporation. I talk about a State development corporation, not in the shape of the recent announcement in accordance with the national understanding but in the sense of something on the lines of what is in existence in Sweden — a kind of national planning commission. I also say it in the context of a mixed economy. If we think about this matter very seriously we must not be afraid to admit that private enterprise does not provide the cure for all our ills. This development towards taking the State out of the supportive role can strike the balance between the private and public sectors and can head us more in the direction of creating full employment. I am not — and I would like to make this quite clear — denigrating the IDA's central policy and I am certainly not proposing that it be abandoned. I am merely asking whether the liberal market economy works and provides the jobs that are necessary. The only answer that I can give to that from my own life and family experience is that this sort of market does not provide the answer.

We have, even now in this day and age, a population explosion. We have no longer the safety valve of emigration which we had when we had a does of unemployment anyway. We must begin to realise that there is a massive challenge to manufacturing industry. The number of jobs needed to be created is well outside the capacity of the IDA central policy, which is based on private enterprise, to deliver. They cannot do it. They cannot cope with the creation of about 32,000 jobs a year having regard to the fact that they will also be working against job losses through closures and so on. I do not think they can go it alone. I am not advocating socialist planning in the old fashioned way as being the panacea to all our ills. I am making a serious and genuine plea for an acceptance of the fact that when the plan of over-dependence on the private sector to do the job of creating full employment has been found not to work, we must make changes. I referred here before to the whole question of the sixties when we had wonderful wages. That was the best decade we have ever had in the context of incomes. It was also the best period of manufacturing output, but at the end of the decade there was not one extra person at work. I am not going to go right over it again. I welcome the Bill and I hope it goes through quickly.

There is another point I should like to make, through the agriculturists may not agree with me. Agriculture is a very important part of the economy. We have all benefited greatly from it and many industries have grown from this industry. However, what has to be recognised nowadays is that our manufacturing exports exceed what comes out of agriculture so that the tide is changing and we now have to have a new look at the situation. I would make that plea, not on the basis of a confrontation or of an ideology, but on the basis that I do not believe that you can actually develop to full employment on the basis of mere dependence on the private enterprise system.

Perhaps there are great arguments against some of the State industries, in particular the services industry, but I do not think that we have gone into the area of the State manufacturing side of it and what the potential is in that area. We are inclined to be afraid to risk it because I suppose when one looks back in history and looks at the whole question of Irish attitudes and when we go back to the question of the fellow years ago who took pride in really owning his own ditch, that attitude is still with us. But many countries are like that and they had to break away from it and finally find their way forward. We must have a mixed economy if we are to be successful.

Dr. Whitaker

After our somewhat distasteful and disheartening discussion earlier this afternoon on the affairs of NET, it is welcome and refreshing to be able to move to the top of the merit scale for State organisations and to welcome the provision by way of these two Bills of further finance and further scope for the operations of the IDA. I regard the IDA as the most important development agency we have and also as an organisation which has been remarkably successful and efficient in performing a genuine and urgent national function, that of creating jobs. It has been successful even against a difficult background both externally and internally — an external background of world recession, high energy costs, growing competition from developing countries in areas in which we were already engaged, like textiles, footwear, metal fabrication and so on; difficulties on the home front, especially the relatively high rate of cost inflation we have been suffering here in recent times. That relatively high rate of inflation has been the major factor in causing the disheartening situation of very heavy job losses, to which Senator Harte has just referred.

One point I would like to make is about the magnitude of the problem the IDA, indeed the Government, face in trying to create anything approaching full employment here. A good measure of this is the calculation by the ESRI that it would need twice the rate of increase in manufacturing output over the period 1973 to 1980 to reach full employment within any reasonable period of years. That being so, and considering all the difficulties we still have to overcome, I think it is appropriate that the IDA should move into the services field and try to supplement their employment creation on the manufacturing front.

The Minister did not mention, and I think it is perhaps relevant to the question that Senator Harte raised as to the utility of the finance that is being provided through the IDA, that under the auspices of the National Economic and Social Council a very far-reaching study is in progress at present into our industrial development policy. Naturally, that will cover the basic question whether the way we have been proceeding is the right one and whether the results are commensurate with the effort and the money we have put into achieving them. I suspect that one of the things that will be found is that rather too much of our success has been in sheltered industry and sheltered services and that if we really want to gear ourselves to wider markets than the domestic market we will have to give more attention to breaking into the open market sector both in manufacturing and in services.

I would not care to follow Senator Harte in any discussion of ideologies. I am not committed to one or the other, but I think it is only fair to say that the difficulties in the world today are not confined to private enterprise economies or even to mixed economies. They extend even to the completely centralised collectivist economies. It is remarkable fact that all over the COMECON countries, as the whole range of eastern bloc countries is called, the growth rate has slowed down virtually to nil. Even in Russia the growth rate only matches the population growth and there is a static situation. I would not think that, from experience, there is any reason to believe that progress would be faster or that our difficulties would disappear under a different kind of direction of the economy.

That brings me to the final point I would like to make. If we really want to help the creation of jobs, and help the IDA, we will not do it just by grants alone. We will have to give them a helping hand by trying to create an economic climate here at home favourable to the expansion of industry and services. We do not have that when our inflation rate is so high. So a basic requirement of any progress is that we move towards reducing our rate of inflation. It is the high rate of inflation, as I said a moment ago, which is causing so many of the industries — hard won here — to pull out again. I know many more are in danger. Unless we do something to bring our rate of inflation down closer into line with that on the European continent we face a great risk of job loss, and that would make the task of the IDA virtually an impossible one. Reference has been made to the asset we have in a more youthful, better educated, more skilled population. That is undoubtedly a great asset, but we must contrive to use it by moving up the scale, advancing in technology, being more export-orientated, and adding more value in the production process at home so that we will retain jobs here and that those jobs will be better paid jobs because they are based on higher productivity.

Mr. McDonald

I think it important that every opportunity should be availed of to pay a tribute to the work and the contribution of the IDA consistently over the years to the industrialisation of our country or the greater portion of it. I welcome these Bills, which one could say update existing measures and lay greater emphasis on the desirability of supporting smaller industry, particularly the services industry. This, of course, has to be welcomed.

For a long time I have subscribed to the view that we need a very mixed kind of industrialisation in this country and I stated this originally on a local industrial development committee. That committee had high hopes of attracting a huge international or multinational concern to the town, and I think they wasted many years with those high ideas. I welcome the IDA's policy of cluster factories, support the Irish entrepreneur, the small man with the ideas, and give him a chance. Some may think that the employment of ten or 12 persons is very small, but nevertheless I think that those kind of industries very seldom go to the wall because everyone involved has a great interest in the enterprises. Also, in a small concern all must pull their weight. Therefore, I am glad that the IDA are giving greater support to the small industry section, and credit is due to the personnel in the IDA for that but that is not to take from the splendid work of the IDA as a whole.

I should like to refer to an old hobbyhorse of mine — my experience in regional development. In the years when I was president of the commission dealing with regional development I visited every region in the Community. Many of the member states have a system of enabling grants to ensure that small industries have the opportunity to avail of every possible European fund that is available.

I should like to cite the situation here where so many people are debarred from benefiting from the FEOGA grants systems because there was no system up to now whereby the IDA would give a small IDA grant of at least three per cent. This would put small entrepreneurs in a position to benefit from a 25 per cent FEOGA grant, especially in respect of agricultural-based industries whether it be meat processing, the utilisation of whole milk or milk processing. I have been pressing the IDA and the Minister for a number of years to take another look at this situation. There is certainly a market in the midlands for industrious, progressive and hard-working farmers and even co-operatives — two or three farmers getting together — to process their own milk, to make yoghourt and prepare small bottles or cartons of milk for schools. The Commissioner for Agriculture is anxious that more whole milk should be used on the local markets. If the packaging and the support are made available we would be doing the common agricultural policy a service by encouraging greater usage of those agricultural products on the home market. This is necessary.

The range of industrial activities that I am speaking about is the agricultural-based service industries or processing industries. They cover not only milk, beet and grain but the entire range of commodities that would come under the FEOGA grants scheme. I appeal again to the Minister to look at that aspect. Business people and farmers who have ideas, energy and skill and who are setting up these small industries should be given the benefit of a 25 per cent FEOGA grant to which they are entitled by law under the common agricultural policy. I do not know why the IDA persist with their present policy in this matter. I hope there will be a change of heart in this direction.

As Senator Harte said, the job of creating employment in this country at the present time cannot be left to either the private sector or the public sector. It is a job that everyone should be encouraged to participate in. There should be greater co-operation between the Departments and the semi-State bodies in assisting in the creation of jobs. I had occasion — out of sheer frustration — to write to a number of Ministers last year when there was the prospect of getting 50 or 60 jobs in a plant in the midlands. Because of the nature of their business, the company required a telex and eight telephone lines. I wrote to the Ministers for Energy, Industry and Commerce and Posts and Telegraphs in this connection but it was not possible to provide a telephone and a telex for a company who were establishing at a cost of several million pounds in a midland town. The company had to wait for six or seven months before they could start business even thought the plant was ready to roll. There is no excuse for this sort of thing. Eventually the company got four telephone lines as a great concession; they could have either four telephone lines or three telephone lines and one telex line. Perhaps there is something wrong with the service, but when one picks up the newspapers one reads that the Minister for Posts and Telegraphs is saying that 1,000 new telex lines are being installed and that people can get them almost on demand. It must be very infuriating for people who require the service and who experience such great difficulty in getting it.

At present there is certainly a great shortage of job opportunities and there are many people chasing too few jobs. If the private sector is to be expected to play a greater role in job creation, the old-fashioned concept of a profit at the end of the year must come back a little stronger into the economic thinking. While the semi-State organisations, or perhaps the Government Departments, are not concerned with making a profit and do not seem to be terribly worried about meeting and staying within economic guidelines, the private sector must certainly do so and cannot survive without the element of profit. This is something which the whole country must realise. As far as the export markets are concerned, we must present our goods at a competitive price and we must also ensure that there is a profit for the producer. We must get back to this as a basic first step before we embark on greater industrialisation.

We have to make up our minds on whether we are going to encourage into the country enterprises that may be looked upon as dirty industries. We cannot have it both ways: we have to weigh up the overall benefits between employment and industries that cause inconvenience. This is an area where our planners come in. When the IDA are acquiring or purchasing sites for industrial development, they should have regard to the location and suitability of the site vis-ávis proximity to residential areas. I sometimes get annoyed with the IDA when I see them moving in to develop a site and bringing in not only the personnel to develop it but also all the materials, even though the same materials may be manufactured only a few hundred yards away from the site itself. The IDA should have regard to the high cost of fuel and transportation which should be included in their accounts. When there was development of an industrial site in Portlaoise everything from the personnel to the cement blocks and the kerbs was imported into the country, even though everything the IDA wanted for that site was manufactured in the country. That was unacceptable, unnecessary and unfair to the population of Portlaoise.

While I wish in supporting these Bills to support the IDA in their continuing efforts to provide more job opportunities in this country, I believe they should have a more flexible policy when they come to look at an industry they may have earmarked as being on the decline, for instance, the shoe industry. It may be having difficulties in some locations, but nevertheless the total number of shoes manufactured here does not go near the numbers that are imported and are necessary to meet the trade demand. I would hope that in cases like this the IDA would look very sympathetically at applications from Irish entrepreneurs who are able to produce both for the home and export markets even if it is in an industry that the IDA may consider to be in grave difficulties. Every individual who has an idea, a skill or a product which he feels he can produce profitably and can sell at home and abroad is entitled to a fair crack of the whip. All people who are in business should be treated equally. I do not think the policies of the IDA should be discriminatory. Every proposal that goes before the IDA should get a fair crack of the whip and grants for job creation should be dispensed equitably.

I know the IDA take great care in vetting projects. The relatively small number of projects that fail get great publicity but I do not think the thinking person is deterred by that. The vast majority of the people in the country appreciate the work the authority puts into the task that the Oireachtas entrusted to them. However, there are individuals throughout the country who feel quite aggrieved that the IDA for some specific policy reason will not support their ideas and give them the same chance as their neighbours to compete. I hope there will be a change of heart and perhaps a change of policy in this regard.

Minister of State at the Department of Industry, Commerce and Tourism (Mr. D. Gallagher)

I should like to thank the Senators for their contributions and, in particular, I would like to thank them for their acceptance and praise of the work that has been done by the IDA in creating employment over the past number of years. I will try to deal with some points raised by the speakers.

First, I will take Senator Staunton's contribution with regard to services. He made reference to having the IDA provide the jobs on a regional basis. This is something that we will bear in mind. We will try to ensure that the services will be provided on a regional basis and this will be kept in mind in the programme of job creation by the IDA. The Senator also mentioned the use of peat and our own natural resources in relation to energy. I agree entirely with him. The Senator was too modest to tell the House that he has in a practical way demonstrated how this can be done in having peat used instead of oil in an industry which he himself has established. I have also seen where the Western Health Board have done something similar in substituting bricini for oil in the boilers in one of the institutions in my own constituency. This is a headline that can be followed by industrialists. There is advanced technology now whereby it is possible to use peat; I am sure the IDA are aware of it and that they will bear this in mind in their job creation programme and make industrialists aware of the resources we have in that respect.

Another point made by Senator Staunton related to employment grants. He stated that they would be limited to £5,000 per job. That is not correct. It is an average employment grant over a one-year period. The IDA will be able to vary the assistance according to the area in which the service project will be located.

Senator Harte mentioned the question of grants. He questioned whether we were actually getting value for money in relation to the grants paid by the IDA. In the particular instance he mentioned, the industry in Ballyhaunis where Wrangler decided to withdraw from the factory there, we are in the happy position that they have said publicly they are prepared to repay whatever State grants were given to them when they set up there. It is fair to say that there are certain anomalies in relation to closures in that very often you see people getting redundancy payments and they are employed subsequently. I do not know how one can get over that, but it is State money that is involved all the time. I do not know how they can be dealt with, but I certainly see something wrong with that kind of situation.

I would like to concur with what Senator Whitaker stated, that nationalisation of industry — and even here in our own country where we have semi-State employment — is not always entirely successful. There is a lot to be said for the system we have at the moment where a private individual with an investment will try to ensure that he gets value for his money. In the long term it is probably the best system and the one which has worked most successfully.

Senator Whitaker also referred to the recent NESC report. This was referred to in the Dáil by the Minister, Deputy O'Malley.

During that time we have seen a dramatic switch in emphasis from agriculture to industry. If we are to provide employment for our growing population we must continue to ensure growth in the industrial sector. Despite the fact that the IDA had their most successful year in 1980 with 35,600 job approvals, we are still faced with a daunting employment challenge. Because of the amount of State money involved, the time has now come for us to ask ourselves if we are getting the best possible return on our investment in industrial development and whether the policies which have served us well in the past are the most appropriate for the eighties and beyond. For this reason the Government asked the National Economic and Social Council to carry out a review of our industrial policies. This review is nearing completion and I look forward to the conclusions of the council.

The Minister and the Department are aware of the problems to be faced there and they are taking the steps they consider necessary to try to ensure that we will meet this challenge of providing as many jobs as possible for the eighties. There can be no argument about the merits of the Bills. All sectors of the community must pull their weight as best they can to try to ensure that the necessary jobs are provided for our people. There is no use having schemes provided, and the money provided by the Government and the IDA, if we do not have the full backing of every section of the community in trying to achieve our aim of full employment. Again I want to thank the Senators for their contributions.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without recommendation, received for final consideration and ordered to be returned to the Dáil.

Seanad Éireann debate - Wednesday, 20 May 1981