Industrial Development Bill, 1985: Second Stage.

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

Minister of State at the Department of Industry and Commerce (Mr. E. Collins)

Ireland's industrial development policies have been under intense scrutiny and reassessment since the late seventies. Senators will be familiar with the major report of the Telesis Consulting Group and the associated comments of the National Economic and Social Council. The Industrial Development Authority produced their own internal strategic plan in 1982 and there have been many articles and reports by industrialists, research institutes and economic commentators.

The White Paper on Industrial Policy, published in July 1984, constituted the Government's response to the debate on industrial policy and outlined a coherent and comprehensive ten year strategy for industrial development. The Industrial Development Bill, which is before the House today represents a further important stage in the progressive implementation of the new industrial policy. Moreover, the new Bill brings together, for the first time, in one comprehensive code, the existing body of legislation relating to industrial development and the IDA.

For the benefit of the House, I would like to set out the objectives of the new policy as contained in the White Paper. (i) to create and maintain the maximum number of sustainable jobs, as many as possible of them high-skilled, in manufacturing and international service industries; (ii) to maximise value-added by these sectors and to capture the wealth thus created for further investment and employment creation in the Irish economy; (iii) to develop a strong and internationally competitive industrial sector in Ireland, made up of both Irish and foreign-owned industry; (iv) to promote the more rapid development of our natural resource-based industries, particularly food and timber; (v) to promote the integration of foreign industry into the Irish economy through greater linkage with Irish industry and educational institutions; and (vi) to improve the rate of return on the Government's investment in the commercial State companies.

This new policy is being actively implemented. Before outlining the general contents of the Bill, I would like to set out for the information of the House a list of some of the new initiatives being undertaken.

The National Linkage Programme got under way in July 1985. The objective of the programme is to develop a successful subsupply industrial base in Ireland for larger industry. From its initial focus on the electronics sector, it is now being extended to health care, consumer products and engineering. In 1985 a national linkage team of experienced engineers and management and financial accountants was assembled from a number of the major state agencies. By the end of 1985, 45 electronics multinationals were involved in the programme and the target for 1986 is to place £40 million worth of business contracts with Irish suppliers.

The company development approach involves the IDA, the IIRS and Córas Tráchtála working closely with selected companies to help them to identify and implement strategic development initiatives. The programme is designed primarily to encourage indigenous companies to develop to a point where they are capable of developing their own R & D programmes and achieving a strong international marketing position. Fifty-six company development programmes were approved by the IDA during 1985, bringing to over 100 the number of companies which have finalised development plans since the programme commenced. Already many of the strategic initiatives identified by companies under the programme are being implemented. The operating target for 1986 is that a further 50 companies will be covered under the company development programme.

The regionalisation of IDA's small industries programme was successfully completed during 1985. A full service to entrepreneurs is now available from the IDA offices in the regions except in the case of the mid-west and Gaeltacht areas, where this service is provided by Shannon Development and Údarás na Gaeltachta. The administration of the small industries programme, including decision-making on grant applications, now rests with the regional small industry boards supported by 130 IDA staff at regional level.

I believe that there is great potential in Ireland for developing small industries and in recent weeks a number of project and employment announcements have been made by the Minister for Industry and Commerce which highlight the continued progress we are making in this area. A total of 735 small industry projects were approved for IDA support in 1985, an increase of almost a quarter on the figure for the previous year. In the mid-west area covered by Shannon Development 164 small industry projects with a job potential of over 1,500 were approved in 1985.

A nationwide network of "One-Stop-Shops" was launched in April 1985 where entrepreneurs will be able to obtain information and advice on all aspects of setting up and running a business. Initially these centres are operating as an information and research service giving details of all State services to small firms. The second phase is more ambitious and more important and when completed will result in all the major industrial agencies in the regions either being located under one roof or providing services to the "One-Stop-Shops" on a visiting or clinic basis.

A number of new marketing initiatives to assist exporters have been introduced by Córas Tráchtála. The most innovative of these schemes is the Market Entry and Development Programme which is designed specifically to help exporters with the various expenses incurred in breaking into new markets. The other schemes deal with (i) building marketing strengths within firms; (ii) market research proposals; and (iii) design and product development proposals. In aggressively implementing these schemes Córas Tráchtála are focussing on the need to develop a market-led approach by our industries. This implies a precise identification of consumer needs and putting in place a strategy to meet them in the areas of design, quality, pricing and after-sales service.

The business development scheme, under which qualifying investors in unquoted manufacturing companies are permitted to write-off up to £25,000 per year against income tax, is designed to increase the flow of equity funds to industry. The scheme has been improved since its introduction in 1984 and has raised over £5 million in new investment up to the end of the last tax year. Its attractiveness has been further enhanced with the introduction by the Stock Exchange of the new smaller companies market this year. Moreover, this year's Finance Bill includes important new tax-based incentives for research and development and for private investment share-ownership in industry.

The National Development Corporation Act was recently passed by the Oireachtas and the corporation will soon be in operation. The corporation is a further vehicle for State involvement in, and the promotion of, industrial development. The NDC's principal objective will be to invest in viable projects to assist in the maximum level of job creation. Arrangements will be put in place to ensure that there is no overlap or duplication of functions with the IDA.

A Management Committee on Industrial policy has been established to ensure the prompt and effective implementation of the White Paper policies. This committee, under the chairmanship of the Secretary of my Department is comprised of representatives of the main industrial development State agencies. At their regular meetings to date they have reviewed progress reports and submissions from the agencies and have ensured a co-ordinated approach to industrial progress from all the relevant State interests.

These, then, are some of the new initiatives arising from the White Paper. I will refer to some other new measures in the context of the Bill before us here today.

During the debate in the Dáil, there was an understandable emphasis by Deputies on the need to enhance the employment impact from industrial development. This is, of course, recognised in the White Paper, which set an ambitious target of an average net increase of 3,000 to 6,000 jobs per year in manufacturing industries over the period 1984-94. These targets are based on a doubling of industrial output over the period. We will be striving for even better results now because of the more favourable macroeconomic situation. While to some the employment targets may appear to be modest, in the Government's view it would have been dishonest to set higher targets simply in order to make them more politically palatable.

I am conscious that in trying to increase direct employment in manufacturing, we will have to achieve results which are in stark contrast with the trend in other western European countries. Reductions in manufacturing employment are arising in most developed countries from the continuing advances in technology, improving productivity and the decline of certain traditional sectors.

These trends should only reinforce us in our efforts to maximise the direct and indirect employment spin-off from industrial development. I am glad to say that the central focus of the IDA in 1986 will be to get a better employment and value-added performance from the existing industrial sector and every encouragement and feasible resource backing will be given to initiatives involving significant or quantum leaps in terms of direct or indirect job impact. Industrial policy is not employment policy, although it is an important component of it. Our unemployment position must be tackled on a broader front as set out in the Government's national plan Building on Reality.

I would now like to turn to the contents of the Bill. As I said earlier, the opportunity is being availed of to consolidate all existing industrial development legislation into a single comprehensive code. The Bill will, therefore, repeal and reenact with amendments the Industrial Development Authority Act, 1950, the Industrial Development Acts, 1969 to 1981, the Undeveloped Areas Acts, 1952 to 1969, and the Industrial Grants Acts, 1959 to 1969, deleting provisions which are no longer appropriate.

Following detailed reviews of the structure and administration of incentives for industry in Ireland, the Industrial Development Act, 1969, resulted in the formation of the Industrial Development Authority in their present form.

Established in 1970, the new Authority were given power to offer a wider range of incentives to indigenous and overseas industry. Their new package of incentives and services to industry incorporated grants towards the capital cost of new industrial projects, re-equipment grants to assist industry to adapt to free trade conditions, special grant assistance geared towards the development of small industries, training grants, interest subsidies, loan guarantees, equity shareholding, R and D grants, the development of industrial estates and the construction of advance factories.

I believe that the Industrial Development Authority have served us well since their formation. Their flexibility and efficiency in encouraging industrial development has been remarkable and is the envy of may countries. The redefinition of IDA's role in section 11 of the new Bill will ensure that the IDA will be enabled to continue and extend their work into the future.

The primary role of the Industrial Development Authority is to act under the Minister as a body having national responsibility for the implementation of industrial development policies. In the exercise of their functions they act in accordance with policies set out for them from time to time by the Minister. The Industrial Development Authority, together with the other agencies involved in industrial development, such as the IIRS and Córas Tráchtála, will have executive responsibility for the implementation of industrial policies.

Provision is being made under section 4 of the Bill to allow the Minister to make a more flexible use of designation for industrial grants purposes. As Senators are aware, this is the system under which certain areas of the country are designated as eligible for a higher rate of fixed asset grant. As no objective or systematic review or designation had taken place since it was first introduced in 1952 the former Minister, Deputy John Bruton, requested the National Economic and Social Council to prepare an independent and objective review of the use of designation as a flexible policy instrument.

The council published their report in December 1985, recommending objective criteria, based on labour market imbalances, to determine designated status on a needs basis for the future. Following receipt of the NESC report, the Economic and Social Research Institute were commissioned by my Department to advise on the implications of implementing the NESC recommendations to enable the Government to consider the matter further. This report has been received recently and is being examined. I should stress, however, that no decisions have been taken as yet on any changes in the designated areas.

To ensure that industrial policy evolves in an orderly and planned manner and that Members of the Houses of the Oireachtas are made aware of the costs and benefits of industrial policy at regular intervals, the Bill includes in section 6 a new provision for a review of national industrial performance every three years. These triennial reviews and the conclusions arising from such reviews will be laid before each House of the Oireachtas. This is an important provision as I believe that Government policy in an ever-changing sector such as industry needs to be dynamic and constantly fine-tuned to maximising new opportunities and technical developments. In fact, a policy review of developments since publication of the White Paper is already underway within my Department. The review group are addressing a number of important issues, such as how direct employment can be maximised from the industrial sector and what further steps can be taken to develop indigenous industry. The results of the review will be available before the end of 1986.

The Bill for the first time will provide, in section 13, for the issue of directives of a general policy nature to the Authority, subject to a number of safeguards. Such directives shall not apply to any individual industrial undertaking or to the location of an industry other than as part of a general review of industrial policy for the country as a whole. Copies of all directives given by the Minister under this section must be laid before each House of the Oireachtas within 21 days.

Section 21 of the Bill sets out the new selectivity criteria under which the Authority will provide grant assistance to industry in respect of fixed assets. These criteria will also apply to leasing grants, rent subsidy grants, loan guarantees, interest subsidies in relation to fixed assets, training grants, the new technology acquisition grants, the incentives for enterprise development and equity participation. Other grants programmes, such as research and development, international services and the incentives in respect of restructuring of industry, will remain subject to their existing criteria.

The new grant criteria were outlined in the White Paper and will be substituted for the criteria set out in the two-tier grant system in sections 33 and 34 of the Industrial Development Act, 1969. The new criteria overlap with the old as regards the necessity for financial assistance, the permanence and viability of the firm, the provision of employment, use of natural resources and technological content. There will be no change in the maximum rate of grant which may be made, which will remain at 60 per cent in the designated areas and 45 per cent in the non-designated areas. However, the average level of fixed asset grants will be gradually reduced so that savings may be applied to technology acquisition grants and the new marketing initiatives.

This is quite important because the White Paper on Industrial Policy clearly envisages a shift in resources from fixed assets to technology acquisition and marketing, and this reduction must be made to effect that shift. In addition, the new selectivity criteria will focus on the need to develop and increase linkages between overseas and indigenous industry and in particular the development of import substitution projects and export markets. Employment creation and maintenance, in addition to the new emphasis on output growth and generation of value-added within the economy, will continue to be the main focus of State assistance to industry.

The conclusion in the White Paper on Industrial Policy was that grant assistance should be directed to remedying perceived weaknesses in Irish industry in the areas of marketing, management, research and development and innovation. Companies approved for grant assistance will, therefore, have to demonstrate that they will comply with the new criteria, have suitable company development plans and also that the equity base-financial structure of the company is adequate.

An important amendment to section 21 of the Bill was passed in the Dáil which will allow new arrangements to be introduced in respect of industrial development grants for small industry. The new system allows promoters of new small industry projects, at their discretion, to avail of employment grants as an alternative to grants towards the cost of machinery and buildings. The result will be to encourage more small industry start-ups. A promoter will now have the option of using employment grants to acquire modern second-hand equipment which would not qualify for capital grants. This will be of particular benefit to industries such as clothing and engineering where there is excellent second-hand equipment available at present.

The Bill also makes a number of changes in the IDA's R and D grant programme. Under section 29, costs eligible for assistance in future will include the salaries and wages and travel and subsistence expenses of those engaged on the project or in identifying product or process development opportunities within the company. Secondly, in order to encourage the smaller industrial undertaking to make greater use of the R and D grants, it is proposed to allow the Authority to make advance payments of up to one-third of an R and D grant to small industry.

It is now recognised that small companies are often more innovative than the larger companies, yet at the same time do not have the financial resources available to devote to a concerted and systematic research and development effort. This new provision will assist the smaller undertaking involved in research and development and considerably ease their cashflow and working capital requirements.

It is now generally accepted that we can no longer rely exclusively on overseas investment as a means of improving the level of technology in Irish industry. The White Paper on Industrial Policy stated that the IDA would be empowered to give grants not exceeding 50 per cent towards the costs of acquiring new product or process technology. Section 30 of this Bill will enable the IDA to give such grants and sets out the costs which will be eligible for grant assistance. Product or process technology for the purpose of grant assistance will include patents, designs, trade marks, trade secrets, copyright and proprietary and non-proprietary know-how.

A number of other minor technical or general amendments have been made in regard to grant schemes, incentives and equity participation powers of the Authority, the Government's powers in regard to grants, the period of appointment of, disqualification of and declaration of interest by Authority members, and the delegation of functions to boards and committees. It is also proposed that a new limit of £700 million be set on the total expenditure by the Industrial Development Authority as from the coming into force of the new Bill. This will enable the Authority to carry out their functions for a further three to four years and will allow the Oireachtas to review the operations of the IDA at that stage. I will be happy to elaborate further on Committee Stage on these provisions, which are primarily of a regulatory or controlling nature or are designed to make explicit, provisions which are already implicit in the existing industrial development legislation.

A number of provisions in the old legislation are not being re-enacted, including the IDA's re-equipment grant scheme, which was of special significance during the seventies in the modernisation of industry to assist it to operate in free market conditions. During the decade over £450 million was approved for Irish industries under the programme. The programme helped Irish firms to adapt to the free trade conditions brought about by the Anglo-Irish Free Trade Area Agreement and Ireland's subsequent entry to the European Communities.

The programme was phased out in the early eighties and ceased in 1982. The Industrial Development Bill repeals these provisions permanently on the basis that they have served their purpose and continuation of the measure could no longer be justified.

Similar considerations apply in regard to the IDA's powers to provide and arrange housing for employees in industry. I am satisfied that it is no longer appropriate that the IDA should retain this power which is more appropriate to the local authorities, the National Building Agency and the private sector.

I would like to conclude by making some general remarks on the outlook for 1986. The growth in manufacturing output and exports is expected to continue. Investment by industry is expected to continue at a high level, resulting in the creation of 12,000 new jobs in IDA-backed firms in 1986. I expect this development will be encouraged by the continuing fall in inflation, the reduction in the price of oil and favourable currency exchange movements.

The ESRI publication, Medium-term Outlook: 1986 — 1990, published some weeks ago, predicts that total employment in the economy is expected to stabilise in 1986. The manufacturing sector is expected to make a positive contribution to this improved situation. Medium and large Irish-owned companies will be encouraged to come forward with job-creating investment proposals. The State agencies will continue to work with a range of firms to encourage them to draw up strategic development plans with a view to increasing the job contribution of indigenous industry in future years.

I believe we have the right policies and that the new Industrial Development Bill will facilitate a renewed impetus to industrial growth and prosperity. I commend the Bill to the House.

Mr. Lynch

Before commenting on the Bill, as the Minister mentioned copyright I would like to say that both Senator Howard and myself are looking forward eagerly to the re-introduction of the Copyright Amendment Bill because, as I said earlier today, there is widespread growing concern with regard to the spread of video nasties. The main purpose of the Bill is to deal with that. We have pointed out the defects in the Bill and I am sure they will have been remedied. We would greatly appreciate if the Minister would use his powers to have that Bill reintroduced. We will support him in bringing in the legislation to ensure that this plague of video nasties does not spread further. It is a terrible disgrace to allow them into any country.

With regard to the Bill before the House, as vice-Chairman of the Oireachtas Joint Committee on Small Businesses, I welcome this Bill. It is in the context of the Bill's effect on our small manufacturing firms that I will address my remarks. The Bill is largely a consolidation measure of all industrial development legislation since the 1950s. It also provides for a significant number of changes which will have a major impact on our smaller manufacturing firms in particular. These are the ones that our committee are mainly concerned with. I refer to businesses comprising of from one employee up to 100 employees. The Committee on Small Businesses published their report on manufacturing industry on 10 May 1984, a report which was debated in this House on 12 September of the same year. I am glad to see that some of our work is reflected in this Bill.

Section 21, subsection (3), sets out the main criteria under which a firm may qualify for a grant from the Industrial Development Authority. These criteria as they relate to manufacturing industry are that a grant-aided undertaking will (1) produce products primarily for export, in particular, products which utilise our own raw materials and natural resources; (2) produce products of an advanced technological nature for supply to internationally trading or skilled sub-supply firms within the State; (3) produce products for sectors of the Irish market which are subject to international competition.

These criteria are broadly acceptable in that they focus on the main priorities for new industrial development, as the Minister said but are also flexible enough not to exclude worthwhile projects.

However, it is in the commercial and development criteria set out in section 21, subsection (4), that are of more specific interest in relation to our smaller firms. These criteria are set out in subsection (4) as follows:

(a) financial assistance is necessary to ensure the establishment or development of the undertaking;

(b) the investment proposed is commercially viable;

(d) it has prepared a suitable company development plan;

(e) it will provide new employment or maintain employment in the State that would not be maintained without assistance given under this Act and increase output and value-added within the economy.

That is very important.

I would like to deal in particular with the issues of a sound equity base and company development plan. There is no reasonable doubt that the great majority of our small manufacturing firms are overborrowed. We discovered this in the process of taking submissions when producing our Oireachtas Joint Committee report on manufacturing. We have a situation where 70 per cent of borrowings and 30 per cent equity is the norm. If one bears in mind that most borrowings are often short term, usually under three years, and that we have very high real interest rates, then we must conclude that most of our small industrialists are working for their bank managers rather than for themselves. Although this situation is clearly very unsatisfactory, too many of our small manufacturers will not accept outside equity participation on the basis that dilution of the control of their company is not acceptable to them. Each man, especially the small man who has built up his own business and developed and expanded and who has received financial assistance from the banking institutions, wants to retain his sole right as the owner, manager, the secretary, marketing manager, etc. In a way we cannot blame them for it. If manufacturers in this position would objectively analyse their true situation and ask themselves what degree of real control they now exercise over their overborrowed firms, I am sure they would see the benefit of accepting outside shareholders in preference to being trapped within the spiral of debt. The lower a firm's borrowings the wider are its choices. We now have the business development scheme and the small companies section of the Stock Exchange to facilitate investment in the share capital of smaller industrial firms. The IDA and the State agencies should insist that these facilities are availed of, if that is what is in the best interests of the firm.

In our report we laid major stress on the need for good management in our smaller firms saying, and I quote:

All research in business success and business failures reaches a universal conclusion, that effective management is the key ingredient of success and weak or inadequate management is a primary cause of failure.

Planning is an integral function of effective management and the Bill is right to stipulate a requirement for company development plans. A development plan need not be and should not be, certainly in the case of small firms, an expensive bound volume of charts and projections prepared by equally expensive consultants. However, each small firm should be capable of setting realistic sales targets on a three year basis, of identifying all their requirements to meet targets, and of having the means of funding these requirements. A company development plan should not be regarded as a bureaucratic imposition by outside investors, by banks or by State agencies on hard-working entrepreneurs. It is first and foremost a framework within which an industrialist should justify his proposals to himself, to determine whether they are feasible or need to be modified, to identify problems and see how they may be resolved. The main beneficiaries of good planning are the companies themselves.

In our report we asked for greater flexibility in the grant aid package to include: (1) Export marketing expenditure; (2) State guarantees and working capital and loans; (3) Approval for secondhand machinery.

I understand there is a problem with regard to grant aid for secondhand machinery. I have come across many cases where it would be much easier for an entrepreneur to start up his business if he had grant assistance towards the provision of secondhand machinery. The committee discussed this matter. One case was brought to light where somebody had bought a secondhand machine that was supposed to be one year old and when the motor was checked it was found to have been rewired ten years previously. There is a problem admittedly. I know of a very reputable firm which has machinery which is in very good condition and one of its employees wants to start up a business on his own and work for the company in his spare time. The firm is willing to sell this machinery to him at a reasonable price. It is a chrome and polishing business which cannot cope with the workload. They are very anxious for this particular man to start his own business. I do not believe it will be grant aided for the secondhand machinery.

Mr. E. Collins

I would refer the Senator to section 21 where we are addressing this problem, whereby a small industrialist can use an employment grant scheme——

Mr. Lynch

I know that.

Mr. Collins

——which will allow him funds to buy a secondhand machine.

Mr. Lynch

This man will be starting up on his own initially with the hope of developing his business to the point where that section would be of use to him. If he has to get his machinery started and build up from there he will not be able to avail of it initially. The report continues: (4) Grants for fixed employee assets should be optional; (5) Payment of grant without delay after expenditure is incurred.

This is very important and I would like the Minister to bring that to the notice of his officials. We have found that where bridging finance was concerned many firms were crippled in the same way as applies to new house loans et cetera, where bridging finance is availed of. Bridging finance builds up to such a level that they are eventually caught. The same thing happens in the manufacturing area if there is undue delay in payment of grants where grants have been sanctioned and people borrow money on the strength of the grants. The banks should be a little more flexible. They have screwed many a firm in this country. The payment of these grants should be made as expeditiously as is humanly possible. (6) The availability of long term, 15 to 20 years, fixed repayment loans; (7) the provision of aid in relation to full time employment to firms not eligible for capital grants.

While the present Bill does not encompass all of our recommendations with regard to the grant aid package, section 21 (5) which provides for employee employment grants for small industrial undertakings is a very significant step forward. We are providing for the first time IDA grants which will aid investment in labour rather than in fixed assets. We welcome that move.

There are EC restrictions on the maximum grants which may be given under this measure. The upper limit for each additional employee is 13,000 ECUS. I make that out to be £9,300, which would add to the attractiveness of the incentive package for small industries, particularly in the vital area of new jobs. Although there is no movement on the question of grant-aiding secondhand machinery, I understand that the Minister's view is that the new employment grant will facilitate labour-intensive firms in purchasing secondhand machinery if they so wish. In this respect I would prefer a more flexible attitude to secondhand machinery in its own right. In fairness, I will suspend judgment until I see the new employment grant scheme in operation. I would ask that the maximum flexibility be observed in the operation of the employment grants. There are one-quarter of a million unemployed people and that means one-quarter of a million reasons for operating these grants to the maximum effect.

There is one aspect of this Bill which I wish to discuss because it reflects a certain realism with regard to the cash needs of small manufacturing firms. Section 29 (5) provides that the IDA may make payment of up to one-third of a research grant prior to the approved costs being incurred. I welcome this provision which will be of genuine assistance to small firms engaged in research and development. We have to get more small firms involved in product research and development on a much more intensive scale. Expenditure on research and development by Irish industries accounted for only 0.4 per cent of GDP in 1984, which is only one-third of the OECD average. The existing research grants with provision for advanced payment to smaller firms of a proportion of the grant, the new 50 per cent technology acquisition grants outlined in section 30 of the Bill, and the personal tax incentives for investment in research and development do provide a frame work for more investment in this vital area. I hope there will be tangible results. Product innovation is vital to the survival of firms now more than ever. Innovation depends on research.

This Bill does not encompass all of our recommendations although many of our recommendations require administrative action rather than legislation. We recognise that fact. However the basic thrust is correct, particularly the new emphasis on employment grants for small firms. I, therefore, welcome the Bill as a step forward for manufacturing firms.

We all agree that most small firms have high level and low level periods which we describe as peaks and valleys. It is more prevalent in the building industry than anywhere else. Most small firms have severe cash flow problems for a certain period of the year—the valley period. One of the major problems brought to my attention was lack of finance towards marketing. We discovered in our deliberations that one of the major reasons for failure of many firms was lack of good cohesive marketing and management.

I would like to ask the Minister if any action could be taken to prevent a typical case of restrictive practice which has been brought to my attention recently. The committee have taken a particular interest in the problems facing small industries. I come from an area where closures have been rampant over a number of years. I read in The Irish Press recently that the number of companies closing down either through liquidation or receivership jumped from 136 in 1979 to 574 last year. The same paper a month ago showed that in the first three months of this year there was a further dramatic increase in the number of failures. As I stated here before, many traders quietly closed their doors and had simply given up. Would the Minister tell the House whether or not the Bill will create the right business climate to reverse that trend? I certainly hope it does.

We would be very concerned with any restrictive practice whereby any firm, especially a multinational firm, or any number of wholesalers or retailers would be seen to be ganging up with overseas manufacturers or multinationals to curtail the sale of a local product.

I have in front of me a letter from an international firm, Scholl Ireland Limited. I will quote this letter. It was sent out to every chemist in this country. It was given to me by a chemist friend of mine who is very interested in Ireland, and in the small business sector and in maintaining employment here.

Dear Pharmacist,

Scholl Ireland Limited are most grateful for the very supportive address made to the Eighth Regional Annual General Meeting by the Irish Pharmaceutical Union's President.

The President's name is given.

We offer our fullest co-operation to the Union and its members in ensuring that the sales of Scholl products through pharmacies will increase to the profitable advantage of both the pharmacist and Scholl. Part of our co-operation will be to alert the IPU's members to real opportunities existing for Scholl products. As you know we have launched in 1986 a comprehensive programme of advertising and promotional support for the Scholl brand. However, our sales information for the period January to March 1986 would indicate that not all pharmacists are availing of this promotional support especially the opportunities existing for insoles and sandals. We ask you to give full support to the Scholl brand, the only company investing in promoting chemist confined footwear, the only company investing and promoting chemist confined foot care, the only company investing in promoting chemist confined hosiery. Their full support will increase your offtake, allow you to fully avail of our advertising support and enable you to generate higher cash margins than anyone else can offer. The opportunities are there to be grasped. I look forward to sharing the benefit with you.

In support of that letter the Irish Pharmaceutical Union issued a bulletin to all community proprietory members from the business manager dated 1 May — No. 2 1986. I quote this bulletin:

Yes, we do support Scholl and why shouldn't we? Scholl products are confined to pharmacies. Scholl will spend £300,000 on advertising in 1986. Scholl insoles are on television up to 27 April for the first time. Scholl will be heavily advertised up to and during the Evening Press women's mini-marathon, Whit Monday, 2 June. Scholl will help train your staff in footwear retailing. Scholl nationwide window display competition takes place again from April to September. Scholl foot collection on television, week commencing 2 June. Scholl will continue 15 new products in 1986 including coppertone natural tan accelerator, a unique breakthrough in the sun care market. Scholl products are major OTC products.

We would not worry too much about that aspect. The final nail in the coffin is from the IPU.

We do support Scholl because Scholl supports you, the pharmacists. We must not therefore support opposition products.

That is a very serious matter. I would ask that the Department investigate that type of restrictive practice where it is very obvious that there is an effort to gang up with overseas multinationals to keep out the local product. Senator Fitzsimons was here behind me today. There is a firm in our area producing locally a product which is able to outsell this product but the heavy hand of the multinationals, which we have stressed many times, will be able possibly to outsell it on the local market. I do not know if I am right in quoting that here. If I am wrong, I will apologise.

Mr. E. Collins

I do not want to interrupt——

Mr. Lynch

I think that is very wrong.

Mr. E. Collins

What is the nett point in the context of the Bill before the House?

Mr. Lynch

We are talking about small manufacturing firms. There is a multinational firm who have got the support of the IPU, who sent a letter to their members of which the final sentence is "We must not therefore support opposition products," even though they would be made in Ireland. This is a scandalous situation.

Mr. E. Collins

That is a criticism of the IPU, not of Government.

Mr. Lynch

Certainly. There is no criticism. I am asking the Minister to use his good offices in Government to try to do something about it. I support this Bill in its entirely. It has embodied many of the recommendations of our committee and I greatly appreciate the interest the Minister and the former Minister, Deputy Bruton, have taken in our report and that so many of our recommendations have been implemented. The matter I refer to is outside the context of the Bill but it seems to me a very urgent one that should receive the attention of the Department. I believe the Department will deal with the matter adequately. I certainly support the Bill.

Mr. Howard

I understand Senator Lynch's last point there which is basically that there is some small business in his area manufacturing this product and there is an international organisation or manufacturer who, in cahoots with a commercial organisation in this country, are saying, "look only the products of the international outfit can be stocked and not the local ones." Senator Lynch is asking the Minister if he has some powers under restrictive practices law whereby he could look into that situation. If that is what it is, it is a very reasonable request. As a general comment on Senator Lynch's contribution, it is the usual solid constructive stuff that is typical of him here. When I tried to catch up on the discussion of the Bill that took place elsewhere I found that there was little of value that I could obtain. There was a tendency to chase off all over the place. I am not supposed to criticise other places but I cannot but make the comparison. There was a good solid contribution to the debate here and it deserves to be recognised. Senator Lynch said he welcomed the Bill and recognised the thrust was in the right direction, and that I accept.

Senator Dooge earlier today on the Order of Business made the point to us that there was a certain urgency and a certain priority in relation to this measure, that it was his hope and the hope of the Minister and the Government that the Bill would get through the House with the least possible delay. Because of that, I have reduced to some degree the contribution I had intended to make. I welcome it.

As Senator Lynch has shown, this is a non-controversial measure. It is basically a consolidation measure. It consolidates the previous legislation in relation to industrial development that has emerged in the State since 1950. It brings it all into one comprehensive code. That, of course, is something to be welcomed and something that is desirable. As the Minister said in his address, it is a follow up, and part of the overall Government strategy for industrial development, employment and job creation. It is the result of quite a lengthy examination of industrial policy in this country over the past number of years. The major points in that review were the Telesis report of 1981 and the Government White Paper. The performance of industrial promotion and development was examined and also the performance of the agencies operating in this particular field. Comments, compliments and criticisms were applied to various aspects of the work under review.

The Minister mentioned a number of priority points arising from the Government's White Paper on Industrial Policy. I would also like to refer to some others, because they put in perspective a number of points I intended making but which I will not be making at length. Among the policy objectives, as announced in the Government's White Paper, was the doubling of manufacturing output over the next ten years. That should lead to a growth of jobs in manufacturing industry of between 3,000 and 6,000 a year. This would be done by developing a strong international competitive industrial sector, made up of both Irish and foreign-owned firms. Emphasis was laid on the fact that we needed more highly-skilled jobs and a more highly motivated workforce than is the case at present. It was an honest observation. Indeed it is one that is necessary and that has to be part of the improved environment that we require for industrial progress.

This Bill is part of that intention to utilise State incentives to redress identified weaknesses in our industrial promotions structure. The regular sourcing by foreign industry of their sub-supply needs in Ireland is something that has been operating in my own region of the mid-west, I would not be surprised if it was pioneered there. That sub-supply or linkage policy is something that has been actively promoted by the Shannon Development Company in the mid-western area and is, and has been, promoted quite successfully.

The objectives of the White Paper also included the rapid development of natural resource-based industries. Again, that was a point I intended to dwell on at length; but because of the request for a speedy passage, I will not be developing it as I intended to. Another point made was a need for a strong equity and financial base and the access to venture capital. The National Development Corporation and this Bill provide the framework to meet these requirements. This should ensure a better performance from State-owned industry, a more dynamic role for Government investment policy in industry, and a more competitive environment for industry due to the reduction in inflation to a rate below that of our main competitors. I am being quite objective when I say that the Minister and the Government deserve our compliments for having already been well advanced on the road to the reduction of inflation to bring us to a position where we are somewhat below at least one of our trading partners and certainly coming close to parity with a number of others.

The White Paper also laid emphasis on the need for the creation of higher technology jobs in Ireland. That has been referred to by the Minister as a growth area, and events over recent years have shown that it is, indeed, a growth area. It is an area that we need to concentrate on. A category of grant should be introduced to enable firms in Ireland to upgrade their technology through licences acquired abroad. It says that many of the skilled jobs in the future must come in the computer and computer-related industries. We accept that. The measures being taken by the Government are helping to achieve that. It also stated that the skilled base in Irish industry will also be developed by forging closer links between universities and industry. I welcome the fact that a special fund has been set aside for joint industry and higher education projects.

I am looking at a table here which indicates a very welcome shift in the pattern of State aid to industry and industrial development since 1978. There is a much needed increase in the proportion now going to technology acquisition, marketing and research and development. They are areas that we have lagged behind in for quite a long time, at a certain cost to our industrial progress here. It is now recognised that that lost ground of some time past has to be made up. Steps are being taken and obviously the gap is being closed in that area.

I welcome the comments on the White Paper in relation to our natural resources sector. It says that Ireland is rich in natural resources but that these resources are not giving their full potential harvest to the Irish people. There is a need for a better organised food and agricultural industry and a better organised forestry industry. To achieve this the newly-established National Development Corporation is being given a special role to underwrite the development of long-term contracts between producers, processors and marketers in the food, fishing and forestry industry. I simply commented on these aspects of the White Paper.

I had intended to develop my comments at some length, but I will not do so now. That was an expression of Government intention. It was an indication of their policy that industrial progress, manufacturing jobs and employment opportunities could best be created through industrial promotion and they have taken the steps necessary to implement that strategy. Among those we had the National Development Corporation Bill not so long ago and now we have this Industrial Development Bill, 1985. Many of the points that were raised and debated in relation to the National Development Corporation could with a certain validity be raised here, but we would simply be covering old ground and there is no point in wasting valuable time in that regard. There is a clear acceptance by everybody that we need more sustainable industrial jobs. It is vital that we aim at the highest number of sustainable jobs. I would like to express a note of caution on that. If we go overboard on emphasising only sustainable jobs, that there must be a cast iron guarantee that they are sustainable, then we eliminate the question of risk taking.

In any industrial activity, particularly because of our need for jobs, we cannot work towards a situation where we eliminate all risk taking from it. Reduce the angle if you like, cut down on risk taking, our policy should be to go for as many sustainable jobs, but not to do it at the cost of avoiding all risk taking.

Resources are very scarce. I would assume that the resources available would be used wisely and to effect in this situation. The objectives of the Bill will supply and supplement and update industrial development legislation. As a result of this Bill, industrial development legislation is clearly defined and it gives an imaginative mandate to the new IDA. I agree with the comments of the Minister and Senator Lynch that the IDA have served this country well. They have often earned criticism. To succeed there must always be an element of risk taking. Therefore, I think that we should balance our criticism against the very many successful enterprises that have been located in Ireland through their efforts. The IDA have many successes that are seldom talked of. Amongst other things, we should always recognise and give them credit for avoiding the De Lorean fiasco, that could easily have been at this side of the Border as at the other. It was good management, caution and intuition on the part of the IDA that led to the avoidance of that situation.

The Government are succeeding with industrial development through a package of legislation which includes the National Development Corporation, this Bill and some other measures as well. The Government are succeeding through prudent and effective management of the economy, which is reflected in the improved level of inflation, and reducing interest rates. I would like to see interest rates at an even lower level. I do not see the justification for interest rates remaining at that level particularly in view of the level of inflation and the level of interest rates in nearby countries. They are also succeeding through the improved competitiveness of our industry and through improved industrial exports.

The principle responsibility of the Government, is to create the environment. There are other people, other organisations, other interests who also have a duty and a responsibility in the creation of that environment. I do not wish to comment on the details of a certain matter that has made the headlines in the past week concerning an industry in the east of Ireland where 250 jobs are at risk, because of a situation relating to one employee who has been offered a substantial sum in compensation for loss or supposed loss or disadvantage that has occurred to him. I think that putting the jobs of 250 people at risk is industrial sabotage at its worst level. I am going on the situation as I have read it. I am not fully familiar with the facts. How can you succeed— with a figure of 250,000 unemployed, — how damaging to the attempts of any Government or any State agency to promote industry when that and other similar situations are there to be used by competing industrial agencies from other countries against Ireland? Responsibility for creating the proper environment for industrial development rests not alone with the Government but with everybody and every organisation and every interest affected by it.

I will make one other observation that has been a bone of contention with me for some time. I have requested here and elsewhere that an attempt would be made to analyse the content or to categorise the unemployment figures in Ireland and to assess from within that figure how many of that number are genuinely available for work and are genuinely seeking work. I have been prompted to do this, as a result of a discussion at a county council meeting on Monday last. Under the social employment scheme 40 people are in employment in the environs of Ennis. There are 29 more jobs there and 29 more people are needed. Despite the best efforts of the council so far, nine applications are the most that have been received for 29 jobs; these have been assessed and only three are suitable. Before we go overboard about the inflated figures of the number of people who are unemployed, those available for employment need to be examined and quantified and those who are not, for one reason or the other, whether it is medical, psychological or whatever. I have asked and I believe it is necessary in the situation we are in that that figure would be established.

I am confident that the Bill will help to serve the strategy of the Government in promoting industrial development in the country. I welcome the provision in section 6 in particular for the three-year review of industrial performance. That review begins this year, and every three years the performance of industrial progress will be measured. I understand that that report will be laid before the Houses of the Oireachtas and the Members of the Seanad and the Dáil will have the opportunity of expressing their opinions on progress by the agencies and progress generally within industry in the preceding three years.

I welcome the clearly defined and broad range of powers that are being provided in section 11 of the Bill. Equally, I would comment that the powers contained in section 17 appear to be very sweeping in relation to the provision of sites and services. If there was any section, I would have reservations about, it would possibly be section 17 but my reservations are not strong enough to argue the case too forcibly.

I welcome section 21 which deals with industrial incentives, the grant making power that has been given to the Industrial Development Authority. These are wide powers which I expect are necessary but at least are going to have the effect of enabling the IDA to operate with the minimum of restrictions.

On section 24, I welcome the liberal regime that is being provided in relation to the guarantee of loans. That was needed.

On section 25, dealing with the provision for the payment of employment grants to service industries, I welcome the question of the acquiring of secondhand machinery.

There are other provisions I welcome, such as the guarantee of loans and interest subsidies, loans for the restructuring of industry for enterprise and development, training grants, research grants, technology acquisition grants, grants to secure reduction of factory rents, and the provision to enable the IDA to take or to buy shares in certain projects. It goes hand in hand with certain provisions of the National Development Corporation legislation and it will strengthen the organisation in its endeavours to successfully achieve its objectives.

Coming from the mid-west, I have a duty to acknowledge the part that the Shannon Free Airport Development Company have played in industrial development in the mid-western area over the years. SFADCo is recognised internationally as the most effective regional development organisation. It has made a marked contribution in the mid-west to the stability of employment and to the expansion and development there, the creation of new jobs and new opportunities through imaginative and innovative schemes, ideas and projects. Eight years ago I recall a previous Minister for Industry and Commerce deciding that the responsibility for major industry, apart from the airport area, should be removed from SFADCo. Eight years is a reasonable time-span within which to measure the effectiveness or the value of that decision. Eight years on, little or no major industry has come to the mid-west region other than what was in the pipeline at that time. With eight years to examine and compare the activity, success and achievements of SFADCo in previous years in relation to major industry, that arrangement has been a failure.

I want to compliment SFADCo on their promotion of small industries. That was a task given to them in 1977. I have figures to show that there has been steady progress since then to the present day. They have shown, in relation to the projects, that they can successfully achieve the targets established for them. They have a most attractive small industries packet, which is yielding results. However, the major reservation I have in relation to the direction we are taking now is in regard to these small industries SFADCo have been promoting over the last eight years. Following changes made in the qualification area for these small industries, 30 per cent of the industries which qualified as small industries for grant aid will not qualify now. If these incentives had not been available over the past eight years, 30 per cent of the people now in jobs would be on the dole. That restriction needs to be examined because that is the effect it is going to have. All sorts of computations can be made, but from time to time we hear people saying that for one industrial job there is a spinoff of another few jobs, servicing or whatever. Thirty per cent of these jobs no longer qualify under the new regime for grant aid. I am not talking about 30 per cent of jobs in isolation but I am talking about the jobs in services that depend on them or spin-off from them.

I welcome this Bill in so far as it is part of the package of Government strategies to create a better environment for industrial development. It consolidates existing legislation and brings it into one comprehensive code. I had lengthier comments to make on it, but in view of the request of the Leader of the House earlier on and in view of the fact that I have dealt with the ones I consider to be of major interest to me, I will conclude.

Mr. Fitzsimons

My contribution will be very brief. The positive parts of the Bill are welcome, but this is an area which would require great experience or specialist study in order to speak in a meaningful way about the Bill. I am not totally convinced that it is going to be the panacea for all our ills. I was brought up in very deprived conditions and, for that reason, all I had recourse to was what I would call fairy tale culture. In the fairy tale culture the idea of magic is a window to look out on the real world. This Bill comes near the magic wand situation. I always thought, in moments of flights of fantasy, that the magic wand would be a great help to anybody and would be a great help to the country. The explanatory memorandum, with regard to the financial implications, tells us:

The proposals in the Bill will not involve any overall additional cost to the Exchequer, nor will they involve the recruitment of additional staff. The cost of the new technology, acquisition grants and the alterations in the scope and operation of research and development grants will be met from a shift in expenditure away from fixed asset grants, as outlined in the White Paper on Industrial Policy.

It seems what we have here is really a bookkeeping exercise. I fail to see how we can achieve what the Government claimed we will achieve without an extra investment of funds. If we do, in some way it conjures up in my mind a situation where at the present time these funds are being badly spent. Most reasonable people would agree that extra investment is needed. I do not doubt that in some way to move the thrust away from one area to another, or to concentrate on one area more than another, can practically work miracles. I have no doubt about that. Nevertheless, I cannot see that any great progress will be made without the extra funds that are necessary. We are told categorically that no extra funds will be provided or are needed. From that point of view, I would be very suspicious of the Bill.

At the same time, with the other Members, I welcome the positive aspects of the Bill. In so far as it will be successful, I welcome it. It is a comprehensive Bill. This is borne out by the number of Acts that have been repealed. Under the Fourth Schedule to the Bill, 20 Acts are repealed, starting with the 1950 Act. In addition, we have an amendment of the Shannon Free Airport Development Company Ltd. (Amendment) Act, 1970. It is quite a comprehensive Bill.

I feel, however, that, since we are all agreed that unemployment is the problem, we should have a policy in this regard. The Minister told us in his introductory speech that "industrial policy is not employment policy, although it is an important component of it". He stated that "our unemployment position must be tackled on a broader front, as set out in the Government's national plan, Building on Reality. The question I would ask is: why are we not tackling it now? If the solution is set out in Building on Reality, and this is a comprehensive Bill, why are we not dealing with that policy? That is necessary. I would like in passing, to make a brief analogy with another area. I refer to the fact that we do not have an overall land policy. I am not saying this in a critical sense. I am just saying this in passing. Although we do not have a land policy and doing works which are not within the context of an overall policy, we can still do works that are important and worthwhile and that help us — for example, in the area of drainage. Of course, we can carry out drainage works. They are important. I am making the analogy that we must have an overall policy. I know the Minister has indicated that he does not want me to proceed on those lines. However, I would like to continue with it. I think I would be within the terms of a Second Stage speech in doing so.

Mr. E. Collins

It is not for me to determine, Senator.

Mr. Fitzsimons

Well, I suppose I would be stretching at the seams to do so. Nevertheless, I wanted to make that point.

Unemployment is our big problem. We are all agreed about that. The ills that follow from unemployment are crime, use of drugs, and so on. I had very recently, a mother of a large family, coming to me. Two of her sons are on the dole and she was very critical of the dole situation. We are all critical of it, and nothing has been done about it. We know that this problem of unemployment is a fundamental one. We know that there must be a new approach to it. In this House previously I have mentioned that what is known as the "Protestant work ethic" is out of date. It will no longer serve the community. While I know that all our ills are not due to unemployment, most of them stem from it. We are not tackling this problem at the base where it should be tackled.

I agree with the statements that have already been made with regard to machinery and similar developments. In this situation it is hard to arrive at a solution to the problem. Some people say we will never solve the problem. I feel that it must be tackled by either coming to terms with the reality that we will never again reach a situation of full employment of our people or by reducing the work hours. We must do something to cater for the majority of the people.

I realise that an Act or a Bill to deal with this problem must be very comprehensive. At the same time, it must be very simple and all-embracing. I am not sure whether this Bill before us, for the reasons that I have outlined and particularly for the financial reasons, will be successful. Reference has been made to the impact of the reduction in inflation. I am glad that the Government can claim that inflation has been reduced from 20 per cent to about 3 per cent in a few short years. We all welcome that. Again, I am not too clear of the advantages to us following the reduction in inflation. Inflation is coming down worldwide. I felt that the Minister for Finance, in this House on a recent occasion, was not too clear about the benefits of inflation. He said, as far as I can recall, that it gave investors confidence and that in some way which he did not clarify, or go into in detail, helped with the employment situation. Beyond that, I am not sure what great advantage it has with regard to reducing unemployment.

Mr. Howard

Costs.

Mr. Fitzsimons

I clearly recall the Minister for Finance going into that matter. That is my recollection of what he said.

I feel that this problem will have to be tackled on a broader base. Look, for example, at our road system. This has been referred to. Our road system is in a deplorable state. Before industry can increase we must improve our roads. This is where it is best to start. It might not be in order for me to enlarge on our disadvantages at the present time with regard to roads. I am not simply talking of potholes. I am thinking of widening our roads. I am talking of realignment. I am talking of improving our roads so that the traffic can drive at a reasonable speed.

Mention was also made of the Institute for Industrial Research and Standards. I would like to add my commendations of this organisation. People are not aware of the great work that has been done by the IIRS. I am pleased that the expertise of the IIRS will be made use of in a very broad way in the implementation of this Bill. Their publication, Technology Ireland, is a very important publication. While we receive technical literature from other organisations, unfortunately we do not receive copies of Technology Ireland. I would ask the Minister to consider making a recommendation that copies of Technology Ireland would be made available to Members of the Oireachtas for the reasons I have stated.

Research has been referred to by the Minister and by Members. Research is very important. There is specific reference in the Bill to the purchase of patents and grants to firms who want to avail of patents. I had some experience of the Patents Office in Merrion Square a few years ago. Even then — I am sure some modernisation has been carried out— it was very out of date. It was a small office. The staff were very helpful. At that time I took out a provisional licence for a contouring interpolator, which was not a very costly exercise. I did not have the finance to follow it up at the time. At the time the outlets were very restricted for those who availed of the Patents Office. I would suggest to the Minister that it should be possible to utilise a patents section attached to institutes of higher education.

There is great ingenuity in this country. A proprietor of a Dublin garage told me about tractors taken to his garage from the country. He said the ingenuity was unbelievable. Pieces of string or wire were made to do impossible things. There is scope there which should be harnessed. An attempt should be made to harness such ingenuity.

The Minister paid great tribute to the Industrial Development Authority. I would agree with him on that. He mentioned their flexibility and efficiency in encouraging industrial development. They have done great work and, no doubt, will continue to do so in the future.

Specifically in relation to the Bill it is envisaged that the new selectivity criteria for grants will be extended to Shannon Development in respect of the industrial estate under a separate Bill. I wonder why a separate Bill is necessary. The explanatory memorandum begins by stating that this is a comprehensive Bill which repeals many other Acts. At this time something could have been included in this Act specifically with regard to Shannon Development.

Section 6 requires the Minister to prepare a review of industrial performance every three years and to lay such review before each House of the Oireachtas. This is important. At the same time, I would ask: why not every year? Why the arbitrary figure of three years? With regard to these reviews and reports which come before the House, possibly it would be a good idea if a select body or a special group would consider them before they came before the House and made some specific comments on it. It would be very important to have a group of this kind.

Section 11 sets out the functions of the Industrial Development Authority. Its primary role is to be an autonomous body. I do not wish to go into all the details of section 11 because this is primarily a Bill which can be dealt with better on Committee Stage.

Section 13 empowers the Minister to give general policy directives to the IDA. Such directives shall not apply to any individual industrial undertaking or to the location of an industry other than as part of a general review of industry policy for the country as a whole. While I would agree with that, at the same time I could see a situation where it might be necessary to deal with the particular industrial undertaking. I would hope that that would not be excluded under the terms of the Bill.

Sections 14 and 15 make provision for the issue by the Minister of grants not exceeding £700 million, with the possibility of another £125 million. Since there is no further charge for the Exchequer this is purely a bookkeeping exercise.

Section 16 enables the Industrial Development Authority to provide sites and services for industrial development and to acquire land for such purposes, either by agreement or compulsorily. They have such power at present. In many areas they have sites which will satisfy the needs for many years to come. There is a very large site in my own town, Kells. Fortunately, we have one successful industry there. We are hoping that this site will be used up before other areas are purchased. Sites have been selected because they are suitable. They have public water and sewerage facilities. These developments should be proceeded with before any new sites are bought.

Section 19 gives the Authority the power, subject to some conditions, to borrow temporarily for current expenditure. Could this be accumulative? Could it result in expenses mounting up which would be rather costly in the long term as far as the IDA are concerned?

Section 21 sets out certain criteria under which the IDA will be empowered to make grants towards the cost of fixed assets. I gather that there is a departure from this. The grants are 60 per cent of the cost of the fixed assets in the case of an industry in a designated area and 45 per cent in a non-designated area. There is no increase in grants here. With higher costs a case possibly could be made to increase the percentages in both cases.

Section 28 refers to the IDA and gives power to consult with AnCO. I would like to pay tribute to the work done by AnCO over the years. I am pleased to see that AnCO will be involved.

Section 29 gives the IDA, subject to some conditions, the power to make grants not exceeding 50 per cent towards the cost of research and development. A case should be made to increase that amount of grant. A case could arise where it might be necessary to give a higher grant in order to get a project off the ground. It is a pity in that situation that this restraint will be there under section 29. The Bill is one more for Committee Stage than for Second Stage. It is important to deal with all those aspects on Committee Stage. The Minister should consider that in certain circumstances it would be proper to make a higher grant.

Section 30 gives the IDA power to give grants not exceeding 50 per cent towards the cost of acquiring the product or process technology. This is not variable, but it should be. Very often the grant would be much less than 50 per cent. There should be some scope, in the few instances it might be necessary to give a higher grant — in some particular cases 100 per cent if the State is going to benefit from it in a way that it would make it worthwhile to invest this amount of finance.

Section 31 empowers the Authority, subject to certain conditions, to purchase or take shares in an industrial undertaking. This is a power which the IDA already have. They have exercised it on a number of occasions. They displayed confidence in many instances. I am not sure what the track record is regarding those cases and it would be interesting if the Minister would refer to them.

Section 37 provides for the repayment of grants or other payments to the Authority in cases where there is a contravention of a term or conditions attached to such grant or other payment. This could, in some way, be a penal clause. It does not refer to a serious contravention. It should be defined. In the general sense and in the way businesses are carried on, sometimes it may be necessary to depart in a minimal way to which the Govern- ment or the IDA might take exception. Here we have a situation if there is a contravention. Presumably the Minister and the Government will decide to refuse to make a payment to an industry.

Section 43 prohibits by penalty the disclosure by a member of the Authority, the board, committee or a member of the staff or advisers or consultants, of information obtained while performing duties on behalf of the authority. The fine here is £800. This is a small amount of money having regard to the seriousness of the situation. In the Bill we are talking in terms of £700 million and fractions of £1 million. A fine of £800 where there is a disclosure of confidential information is not sufficient. Where confidence may be breached, it may often be for financial gain — possibly to another company. This fine is far too low.

I am not clear on how people who have a project in mind set about getting it off the ground. I am aware of an individual who had what he felt was a good project in the agricultural sphere. He did not get it off the ground and he made representations to certain people. There is that difficulty at the present time. I am not too clear how this is overcome in the Bill.

If somebody has a very good idea and can back it up with figures, but has not got the finance to avail of the grants that the Industrial Development Authority could make available, can this Bill help this individual? Section 29 states:

Subject to paragraph (b), the amount of a research grant shall not exceed 50 per cent of the approved costs of the project concerned or £250,000, whichever is the smaller sum.

There are areas where small amounts of money would get a project off the ground. I am thinking of wave power and solar energy in this regard. There is vast potential which would be helpful to the country and it is not catered for in the Bill.

Finally, I should like to refer to section 29, subsection (5):

(5) The Authority may, in the case of small industrial undertakings as defined from time to time by the Minister, make payment of up to one-third of a research grant prior to the approved costs being incurred on condition that the amount so paid shall be repaid to the Authority if the research or development project concerned has not been carried out to the satisfaction of the Authority.

This is very authoritarian. Surely some other body may be resorted to to determine whether a bona fide effort was made to comply with the terms of a grant to the satisfaction of the Authority? There should be recourse to the Minister, the Government or to a third party who would be independent. This could, perhaps, be considered on Committee Stage.

Senator Lynch referred to a small business in my own town of Kells. There are in the region of 14 to 15 people employed there. Like Senator Lynch I was given particulars of a retail professional group who issued a circular letter saying, and I quote: "We must not, therefore, support opposition products". It happens that those "opposition products" are the products which are manufactured in this small factory in Kells. The products which are being publicised in the circular are manufactured abroad. This is an extraordinary situation. I am not going to go into details as it would not be proper on the Second Stage, but what I am saying to the Minister is that there is a general problem in this area where a section of our own professional retailers are pushing foreign products to the exclusion of our own products which give employment here.

I welcome the Bill in so far as it will help. I welcome the positive aspects of it. I regret that no extra finance is being made available for the implementation of the Bill and without this extra finance, overall it is a bookkeeping exercise.

An Leas-Chathaoirleach

As it is 5.30 p.m. would Senator O'Leary clarify for the House if it is intended to carry on business without a break?

Mr. O'Leary

Yes, it would be the proper thing to carry on and get the Second Stage finished, unless the Minister finds it inconvenient in which case we can adjourn it.

Mr. E. Collins

I was hoping, with the permission of the House, to continue.

Mr. O'Leary

The House itself can decide at the end of the Second Stage. First, I would like to take the opportunity of welcoming the new Bill. Briefly, I would like to refer to a number of factors which I consider rather appropriate to Second Stage. They can be divided into three different sections.

First, there is a tidying exercise involved with which I will deal briefly. Second, there are certain new proposals made within the text itself. Finally, there is a more fundamental re-examination of where our industrial policy is going. This Bill gives us an opportunity to explore that area. I would like to refer to the last one first.

The way in which we have organised our industrial development over the last 20 years has been to attract to the maximum possible extent investment from abroad and allied to that to upgrade and modernise the machinery used in our native industry. The system which we have utilised to bring about this situation is that of grants from the Industrial Development Authority to newly-established industries, on the one hand, and modernisation of our existing equipment by way of grants, on the other. I note that the Bill includes a proposal to terminate the modernisation aspect which served us so well in the past. Nobody could doubt that the time for that kind of scheme has indeed long passed.

The industrial development policy must be concentrated in the area of developing new projects which will help us in the difficult times that lie ahead. We have to examine the industrial development area because of our extremely young population and a population which is in great need of industrial employment. Obviously, the policy which we have been pursuing has had a certain measure of success. The fact that we have such a substantial amount of unemployment should not lead us to a conclusion that it has been necessarily unsuccessful. However successful it has been, something extra is needed in order to overcome the problem which we have with regard to our present unemployment and to the expansion of it which is inevitable—at least, in the short term—as a result of the increased number of young people coming on to the labour market.

How do we, as a country, face that challenge? This should be the central core of our industrial policy. What policy can we pursue which will ensure that the maximum number of our young people are engaged in gainful employment? It is in this regard that I refer to one of the proposals in the Bill, section 6 under which there would be a triennial review of the national industrial performance. While this seems a fairly innocuous provision, it could, in fact, be a most important one. It would give the Minister the opportunity, and impose on him the obligation, of reviewing our performance on a three-yearly basis. Presumably as a result of that review, it would give the Houses of the Oireachtas an opportunity of expressing their views on it.

Much of the consideration which Members of both Houses of the Oireachtas give, for example, to industrial policy is given in the context of a specific proposal in a specific Bill like this rather than by analysing what the needs of the industrial policy are and receiving from the Minister, in the first instance, a report on what the policy is and expressing a view on it. This is badly needed.

We must look slightly beyond our own country. Why is it that western Europe is falling so far behind in industrial employment? Why is it, given the advantages of a young and educated population — even though I know we have disadvantages as well with regard to our remoteness — that we seem to be unable to get a fair share of the worldwide growth in trade and in industrial output? What contribution can we make in the European scene? More important, what contribution can we make independently of Europe to help us to develop an industrial policy which will mean more gainful employment for a greater number of our people? Why is it that the industrial heartland or the industrial centre of gravity is moving from America and Europe to America and Asia? What is the reason for it? I do not believe that it is a matter of cheap labour. It is a lot more fundamental than that. There are reasons for it and they are pertinent to this Bill. There are reasons why we, in western Europe, are failing to develop industrial policies which create a climate and why that innovation which is an essential part of getting our share of the new industrial growth is not encouraged in the western European context and in Ireland in particular. In that respect the proposal in section 6 of the Bill to have a triennial review of our national industrial performance is indeed important. It is in that context that I look forward to the Minister putting before each House of the Oireachtas as a part of this exercise a statement of the rationale behind our industrial policy.

The excellent speech which the Minister gave on Second Stage today outlines quite a number of new departures and a new approach to operating the IDA, but what it fails to do is to examine fundamentally what our industrial policy objectives are. This is where we are lacking in this country. One of the most fundamental things we should examine is whether it is grants or taxation or a combination of both that attracts companies to this country. The Industrial Development Authority is proceeding in a most efficient manner on the basis that one of the essential elements in attracting new industry, whether it is indigenous or foreign, is grants. Is that borne out by the facts? It is something around which I would like to see a national debate develop.

Similarly, is the tax regime to which industrial undertakings are subjected of critical importance in the location of industry? If it is not, we are giving very substantial discounts in tax bills to foreign operators or to manufacturers operating here, whether home or foreign, to no benefit. I think that the examination of these factors is more important in the long term than the actual structure of the IDA itself.

The IDA is really only a creature of Government policy. It is there to carry out in as efficient a manner as possible whatever policy the Government set for it. If you read this Bill from beginning to end what you fail to get out of it — I think it is probably right that it should not be in the Bill itself — is an idea of what are the real policy decisions on which this Bill is based. There are, of course, a few indications. There are new sections — for example, section 30, dealing with technology acquisition grants. Obviously, that is a new policy departure in which it has been decided that the acquisition of technology should be given a sufficient importance to make it attract a grant. I would like to say that this should only be part of a very fundamental re-examination of our industrial development policy. It has been successful, but it has had limited success. Whether that limitation has been due to some inherent defect in ourselves or to the fact that the grants were not high enough, were too high or taxation policy was right, or tax evasion policy was wrong, or due to our physical location in western Europe, must be determined. There must be an examination of why the things that have gone right have gone right and what changes we can make to encourage a further location of industry in this country. Whether they be indigenous or foreign is not really of tremendous significance.

There is no doubt that a change is coming over western Europe. There is no doubt that in countries like the Federal Republic of Germany there is a considerable shortage of educated young people. I know that the emphasis of the salesmanship of the Irish Government agencies has switched into this change. To what extent we should exploit it by further changes in policy is something which I would look forward to being debated in this House as part of the triennial reviews, the obligation for which is going to be put on the Minister if and when we pass this Bill. I am seeking to use this early portion of my speech to lay down what I would consider to be the important consideration for the benefit of the Minister. If we pass this Bill the first such report will be in the year 1986. Therefore, giving the Minister some idea of what an individual Member of the House of the Oireachtas thinks should be included in that review would be helpful at this stage.

In so far as the Bill consists of the consolidation of existing legislation which has worked well, it certainly has my support. The Minister is to be commended on bringing together under one roof so much legislation gathered from over the years dealing with the Industrial Development Authority in general and development grants and areas in particular. The repeal section at the end of the Fourth Schedule is indeed very satisfactory in that it indicates that there has been a very fundamental re-appraisal and that this Bill will, when passed, represent the complete industrial development legislation and will enable practitioners and general public who have the obligation to pursue the Bill for one purpose or another to see at a glance what is the law with regard to the Industrial Development Authority and related matters.

The things to which I would like to refer to are basically the new ones. I have already mentioned the triennial review under section 6. I think that is a very good section and the Minister should be commended on it. There is an important new section, section 13 which deals with the question of giving policy directives to the Authority. In line with what I was saying I certainly support the concept that the Minister should give policy directives and it is up to the Authority to implement those policy directives. Subsection (2), however, addresses what might be an individual problem there, where it says that it shall not apply to individual industrial undertakings or give a preference to one area over another in regard to the location of an industrial undertaking otherwise and as part of the general review of industrial policy for the country as a whole, as indicated in the directive. I do not think that Ministers in the past — not speaking specifically about the present Minister — have always lived up to that high standard. Very often considerations other than a general review of industrial policy for the country as a whole have appeared to be important in deciding policy as it relates to individual undertakings.

Another matter to which I would like to refer is section 21 which again expands the area and lays down the Authority's general grant-making power. I think here lies the core of what I was saying. We have decided that the way in which the Authority can assist the industrial development of the country is by the making of grants of that kind. The Minister has indicated that certain changes were made in that as a result of amendments in the other House. The Minister is to be commended on that. I am sure we will have on Committee Stage an opportunity of examining that section to see whether it now fulfills the criteria which would be proper to legislation of this kind.

Sections 29 and 30 are two other sections to which I would like to refer. Section 29 deals with research grants. It is making a statement which no doubt the Minister will take up and elaborate on in his report in 1986, sometime during the remainder of this year, on the importance of research. Section 30 is important in acknowledging the importance of technology and the acquisition of technology in helping to solve our industrial problems.

They are the sections which come to my particular attention. The important aspects of the Bill lie in the creation of a new regime whereby the industrial policy of the Government, which up to this has been only very fitfully and incidentally examined by either House of the Oireachtas, will now be examined on a regular and predetermined basis as a result of the ministerial review outlined in section 6.

I would like to welcome the Bill to the House, to assure the Minister of our support for it and our understanding that the vast majority of the provisions in the Bill are re-enactments of existing legislation. We will hopefully be able to speed the Bill's journey through the House on that basis.

Mr. B. Ryan

I never thought I would stand up on an issue like industrial policy and say that I agree with Senator O'Leary: we have disagreed on so many fundamentals before. Quite a lot of what he had to say was of the intellectual standard that I associate with most of Senator O'Leary's contributions. He made remarks which showed a lot of insight into certain areas and I would like to record why I agree with him there. We do need to analyse far more fully the relative contributions of the different parts of our industrial incentives to identify which, if any, of them are cost effective. It is always difficult to put a figure on this but the actual visible costs in terms of grant aid by the Industrial Development Authority are the most easily quantified part of the cost of our industrial incentives.

The exemption from 90 per cent of our corporation profits tax — and in many cases 100 per cent exemption — of most manufacturing industries in this country, be they indigenous or foreign, is also a major loss of revenue to the State and shows up in other areas. Even though our gross level of taxation as a percentage of GNP is not that excessive or far out of line with many European countries of similar population when they were at our current stage of development, we have chosen to exempt large areas of earnings of incomes, including profits, from taxation. Therefore, that 40 per cent is actually being distributed over only certain sections of the community. It is not something on which I would like to take a hard and fast position, but I do think that, given that the burden for paying for the services that people expect at our level of development is carried by a narrower base because of this virtual exemption from corporation profits tax of manufacturing industry, it does behove us to at least be absolutely certain that this level of tax exemption is necessary and desirable and is a major contributor.

I know that survey after survey has indicated that the taxation policy is one of the major incentives. I do think it raises the question whether we need to pay substantial grants in the area of capital acquisition in the form the IDA has traditionally adopted. There may well be a trade-off point between virtually zero tax and the levels of corporation profits tax payable in most industrial areas including the United States. There may well be an optimum point, which is not zero and which is not 40 per cent, which can give us the benefit of both increased industrial employment and increased tax revenue.

We should objectively assess that and attempt to quantify the relative contributions of the different incentives. Recently surveys were published. For instance, we were rated among British industrialists as having the best financial incentives in the OECD. We were also rated by the same British industrialists as having one of the most unstable political environments in which to invest. This was as much a problem of British perception as it was of Irish instability. Speaking from my political perspective, the problem with Irish politics is that it is far too stable altogether. Business men no more than anybody else are not particularly good in the area of politics. In the area of financial incentives one has to accept their skills and ability and the fact that they did identify this country. It is an interesting point as to how far we are ahead of other countries in this area of financial incentives and whether we need to be that far ahead. There are all sorts of hidden costs in the areas of training, education and other areas that would need to be assessed very carefully.

Having said that in response to what Senator O'Leary has said, I cannot but support and welcome this Bill. It would not represent anything like the complete industrial strategy that I would advocate; but as part of an industrial strategy it would be difficult to take issue with it except in so far as it is based on assumptions in regard to other incentives that I would have some reservations about.

It is a mistake to associate the IDA with industrial development and to assume in too narrow a way that this is the primary driving force for industrial development in this country. The IDA have done a good job, and it is ironic that people who scream loudest about the inefficiency of the State sector are often those who are equally loud in demanding that the IDA do more and more. If ever there was an image of a State enterprise, not manufacturing but nevertheless State-owned, whose policy objectives are determined by the State and whose large scale operational decisions are still under ministerial scrutiny, we have it here. It has worked successfully and has responded to shifting market needs.

I do think it is very important to recognise the centrality of manufacturing industry in the development of real employment. There is also need to recognise the need for selectivity in the development of manufacturing industry, or in the sort of jobs we want our people to have. We do not want to go back to a Third World model of development where we move back to low-paid, low-skilled jobs. We want highly-paid, highly-skilled, demanding and therefore satisfying work for our people. It is not and should not be a question of jobs at all costs. We gave that up 30 years ago. I do not think we should allow the problems and worries of the immediate past to deter us from keeping on in the direction of becoming a high skilled, high technology, high wage and high employment economy. There is nothing irreconcilable about those objectives. They have been set and achieved by some of the most successful countries in Europe, countries which are comparable in population with ourselves and who were comparable in industrial development 50 years ago to ourselves but who adopted a considerably different strategy and seemed to have been considerably more successful than ourselves. I would identify among those, Sweden, pre-war and post-war, and Austria subsequent to the war. Both have adopted political strategies and industrial strategies somewhat different from ourselves and have been remarkably successful.

Probably the finest argument that there is not just a passive but an active and creative role for the State in industrial development and industrial restructuring is to look at the history of Swedish industry in the 1970s. We should not allow ourselves to be browbeaten into believing that there is no role for the State in industrial development and in identifying priority areas and that some sort of mythological market force, which probably has not existed since the turn of the century, is determining these things, because at the centre of it all must be successful manufacturing industry. It is an important word of warning to many who would have us ape the American unrestricted market forces model that there are serious deficiencies in the boom in the United States about which we hear so much. There has not been enormous growth in many areas of manufacturing industry in the United States. The United States have a serious balance of payments deficit because of the large-scale import of manufactured goods from other countries. The United States have a large-scale budget deficit because of the economic policies which they have pursued. They also have a boom based largely on public expenditure in the area of defence.

Any Member of the Oireachtas who read The Sunday Times feature last Sunday on President Reagan's former budget director will say that the mistakes that Irish politicians have made in the area of public expenditure are minimal by comparison with the fact that the US Defence Department budget growth rate in real terms was based on a quick calculation made by President Reagan's budget director or on a pocket calculator in a quarter of an hour. That is why we now have a determination on the part of the American Defence Department to have a real growth in defence expenditure of about 7 or 8 per cent per annum from 1979 on — not because of a policy decision but because Mr. Stockman made a mistake on a calculator in a quarter of an hour and that became official Government policy of the United States in the area of expenditure on defence, which is now such a huge part of American defence expenditure.

That is what Mr. Stockman said. I do not know if he is telling the truth but it is an interesting insight which should give Irish politicians who have been so severely lectured about their profligacy in spending other people's money and who have all been lectured in particular about the success in the United States not spending other people's money to give themselves a clap on the back for being a lot more careful, a lot more sensible in the decision making.

One area which is mentioned in the Minister's speech and also in the White Paper, which has not yet been sufficiently developed and teased out in any strategy for industrial development, is the whole question of innovation. We are liable to have a new competition in this country shortly which you could probably refer to briefly as a less conscientious entrepreneur. There is apparently a species running around in this country under the general title of entrepreneur seeking opportunity which we apparently are failing to provide but which is nevertheless out there ready, willing and able to do all sorts of wonderful things for us if we only create the proper package of incentives to encourage them out from their shy nesting grounds where they are currently confined by an apparently oppressive State system.

This is the sort of imagery that we have been presented with by the collective spokespersons of the new right, that we have the entrepreneurial class. One has only to read the OECD examiner's report on innovation policy in Ireland. I am referring not to the report but to a newsletter of the Confederation of Irish Industry published in December 1985, volume 44, No. 7 which will hardly give a summary of that report which is anyway favourable to my political or economic philosophy. Nevertheless it goes a long way beyond financial incentives and financial considerations in talking about the problems of innovation. They make an interesting two-line summary which turns the report on its head. The actual detailed summary makes quite a considerable number of comments with insight on this country and why we have been relatively unsuccessful in the area of innovation. I cannot overstate the degree of my conviction that innovation in indigenous industry in particular is the real area that we will have to look to for real development in manufacturing industry.

The OECD apparently stated that in terms of innovative orientation Ireland is currently ranked in the bottom quarter of industrialised countries. That puts us down in terms of capacity to innovate with countries like Greece, Turkey, Spain and Portugal. Given the advantages we have over countries like Greece and Portugal and Turkey in particular in terms of literacy, participation in second and third level education and in terms of the enormous, proportionately speaking, investment that we put into third level education — even though it is inadequate we do put in quite an enormous proportion of our GNP into third level education — it is somewhat surprising that we should appear to be so out of line with other countries in terms of our ability to innovate.

The OECD identified a number of factors which they related to our lack of innovatability. I list them in the order in which they are listed here. I do not know whether it is the order in which the OECD listed them. One was the lack of specific technological skills and the general awareness of new technology in Irish firms. It was not a bad workforce, a high wage workforce, a recalcitrant workforce or the trade unions that they identified as the problem but the actual Irish indigenous firms themselves not really knowing about new technology and having a workforce which lacked the skills to use new technologies. That is something we have to address ourselves to. It is not a question simply of incentives. It has to do with education, targeting areas where people are prepared to make it different and not hand out undifferentiated assistance and grants whether they be by way of grants or tax breaks to companies that are still hoping to sell buttons to Britain when we should be selling computers to West Germany. That really is at the core of our problem.

The second area—this is the buttons to Britain phenomenon again—is the production of undifferentiated low technology products sold at low prices instead of products based on quality, new technology and exclusive design. I always feel a fundamental flaw in our industrial development strategy—it is the profound conviction that seems to have motivated most Governments in the last 15 years—is that in this whole area of new quality products, high quality products selling into international markets we somehow have to always depend on foreign investment for that development and we do not really believe in ourselves and in our capacity to develop products that are saleable on the international market. One can contrast that with a country like Sweden, a country of 8,000,000 people equally remote almost with ourselves from major markets which has produced a number of companies, large multinationals, which are among the most successful in the world.

It is often worth reminding people of some of the companies that are actually Swedish owned and Swedish based. Electrolux is one that I discovered recently to be actually owned and based in Sweden and which one would have assumed to be either a German or an American multinational, this is so pervasive all over western society. Saab cars, Volvo cars, and Erickson, in the area of telecommunications, are large corporations based in a country that, if you are to believe the propagandist, is the least encouraging of enterprise in Europe because of the levels of taxation, State regulation etc. but which still have been among the most successful in the world. To elaborate again on the low technology product sold at low prices, that is why I perpetually talk about selling buttons to Britain. I believe there are far too many Irish manufacturers who believe they can continue on selling the same product of the same quality and hopefully at the same price to the same markets indefinitely and if that does not work they blame everybody, be it Government, trade unions or whoever happens to be the most convenient person to blame at that moment in time, whereas the OECD identifies the problem as the industry's own failure to develop new products and new technologies.

The third weakness identified among Irish firms was an exclusive orientation to relatively small unsophisticated Irish and/or traditional British markets. This is a long way from the catchcry of the last five or six years which was that Irish wage rates, as it was always said, were crippling the country. The last time I spoke about these things here I quoted OECD figures which clearly show that the growth rate of exports from this country is only exceeded by either one or two members of the OECD. We are, in terms of growth in exports, ahead of Japan and have been for a number of years. It is difficult to believe that Irish wage rates can be so crippling a burden if sections of Irish industry, particularly the multinational-based Irish industries, are doing so well. Most of what is being said by the OECD reflects on indigenous Irish industry rather than on the foreign multinational.

The fourth defect which inhibited innovation in this country in the eyes of the OECD was "the absence of larger progressive indigenous firms which would provide a strong technological and industrial background for small companies". The important words there are "large, progressive and indigenous". We have to get beyond the hand-outs mentality which believed that we had to have multinationals to give us products which are saleable on the international markets. It is a matter of regret, as the Telesis report pointed out, that most of the large Irish manufacturing firms are not involved in trade. They are involved in the non-trading sector, that is the sector which can safely continue to be sold here, because there are problems of communications and transport which make participation by external competitors impossible.

The fifth deficiency was related to problems of communication and lack of acceptance of the need for technological change by management and workers. The sixth one — not necessarily one I would agree with but they did list it — was the lack of opportunity for private individuals to make profit, partly because of heavy personal and capital gains taxes and therefore lack of development and venture capital. That is one of the reasons, but it is by no means the only reason. If you were to listen to most of the apologists for industry or if you were to read the Confederation of Irish Industry's own summary of this policy document, you would think it was the only thing that the OECD people had said. It is identified as one of the deficiencies, though I believe some of the recent changes in taxation policy would probably meet some of those objections. They finally identify a general lack of understanding of innovation entrepreneurship and of a strong innovative culture within firms and in Irish society generally. I take from that that it is not just a question of attracting better and more carefully selected foreign multinationals or local industries. It is a question of a transformation in the perception that Irish society has of itself and, in particular, a transformation where we actually believe that we do not have a cheap goods, cheap wages, low skills economy, but that we believe it is possible for us to emulate what has been done in other small European countries like Denmark, Norway, Sweden and Austria. The only thing I would add to that is that only one of those four countries is a member of the EC. The others found it far more beneficial to themselves to remain outside the EC.

Mr. Lanigan

Kurt Waldheim ——

Mr. B. Ryan

I do not have any more enthusiasm for Kurt Waldheim than Senator Lanigan has, but I am not sure what he has to do with Irish industrial policy.

An Leas-Chathaoirleach

Senator Ryan to continue without interruption.

Mr. B. Ryan

The OECD talked about what we needed to do in order to develop industry. Like everybody else, I suppose the reason I am quoting all this is because I agree with it. I am not quoting it just to put it on the record. It is a very interesting detached external view of what we need in order to achieve real industrial development which is based on innovation and new product development.

They list as their recommendations the following principles. First of all, they recommend that the State should shift towards stimulating private entrepreneurial initiative. I am not sure what they mean there because the State has always emphasised the development of private entrepreneurial initiative. They go on to say that the country cannot afford to increase total public expenditure. I have said often in the past that until such time as we are prepared to talk about renegotiating the one-third of our expenditure that is paid to banks, either national or international, we cannot really talk about increasing public expenditure. It cannot go much above the present level. The only way you could deal with higher public expenditure is by rescheduling the massive debts we have so that they are not covered by one generation over a five or ten year period. That is for another day.

They emphasise that there is ample room for reallocating existing State expenditure, particularly a reallocation of existing systems. They emphasise the need for decentralisation and flexibility in decision making. It is particularly welcome that the IDA have decentralised to a large extent their decision making procedures for dealing with small industries. The OECD would have us go further and involve local authorities and communities to the maximum extent in the developing process. We should think that one through, about how we could involve local authorities in doing more than making speeches and asking the IDA to do something, because at local level whenever we have a problem in the area of unemployment the first thing we do is denounce the IDA rather than get involved in developing a local strategy for industrial development.

The third recommendation the OECD made was to support investment in brains rather than in fixed assets. I know the Bill goes some way in this direction. I would like to quote what the Conferderation of Irish Industry summarises as the OECDs recommendations.

That modern development relies more and more on investment in brains. Price is no longer a dominant factor in international markets. Advance firms of a high technology area invest in research and development, marketing, training and softwares as much as in building equipment and machinery. Ireland should as a key element in its development strategy, move towards knowledge intensive industries while focusing on the factors most relevant to her needs and capabilities. We should concentrate on applying new technologies, developing market intelligence, continually upgrading the labour force, enriching management capabilities and emphasising product and service quality improvement.

These are things that are part of an industrial strategy which are not as widely understood or as widely accepted as they should be. We still, both in politics and outside it, see the role of the IDA as being that of giving grants to get companies to go somewhere or to build a factory somewhere. Either the IDA or some other State agency must have an equally important role in carrying out the sort of recommendations that the OECD have made about cultural changes in Irish society and perceptions of ourselves in Irish society which are all a necessary part of an industrial strategy which develops native industrial large scale industry.

My view has always been that the State must play a central role in the development of native industry because it is only the State that can accumulate the capital resources to take the risks to develop large scale industrial enterprises.

On that issue there is the question of developing new products. That brings us on immediately to the question of research. According to the figures produced by the Confederation of Irish Industry, the manpower engaged in research and development in this country, full time equivalents, in 1984 amounted to 1,805 people. It does not strike me as being a particularly large investment of manpower in research and development. In agriculture — this is one that knocked me backwards — there were 12.8 people involved in research and development in 1984, according to the Conferderation of Irish Industry. In research and development in agriculture in this country less than 13 people are employed full time. I find this figure very difficult to take. This is separate from food processing and drink processing. It is actually agriculture itself. Food, drink and tobacco works out at 253 people. It is not a particularly large number of people.

I would like to contrast this country, with its abysmally low level of investment in research and development, with the fact that another small country, admittedly far more successful than ourselves, Sweden, actually invests by far the highest proportion of GNP in research and development. It is far higher than any other country in the OECD. The contrast between Ireland, as a struggling country with debts and poorly developing industry, poorly developing infrastructure, and Sweden, with one of the highest levels of industrial production and industrial innovation in the world, speaks for itself.

It is also true that the OECD have been quite critical of the way in which Sweden has pursued industrial development in recent years. They regard it as somewhat wasteful. The achievement of Sweden has been to restructure its industry, to modernise its industry, so that it has the highest by far level of robot involvement in industry in the world. It is far higher by a factor of two even than Japan. Yet, it has yet managed, notwithstanding that degree of automation, to maintain its unemployment level in or around 3 per cent. That is the sort of target we should be setting ourselves. The real core in achieving that sort of target is a change in how we look at ourselves and what we think about ourselves. Lack of investment in research and development, in new product devel- opment, is not so much an absolute shortage of funds, because there are never absolute shortages of funds; there are only relative shortages of funds and relative degrees of priority. The real problem is the lack of a belief that that sort of investment yield the sort of results that we need and want in this country. I always think that one of the saddest facts about this country is that one of the most successful new Irish products in recent times, Bailey's Irish Cream, was developed not in this country but in a laboratory in the United Kingdom. The process by which cream and whiskey, which are produced probably in better quality and quantity in this country than anywhere else in the world, were combined into a successful new product, was developed not in this country but in the United Kingdom. It is that lack of an ability to think creatively that is really at the core of the problem of Irish indigenous industry.

On the whole issue of industrial development, we have to begin to look at figures. We are beginning to get figures about growth rates and exports. I have used them myself politically on many occasions. I wonder how real they are. Most economists now appear to accept that transfer pricing is practised by international multinationals on a massive scale in this country. We have a very attractive location in terms of taxation. Therefore they price down the raw materials they supply to local branches and price up their final product to maximise the profit generated in this country, presumably to minimise taxation payments elsewhere, particularly where double taxation agreements exist, and in the process give a somewhat inflated view of our industrial exports. Given that the average growth in exports in recent years has been of the order of 10 or 12 per cent in real terms — it has been higher on some occasions — and given that exports represent about 50 per cent of our gross national product if you have a 10 per cent growth in exports and the overall national gross is of the order of 1 per cent, there must have been a decline of the order of 9 per cent in our domestic economy. That is a large part of the problem.

I do not know how real the growth in exports is. If it is not real then we should realise it is not and we should identify ourselves as being a hell of a lot poorer than we are. If it is real then we have developed a dual economy. We have a booming export market controlled largely outside the country developing new products which may or may not be manufactured within the country. The strategy of encouraging multinationals to do research here may be attractive in the short term, but the fact that they develop their product here is absolutely no guarantee that they will manufacture it here. Given that most of the products they are manufacturing they developed elsewhere, there is no reason to believe they will stay here.

We have to develop a strategy which will encourage indigenous industry with firm roots here to develop new products which will be sold in international markets. I believe there is a central role for the State in the area of identifying ideas, of supporting ideas and of enabling the sort of capital formation and risk taking that no individual should take. I do not believe that any part of our encouraging entrepreneurial activity should necessitate this thing that is so much boasted about and causes so much irritation in so many places, that some poor misfortunate person actually has to mortgage his house in order to set up an industry.

I regard it as a barbaric practice by banks that people should have to put their family's security at risk in order to endeavour to set up an industry in this country. If we cannot develop a more humane and sensible way of protecting the risks of the banks and of protecting ourselves, then I do not think we should expect, encourage or regard as acceptable the idea that people have to put their homes and family security at risk in order to encourage industrial development.

With all of that philosophising behind me, may I say that the general strategy and the general policy framework contained in the Bill are most welcome. Not withstanding many criticisms I have made in the past of the IDA, it is a model for many other State enterprises of success, of economy of effort and of identifying how to do a job and to do it very successfully. I welcome the Bill and look forward to the future successes of the IDA.

Mr. Lanigan

On a point of information I am not too sure where I should go from here. On the Order of Business I raised the problems that might emanate from nuclear fall out. I asked that the Air Pollution Bill be brought forward because of problems that may arise here. I was shocked and scared listening to the news this afternoon to hear that not alone did one nuclear reactor burn out in the USSR but a second one, according to satellite pictures, has burnt out. We sympathise with the people of the Ukraine on what happened there, but now the second reactor apparently has burned out, if the information we are getting from western intelligence is accurate. The Minister and the diplomatic corps should use every effort to get proper information from that region and find out exactly what is going on.

I do not react very strongly at times to scare stories. I do not react very strongly to problems that occur because I have seen the problems that can occur in the international scene which can be blown out of all proportions but I have six kids — the eldest is 22 — and I do not want them to be annihilated in an atmosphere such as we have at present.

An Leas-Chathaoirleach

I appreciate that situation. The Senator asked for a point of information. The Senator is out of order.

Mr. Lanigan

I do not want my kids to look up into the sky and have some expert from Russia who will not allow anybody from Ireland to go into that area and look at the situation as an expert. I do not want the atmosphere in this country to be so polluted——

An Leas-Chathaoirleach

In fairness to the Chair the Senator is out of order. All I can say is that it is a matter for the House. I appreciate something much more serious has happened since we had the Order of Business. We decided at that time that the most important discussion that was to take place late tonight was on agriculture. I cannot allow the Senator to go on. I cannot tell him when this can be taken in the House. The only thing I can suggest to him is that he should talk to the Leader of the House, and try to get the House to agree even to a late sitting into the middle of the night if that is what he wants.

Mr. Lanigan

I will not disagree with your ruling. The Government have not responded to the great fears there are throughout the country. I am glad the Minister of State at the Department of the Environment is in the House because I know that he shares my fear. It is the first time I have seen him in this House. I sincerely hope he will bring——

Mr. Harte

Could we adjourn the House to facilitate the Minister?

Minister of State at the Department of the Environment (Mr. O'Sullivan)

May I say something regarding Senator Lanigan's statement? We have all heard the news. There is much rumour and speculation at this stage but there is no definite news that a second reactor has actually exploded. It is rather irresponsible of Senator Lanigan to indulge in this type of debate at this stage without prior notice. Equally so, I feel that we have failed in one respect. We all share Senator Lanigan's concern about the safety of our families and children. I do not condone the behaviour of the Soviet Government in not warning their neighbours and countries in Europe who could be affected by this fall-out.

Mr. Harte

We could very easily enter into a debate on this. I reserve the right to propose that we suspend the sitting until after the vote in the Dáil.

Mr. O'Sullivan

I would share Senator Lanigan's concern for the safety of the countries bordering the Soviet Union but the indications are that the cloud is drifting in the opposite direction to us.

Mr. Lanigan

The people in the Ukraine are being affected.

Mr. O'Sullivan

A final point: we should also extend to the people of the Soviet Union our sincere concern for their safety.

Mr. Lanigan

We said that earlier.

Sitting suspended at 6.35 p.m. and resumed at 6.45 p.m.

Mr. Harte

I would like to begin by welcoming the Bill. It is nice to see that it does what I was talking about here the other day in the debate on another Bill, namely introducing amendments into the Industrial Development Authority Act. That is very interesting from my point of view.

It has to be admitted that the IDA have done a very good job through the years. They will continue to do more good work even though things may become more difficult for job creation. They will encounter more awkward situations than they have met heretofore, particularly when they are competing in counties affected by the recession.

The types of suitable enterprises chosen will need great capacity. They have that capacity. It would be ridiculous to suggest that the IDA or any other employment agency can provide a recipe for the creation of full employment. Full employment is not easily or painlessly attained. Jobs are not easily created. We should recognise the role of the IDA in the pursuit of full employment, which must remain an aspiration. The idea of full employment must be pursued. There are many interpretations of full employment. Some people have the interpretation of an acceptable level of unemployment, or measure their employment situation against the numbers emigrating. We would like to think in terms of aspiring to full employment. The IDA would like to contribute towards that. Certainly they will not be responsible for it, nor could they be.

We should look at the appropriate agencies and examine some of the major obstacles which get in the way of creating jobs. That might be better left in the area of Government, but some assistance may be hyped off in that direction towards them. There are impediments to job creation. We must think about how to provoke thought about and wider discussion of the subject. This would necessitate an examination of the choices facing each section of the community and considering broad strategy. The IDA, despite the good work they do, are only an element in the broad strategy. I am talking about a strategy that would embrace the concept of the economy becoming increasingly capable of maintaining full employment. For example there is the whole area of rising standards of living based on a price and cost structure which can compete with other countries, output per worker; productivity of investments; the whole question of savings, exports. These are all part of a broad strategy — the skills and knowledge available to us. It is easy to say that these are not the concern of the IDA. A lot of it is the concern of the IDA in the sense that they must sell it. But it is not the concern of the IDA that they create that situation. It is a matter for the Government and the community to give the kind of leadership where the will is hardened towards that particular objective. To realise our own potential in this broad strategy we must give them as much assistance as possible. The consolidation measure before us goes some way in this direction. It certainly may be much more beneficial to the legislators than it is to the IDA. There will be a spin-off for the IDA in the sense that it will harmonise things a little so that they will not have to keep jumping from one particular Act to another because certain Acts are repealed. It possibly may tend towards greater efficiency or helping them to improve efficiency.

We can introduce legislation that will assist them, but is that the simple answer? Or should we be at the point, after three and a half years of Government, of producing a broad strategy? While we may be on the way to it, the direct answer must be that we have not yet arrived. The Government are in pursuit of this broad strategy.

Obviously when pursuing any strategy, whether for job creation or whatever, certain difficulties get in the way. One great difficulty in a free market society, private enterprise, is the will of particular localities, groups or special interest people. They are not easy to deal with. They are impediments to creating a very broad strategy which would assist the IDA and other job creation agencies. It is difficult in circumstances to achieve and maintain equilibrium in the balance of payments. I say this because we are living in a scrambling, selfish system. We are not prepared to give the objective we set ourselves precedence over the subordinate things that are more important to the group or section or the special interests we pursue. Experience will show that the rate of emigration that existed in the sixties satisfied the situation regarding the creation of full employment. The rate of emigration nowadays, coupled with other factors, will take pressure off the collective will of the community to subordinate its special interests to the overall objective. Emigration is a good release valve. In those circumstances it is hard to get the collective will to make the changes and to take the action that is needed to achieve full employment.

Apart from full employment, it is difficult to get people to go beyond paying lip service to the whole question of job creation. On the one hand they set down the means by which the jobs can be pursued and on the other hand when it comes to the question of the means it is like, as the saying goes: "I do not mind change as long as it affects the other fellow". This is the situation that we have to deal with and it is not easy for any job-creating agency; it is not easy for any Government. The Government are doing their best in this direction. They are suffering, not because they are not guilty of some of it as they were in Government too in the past. By the habits and attitudes we allowed to grow down through the years we always looked at the industrialists and agriculturalists, and so on, as being the workers and did not have regard to the community as a whole. Consequently, the whole system has got to the stage where it is "the devil take the hindmost."

Despite that observation we have a duty to keep up the pursuit and to lay the conditions for job creation, always bearing in mind that the IDA and the NDC cannot be held responsible for conditions that are not laid down properly for them. We cannot turn round and say that the IDA are doing a bad job. On the one hand we cannot argue that a broad study along certain lines should be pursued, agree with the means and the end, and on the other hand not be prepared to suffer the consequences to realise the end and to then blame the agencies who are responsible for job creation. Investors have a job to pursue and must take initiatives. If we do not get the broad strategy right we cannot blame them for it. We are here as legislators to lay down the broad strategy and to make it work in so far as it is practical to do so.

Debate adjourned.

Seanad Éireann debate - Wednesday, 30 Apr 1986