I move:
That Seanad Éireann takes note of the First Report of the Joint Committee on Employment.
As I said on the Order of Business, we will debate item No. 1, the motion, and have statements on item No. 2 both to be taken together.
First Report of the Oireachtas Joint Committee on Employment: Motion.
In relation to this Seanad debate on the First Report of the Oireachtas Joint Committee on Employment I would like first to place on record my appreciation of the work which this committee have been doing. They have furnished what should be remembered as the first of many reports. I would like to commend the chairman of that committee, Deputy Brian Hillery, who has been doing an excellent job in creating the proper atmosphere under his chairmanship for a full and constructive debate by all members of the committee dealing with this the most pressing problem facing the economy.
The impression has been given in some quarters that the Government are not treating seriously the work of the Oireachtas Joint Committee on Employment and that they have no intention of taking on board the recommendations which the committee have made and may make in the future. I would refute categorically any such suggestions. This Government welcome every possible initiative and every workable recommendation from the committee.
As Minister for Labour, my responsibilities and those of my Department are primarily in the area of manpower and training. We need to look afresh at strategies that will help those on the live register to get a foothold in the labour market. In this, its first report, the committee point out the need to focus on the characteristics of the unemployed. Unemployed people are not a homogeneous group. We must consider their skills and their educational qualifications, their occupational history and the length of time for which they have been unemployed. The committee pointed out that in 1991 of the total numbers on the live register, 108,000 had been continuously on the live register for a year or more. A more disturbing observation was that more than 50,000 had been continuously unemployed for more than three years. Long-term unemployment is, therefore, clearly a serious problem.
The report points to some obvious linkages between unemployment and educational attainment. A significant number of long term unemployed do not have the type of educational qualification required in a modern technological society. They do not have the marketable skills needed to get a job in a very competitive market and they are unlikely to benefit from any expansion in employment resulting from an improvement in general economic conditions. Many of those coming on to the jobs market every year have second and third level qualifications. Increasing numbers are coming on every year. This puts the long term unemployed at a serious disadvantage. It is essential that we consider how to deal effectively with that problem.
Among the recommendations contained in the report is one designed to improve the co-ordination of job creation, training and employment schemes. In the context of the forthcoming White Paper on Manpower Policy, I am giving this particular problem very careful consideration.
The question of closer links between my own Department and the Department of Education will have to be addressed. In that context the report recommends the need for an independent certification body so that those who are qualified have qualifications that are certified and recognised internationally.
The committee are aware of the importance of recognition of Irish educational and vocational qualifications by foreign employers if Irish people who go abroad are to secure employment that is commensurate with their qualifications. I, too, am very interested in pursuing this matter. It is also one of the recommendations contained in the Culliton report and discussions are ongoing with the Department of Education to improve the situation as quickly as possible.
The committee also recommended the establishment of an equity for jobs fund and suggested that a sum of £100 million should be set aside as a matter of priority for this purpose, the intention being to make available venture and development capital for indigenous industries.
As this House will be aware, the Government lost no time in implementing that particular proposal. We established the enterprise partnerships boards for every county in the country and we provided more than £100 million to fund this new initiative.
These boards are to be set up nationwide. They are partnership boards and they are intended to involve everyone in the community who is interested in the work of job creation. They will comprise the chairperson of the local authority, the county manager and representatives of local communities, social partners and public agencies. These boards will have three key objectives: the development of small and start-up enterprises employing up to 12 people; training and education, especially as linked to enterprise development and local community development.
The boards will prepare action plans for their counties and areas. These plans will set down specific proposals to be implemented through decisions of three key sub-committees of the boards.
A forum of a relevant local organisations will be held in each county and area every three months to ensure an exchange of ideas and to allow local communities to consider the ongoing progress of the boards' activities.
The Culliton report has already acknowledged that there is a need to tap into local initiative and there is a need for localised structures. When we encourage people to come together with the help of both the public and the private sectors and to take pride in their own area and their own county and in what their own county can do, we are tapping into one of the most powerful forces in Irish life, that is, local pride.
The partnership boards can choose the best from within their own communities. They can give those people with enterprising ideas credibility with the banks and with the financial institutions who might not otherwise risk setting them up in business. This scheme will provide a great incentive to local entrepreneurs. I strongly support it because I know from personal experience that it works.
In my part of the country we set up the County Offaly enterprise board which did and continues to do excellent work in the promotion of enterprise and in the provision of jobs at local level.
This, therefore, is an example of an excellent recommendation by the Oireachtas committee which has been quickly taken on board by Government and which has been given funding which is ten times greater than that which was recommended by the Oireachtas committee itself.
We should not try to kill this initiative before it has even begun. Let us be constructively critical when the interim period is over, when we know if the new structure works or if there is a need for a change, but let us not throw it out until we have given it a chance. Personally I am confident that it will work, that it will be good for the community and that it will provide jobs where none have been available before.
As the Taoiseach's recent successful visit to the United States has shown, support for the local community and for indigenous industries does not mean that we have ceased altogether to look for foreign investment in this country. Mobile international investment in Ireland and in Irish jobs, although not the whole solution, is still part of the solution. It is something on which this economy must continue to concentrate.
The Culliton report points outs, as I have said, our need to develop indigenous industries more actively. The Government accept that point. There is plenty of potential out there for new Irish business. There would appear to be plenty of scope for Irish industry to supply raw materials to the larger multinationals in this country. Culliton identifies this as an area requiring immediate improvement. The Culliton report mentions that perhaps the IDA'S performance in this particular area has not been what it should be. It is these kinds of deficiencies in Irish industrial policy which are being addressed by this Government in the new structures envisaged, in line with the Culliton recommendations, as decided by Government.
We have also recently taken the initiative of expanding the social employment schemes. These are temporary work experience schemes which have been extremely effective at local level through out this country in making a significant contribution to local improvement work of all kinds. The SES is not being put forward as a panacea for all our ills but it is part of our strategy to help the unemloyed, and particularly the long term unemployed, to get back to work and get much needed work experience.
In the future there will be increase numbers on the social employment schemes. However, there is still a need that must be addressed. We require uniform participation on the SES through out the country. Unfortunately, some local authorities still cannot operate the scheme. The arguments against the use of the scheme are no longer relevant my opinion and they should be dealt with within the trade union movement so that we can have an across-the-board application of SES schemes everywhere. I would argue that to oppose the widespread use of this excellent scheme is not doing anybody any good — neither unemployed who would like to obtain temporary employment nor the local authorities or taxpayers who would glad to see the work that is not be done at present being attended to.
The Oireachtas committee report also recommends increased participation vocational training and in opportunities schemes. I fully accept these recommendations and I fully accept the need to develop and increase participation numbers over a period of years. As I have already said, the lack of educational attainment is a major impediment to ting many long term unemployed people back to work.
There is a need here for European Community development strategies to help to deal with the problems of long term unemployment. Such problems are not unique to Ireland. They are also being experienced throughout the European Community.
Earlier this week I attended an informal Social Affairs Council Meeting in the UK and I discussed with my European colleagues the need to bring unemployment to the top of the agenda of the Council of Ministers for Social Affairs. There is a need for the European Community, as a whole, to look at ways and means to co-ordinate measures and to come up with strategies that will help the unemployed. I am glad to say that the UK Presidency has been co-operative with us in this regard. An example of our difficulty is that the criteria governing the European Social Fund are often too strictly laid down. They prevent Ireland getting funding from the European Social Fund, for example, for the social employment schemes. These schemes are totally Exchequer-funded but were we to receive increased EC resources for these schemes, we could boost numbers fairly quickly and do work that badly needs to be done. No one, therefore, should doubt the Government's commitment to giving very careful consideration to all that the Oireachtas Joint Committee on Employment has to say about job creation.
This first report of the committee is not one that will be left to gather dust. I have already pointed out the recommendations which we have taken on board and which we are implementing. They are evidence of the Government's bona fides in this regard. The Government see the work of the joint committee as a valuable tool in fighting the scourge of unemployment. We have no intention of ignoring its views or of treating it as a talking shop.
I would, therefore, like to conclude by paying tribute to the committee's chairman, Deputy Brian Hillery whose committee has completed an excellent piece of work in a very short period of time. I am sure this House will agree that what has already been accomplished has been excellent. I would also like to pay tribute to the members from all the political parties who participated on the committee and to the staff who I understand have given considerable time and effort to the committee. I would also pay tribute to the members of the sub-committees who deserve our praise and thanks.
The fight against unemployment is not one that can be fought by the Government alone. The work of the Oireachtas Joint Committee on Employment is already an indication of what can be achieved when we are united in our desire to improve the situation of the unemployed.
I welcome this first report of the committee. I congratulate Deputy Hillery and his team and I look forward to further reports on the work of the committee in the not too distant future.
I welcome the Minister to the House and I thank him for making time in his busy schedule to do so. I thank him for his brevity — I know it is not because he does not have a lot more to say — but the value of these types of debates is that the Minister listens to the views of all sides of the House on issues that concern us and, hopefully, at the end of the debate responds to the points made rather than just coming in and telling us what way he thinks things should be.
We have an economy at the moment that is dangerously addicted to Structural Funds. Euro-money is replacing national Exchequer funding right through the various Votes and the whole concept of additionality would appear to have been abandoned by this Government.
I found the £6 billion carrot that was dangled before the electorate prior to the Maastricht referendum to be nothing less than nauseating, not because we cannot spend or do not need extra moneys from Europe but because I felt that the Maastricht Treaty deserved to be sold on its intrinsic merit to the people. It was good enough and strong enough to stand alone without being blackmailed as a nation into voting for it. We did an enormous disservice to the whole concept of European union and the ongoing development of the European vision by suggesting that if we did not vote for the Maastricht Treaty we might lose this £6 billion which, by the way, we have yet to hear tell of, about which no decisions have been made and more than likely we will not receive, at least not in full. I wish we had not brought it into the debate on the Maastricht Treaty. As I have said, the concept of Maastricht and the development of our European union can stand alone, and proudly indeed.
There is no doubt that our economy will suffer severe withdrawal symptoms if Euro-money in the future is diverted to eastern Europe and, indeed, to other countries that will join an enlarged Europe over the next decade or so. Nationally we are told that the major economic fundamentals are in line, with the notable exception of unemployment figures. I heard the Minister for Finance last night on television talking at length about the economic fundamentals being in line. The one huge problem we have is the dole queues.
I am afraid, however, there is no confidence in our economy nor is there any confidence in the Government's handling of the economy under this Taoiseach and the Minister for Finance. There is an air of political uncertainty caused not just by economic issues but indeed by some of the social debates that are going on. This Coalition would appear to be dangerously fragile and whatever the reason for the fragility or for the difficulties within the Cabinet it compounds the atmosphere of political uncertainty and that destabilises us economically as a country. The budget this year transferred over £1 billion to be decided on in next year's budget, or perhaps in a supplementary budget or Finance Bill this year. Maybe we could hear from the Minister what the plans are in relation to that. The budget this year rewarded savings and penalised productive investment and risk-taking.
The taxation system is stacked against the employer in this country. It is stacked against the employee, and particularly against someone who is trying to get off the dole queues because the potential employee loses a whole range of supplementary benefits which makes it very difficult for him to get a wage or a salary that will compensate him, particularly if he is married with more than two children. We have been given the figures but examples really concentrate our minds. If an employer wants to give an employee £200 a week, it costs the employer £245 and the employee would get £173 in his pocket at the end of the week. That is the cost of employment today from the employer and the employee's point of view. This area needs to be tackled urgently. We have talked about it for a long time but little progress has been made.
There is also the difficulty of those who get short term or part-time work or who job share and then need to get back into the social welfare system. Is it any wonder we see such a grim picture with over 300,000 people unemployed and this figure is increasing rapidly?
Last week I dealt with the increase in our interest rates when on 8 October we debated the Europe an Community's reports, so I will not repeat myself. The currency chaos and the fluctuations in the markets are compounding our difficulty here. The increased interest rate has caused major problems for businesses, particularly those exporting to the United Kingdom or depending heavily on the United Kingdom markets. It has also caused major problems for businesses, ders, many of whom are put to the pin of their collar to provide their own homes and not resort to State services when it comes to housing.
Let us look generally at the problem and see where we should go. In modern Ireland we are challenged to be able to comprehend our society and to offer a vision which will give hope to all, particularly to our young people, and resolve our economic difficulties. If our political system, currently and for too long absorbed in scandal, does not very soon come to grips with the unemployment problem, then the institutions of State will be seriously threatened.
Democratic politics in our country is primarily a process by which people and nations agree to plan their social and economic programmes. Politics is not there for the honour and glory of those who participate in it. Let us remind ourselves of that occasionally. When it becomes a self-gratification process it is then devoid of purpose and is threatened in itself. If Irish politicians fail to solve the economic problems, then the process of politics as we know it will be endangered.
In this country there is what we euphemistically refer to as an unemployment crisis. The expression "unemployment crisis" is a major turn off. The turn off occurs when people assume that it is a Government problem or at least somebody else's problem — they are wasting their time assuming it is this Government's problem. Unemployment is no longer a suitable subject for after dinner political speeches because people do not believe in the Government's ability to solve the problem, or they believe it cannot be solved.
Ireland's unemployment rate is now the highest in Europe and in the EC; it is six points ahead of strife torn Yugoslavia as we knew it. Within the term "unemployed" there are many categories. There is a transient seven or eight per cent of people who have worked all their lives and are temporarily out of work. They dread the dole queue because they know the value and dignity of work. There are those who have never worked and are without the social skills needed for work. Then there are the 95,000 people under 25 years of age who are without work. Many of them have had the benefits of first and second level education but, regrettably, there is a large number who have not. These are the young hard core unemployed who have no hope of gaining access to work because of the present economic circumstances under this Coalition Government.
Our unemployed are effectively disenfranchised. People out of work are no longer part of the system. The thousands of young people who cannot find work and who have never had work, have never experienced the system and, therefore, have never taken part in the economic and social life of this country.
Our young people have a fundamental right to be players in our economic and social life. In Wexford town alone we have more than 3,000 people out of work; over 23 per cent of the population of Wexford town are unemployed and 24.1 per cent in County Wexford are unemployed. We have the third highest rate of unemployment after Mayo and Donegal. Mayo and Donegal also have a large number signing on for farmer's dole which, in a sense, inflates the figures of those truly without anything to do who are on the register. In Wexford we do not have the farmer's dole to alleviate the plight of many small farmers. Effectively if we rule out those signing on for farmer's dole in Mayo and Donegal, Wexford has the highest rate of unemployment in the country. Is it any wonder I feel so strongly about the situation?
Then the Senator should have sat on the committee.
I will have plenty to say about that report shortly and the facile recommendations 1 to 12 we are faced with. The young people who are unemployed and living in the urban areas of Cork, Dublin and my own area of Wexford are not just excluded from the system but are creating a sub-culture which, in many ways, is the social antithesis of the norms which should prevail in a healthy democracy. There is evidence emerging that within the young hard core unemployed this sub-culture is taking root. The main features of this sub-culture include an antipathy to the gardaí, Church and State. The social norms of honesty and respect for property do not prevail within this sub-culture.
When large numbers of men are without work, the women are locked into the life of the unemployed man given the social norms that still exist here. These women and the women in the households of the unemployed are even more deprived economically and socially than their male counterparts. The economic hardships of long term unemployment falls disproportionately on the shoulders of the housewife and the mother. It is the woman who experiences first hand the full impact of economic deprivation.
There are many other characteristics of the hard core unemployed which I should describe but suffice to say that as the numbers of the unemployed increase so also do the numbers of the hard core unemployed. Currently the hard core unemployed could amount to 10 to 15 per cent of our population. This Government are not delivering to our young. They are removing the dignity and status of work from too many of our population. They have paid lip service to the problem for too long and any Government ignore our unemployed at their peril.
In this grim picture we have yet to take account of the impact of the Common Agricultural Policy reforms on the economic life of our country. Many generations of Irish people have gained their dignity from being self-employed on their own land, be it a small or not so small patch of land. The cheque in the post is the EC Commission's response to overproduction but this takes no account of our family farming tradition.
Let us remember there is nothing common about an agricultural policy where certain member states can afford to pay national aid to their own farmers five and six times greater than other member states can afford. I repeat this because I feel very strongly that it is a point this Government have missed in accepting the reforms of the Common Agricultural Policy, a policy that needed reforming, but the specifics of the reform package do not recognise that certain members states can afford national aid and five and six times greater than this country could ever afford. What is common about a policy when farmers in certain member states can be compensated to a far greater extent for the reforms in the package than our farmers? It is putting the Irish farmer at an enormous competitive disadvantage, compared to the Dutch and the Germans. We need a level playing field before the Community's agricultural policy deserves to be called a common policy.
I am sceptical to the point of being cynical about the so called guarantees on the compensation payments promised in return for price reducations and price control in the Common Agricultural Policy reform package. These reforms are being phased in over the three years and while the price reductions and production controls will be permanent, how can any Commissioner guarantee indefinitely adequate compensation levels given the annual budget fixing that exists in Europe and the likely change of Commissioner, the Council of Ministers and the Parliament that are part and parcel of any democratic system? How can the present incumbents promise indefinitely that the level of compensation payments that have now to be accepted for price reduction and production controls will go on ad infinitum? They cannot. This Commission cannot commit the next to a certain line of spending. Who knows what pressures will be on common agricultural spending in a few years time? What do they mean by “guaranteed compensation”— guaranteed for one year, for three years, or indefinitely, as the farm organisations appear to understand?
The Irish economy, the Irish farming community and agri-business community will need every ECU of compensation we get from Europe. We need to think about it and spend it wisely. Between now and 1995 gross agricultural output will decrease by nearly £450 million or 14½ per cent. There will be 14½ per cent reduction in agricultural output in this country over the next three years. Direct payments, that is, the existing premia, the proposed compensation measures and all the disadvantaged area headage payments, will double to £617 million between now and 1995. Direct payments will account for half of net farm income by 1995, an increase from one-fifth of net farm income today. In other words, the cheque in the post dependence will go from one-fifth of farm income today to more than half in three years time.
Children in this country who are being reared to believe that they, too, will work the land have a very uncertain future.
Another segment of our population are left without hope by this Government. Let nobody tell me that we cannot create significant economic linkages between our capacity to overproduce quality food and the problems of hunger facing the African continent, Somalia and the new democracies of Eastern Europe and Russia. In marrying our surplus to their great need, there lies one of the greatest challenges yet for our democratic institutions and for this Government as part of the European Community.
The Minister referred to the first report of the Joint Committee on Unemployment, one of the two items we are debating here today. The Fine Gael view is clearly known by the Government. They understand very clearly why we chose not to become part of this committee. They know our serious concerns about the direct relationship of Ministers to the committee and the fact that the social partners are not part of the committee but of a sub-committee structure. We have very clear ideas about how all of us should work together to resolve the crises in our economy at this time. Fine Gael were prepared to serve if the terms of reference were such that it would not be just a talking shop. I sincerely wish the joint committee well. Even if we feel it is misguided and the terms of reference are not as we would like them to be, any attempt to resolve our problems, particularly our critical unemployment problem, must be given every chance.
I was disappointed with the summary of recommendations. They appear to be a repetition of the committee's terms of reference rather than the results of two months' deliberation. These are the 12 points that should have been given to the committee for their first meeting.
The recommendations are as follows: (1) Improve co-ordination of job creation, training and employment schemes — we all agree. (2) Support the broad thrust of the Culliton recommendations —"broad thrust", is ominously vague, an á la carte selection from Culliton is obviously what is meant. (3) Establish an equity for jobs fund — there is no difficulty with that but we need immediately to know on what basis and how. (4) Develop linkages further — that would be self-evident. Any linkages we can develop will help the unemployment situation, reduce our dependence on imports and develop the area of import substitution. (5) Develop the job creation potential of the semi-State sector — that is what the committee were told to do. They did not need to find it as a recommendation.
(6) The planned expansion of the social employment scheme — provided it is an avenue to viable work we all support that or a similar back-to-work scheme but not if it is just another means to temporarily reduce those on the register with no meaningful job potential at the end of the day. (7) Increase participation in the vocational training oportunity scheme — yes, we should increase the participation in any training scheme that is leading to viable employment. (8) Develop proposals using existing resources to provide employment for the long term unemployed — what else were the committee supposed to be doing? Yet, this is a recommendation in the first report.
(9) Maximise the commitment of Structural Funds to Ireland post-1993 — we are all in favour of what we can get from Europe but how are we going to to spend it productively? Will it light economic fires from which viable, self-sutainable jobs will emerge once the initial capital has been spent? Yes, we need Europe to help us. We were there when Europe needed us in June when we endorsed the Maastricht Treaty as no other people has done. We have paid Europe back for every ECU they have spent on us over the 20 years, but what we as a nation must do now is to question how we spend the European moneys, whether it is lighting economic fires creating sustainable viable jobs or it is just compensating for Government spending and is not on a true additionality basis.
(10) Extend and improve support services for those considering migration — that stands alone. There will be those who will opt to go abroad when we cannot provide jobs for them here. They should not go abroad without knowing exactly what they are doing and, hopefully, it will not be forced but voluntary migration. (11) Develop measures to encourage and support the return of well qualified migrants — if our economy allows them to be placed in jobs, there are well qualified migrants who would be very welcome home with the experience they have gained abroad. That is more wishful thinking because most of the migrants who are fit to come back home usually are so self-resourceful that they will look after themselves in this area. I hope we have room for thousands more of them. (12) Establish a more coherent internationally recognised system of certification for Irish vocational qualifications — that would get our certification systems in line with Europe and places further afield so that our certificates would be passports to those who wish to travel, as an indication of their qualifications.
While there is nothing wrong with the vast majority of those 12 points, they are, in fact, what the terms of reference of the committee should have been, rather than arising as recommendations a couple of months down the line. There is nothing wrong with them but they indicate little progress.
I know it is early days yet. I will just note the report and look forward to a further report and more rapid progress very quickly. I would hope, given the hype, the launching of this joint committee and all the Government had to say about it at the time, that it will bring results. I have a feeling, however, that the focus of the Government's efforts in the whole area of job creation has moved from the joint commitee and into other areas, which I will briefly mention.
There is, quite possibly, a lot of duplication now with the various bodies, partnerships, action plans and programmes of one kind or another that are forming layer upon layer in an attempt to resolve the problems. In our effort and then Government's effort to get an answer, rational thinking is needed. We must not just heap emergency measure upon emergency measure causing duplication throughout the system.
The Minister referred to the county enterprise partnership boards. My natural instinct is to allow any idea to gestate to the point of proving whether it is worth-while and viable. However, there are questions I must put to the Minister and I would appreciate very much if the Minister for Finance when he comes into the House at 3.30 p.m. would reply to some of them. In relation to these proposed enterprise boards my queries are shared by Members in this House of all sides and by local government representatives of all political shades, including Independents. Without casting too much doubt on a proposal before we really know whether it will work, I would like to know to whom will these enterprise boards be responsible? What Minister are they answerable to? I would like to know why only one public representative at community level will be on board?
The Minister in his speech said in relation to these partnership boards that "they are intended to involve everyone in the community who is interested in the work of job creation". I put it to him that there can hardly be any group more interested in job creation than local county councils and the bigger borough councils. They are comprised of democratically elected individuals of all shades of opinion, political and otherwise, who have been selected by the people in their community to represent them for five, six or seven years on the local authority in question. Yet, the Minister, or the Government, see fit to involve only one member of the local council among the 15 members of these enterprise boards.
I question seriously this Government's commitment to local democracy, to local government reform, if, in perhaps one of the most critical moves to solve our most difficult problem in our country, they virtually exclude local authority members. That is not acceptable, it is undemocratic. I ask for serious reconsideration of that point.
We must work together to solve this problem. The Government have antagonised every local authority in the country with the initial announcement of these boards. If they continue to antagonise and do not bring the local authority representatives on board, these enterprise boards will not work. I am not suggesting the boards should be filled on a "jobs for the boys" basis. I mean we should have local representatives on the boards who have something constructive to offer in terms of job and employment creation in the local community. We need the thinkers, those who are not in it for themselves, and where the old pals act is not involved. There should be a serious effort to involve members of the local councils and the locally elected representatives of all political parties and Independents who have an enormous amount to offer in relation to the purpose for which these boards are being set up. The Minister has insulted the local authority structure and representatives by setting up enterprise partnership boards and ignoring the local public representative. I urge him to resolve that point very quickly. Perhaps it was an oversight, but somehow I doubt it.
I mentioned, briefly, that I am concerned about duplication in the terms of reference of these enterprise boards, particularly when one looks at the pilot projects set up under the Programme for Economic and Social Progress. In Wexford we have the South West Wexford Partnership, an excellent concept but surely an enterprise board in County Wexford would duplicate some of the work of that pilot scheme under the Programme for Economic and Social Progress. I would like a response from the Minister as to how they will liaise, how we can avoid duplication. We also have a Leader programme in Wexford called WORD, the Wexford Organisation for Rural Development. The terms of reference of that programme duplicate the Programme for Economic and Social Progress pilot project to some extent and certainly duplicate the terms of reference of the enterprise boards. I am concerned about rationalising our efforts to get action on jobs rather than duplicating and thus dissipating resources.
The county development team is to be absorbed into these enterprise boards but I have serious concerns about that, particularly if we leave the local representatives off the boards. In County Wexford, where we have no IDA one-stop shop, we are highly dependent on our county development officer and his one assistant. If they were absorbed into the enterprise board, the democratically elected representatives would have no direct access to a county development officer with the local authority anymore. While there is much merit in the concept of the enterprise board, there are major problems in regard to its proposed structure. I would like to see an enterprise board developed around the existing county development officer or county development team, which exist in some counties. In Wexford there is only a county development officer. The county development officer could be augmented by vocational support, the social partners and all the other bodies it is proposed to add to the enterprise board.
That is what is happening.
No, no. What I understand is proposed is that the county development office in the local county council will close and the county development officer will go to this new enterprise board and will operate on that board totally separate from the local authority. In other words, the local authority will lose an officer and that officer will become part of the enterprise board. I am prepared to be corrected but that is my genuine, honest understanding of what was proposed. I await the Minister's explanation if it is any different. Incidentally, that was also our county council's understanding, last Monday, when we debated these proposals at length. It was the understanding of the county manager and the county chairman who is one of the Minister's party. I would be delighted to be corrected if I am wrong, but it appears we will lose our county development officer.
I would like the local authorities to keep their county development office augmented by an enterprise board representative of various groups as the Minister has proposed. That office should be kept as part of the county council official structure, albeit augmented by this supplementary board. That county development officer could be the chief executive officer of the board the Minister is proposing while remaining county development officer to the local county council. In that way it would not be necessary to put the councillors actually on the board. The link between the local authority representatives and the board would be the county development officer. Thus, one would meet the difficulty created by the exclusion of all the public representatives at local level at the moment.
In Wexford, as in many other counties, we have created a jobs forum of our own in the local authority structure. It is chaired by the county chairman. The chair persons of all the four district committees are on it as well as the chairpersons and Mayor of our borough and urban areas. Thus we have an excellent jobs forum representative of the chairs of the local authority and the districts in our county. That jobs forum would continue to operate directly as part of the local authority structure under the county chairman. The link between the local jobs forum and the enterprise board would be the county development officer, who would remain as an official of the county council while acting as chief executive officer of the new enterprise board. In that way everybody would be on board, working for the same goal.
I resent any attempt to remove from local authorities their county development office, particularly given the much heralded promise of increasing the developmental role of local authorities. This was supposed to be the principle of the local government reform package which we are awaiting. If the developmental role of local authorities is to be increased, a policy which I support, surely it is a retrograde step first of all to abolish the county development officer and absorb that post into the new enterprise board. More thought is needed. In the Government's effort to resolve crisis problems they rushed a solution here. In any case there is a major difficulty on the ground with the local public representatives who effectively have been excluded from the community enterprise board concept.
Another question in relation to the enterprise partnership boards is the definition of "enterprise". I have in front of me the literature that was published in relation to these enterprise boards. "Enterprise" is a loose word. Will there have to be county uniformity on grant aid criteria from these enterprise boards? Otherwise, if County Wexford has a more favourable grant regime for small enterprises or ideas than, say, Carlow or Kilkenny, what is to stop Carlow or Kilkenny enterpreneurs coming to Wexford and locating in Wexford? I can see a problem here unless there is very strict national control on the grant aid criteria. In a sense that would defeat the purpose of setting up local county boards to do their own thing. I can foresee poaching of ideas and entrepreneurs by more favourable regimes.
As they are, even without including more local authority representatives, the structure of the boards is too cumbersome; it is too big as a result of its attempt to be all embracing. Having 15 members on a board, plus a chairman, makes it too big. Primarily, it is too big to ensure confidentiality in terms of proposals that would come before the board. If you or I had a good idea which we thought would create money, make a profit for us and allow us to employ people in our community, would we not be nervous going before a board of 15 members of the local community, all of whom we know well? I feel the board is too big and cumbersome to allow confidentially of ideas and projects that may come before it. Hence it might not operate as we would all like it to operate.
Do these boards remove the responsibility of job creation and industrial and commercial expansion from the Minister for Industry and Commerce? Is this the Government's way of putting at arm's length their responsibility to the unemployed? In other words if the boards do not work and if the jobs are not forthcoming, it will be the fault of the enterprise boards, not the Government. Let us be quite clear what they are doing here, we need to know.
Will projects and ideas which have been rejected by the commercial banks as not viable now come before these enterprise boards and will they be given the green light? We must be careful here too. We all complain about the banks and we all have a view that they are restricting lending. They will vigorously defend themselves and say that is not so, but we know from the feedback from the communities we live in and which we represent that there are problems in financing good ideas and new enterprise. The banks will have screened proposals very carefully. If they decide they are not viable will these enterprise boards, with their £150 million that will be available to them be in a position to give a green light to proposals that have been rejected by the banks?
I like the idea of the county tourism managers incorporated in the proposal for the enterprise boards. I like it because I represent Wexford, a county in a region that does not have its regional tourism office located in it. We are but one in a region and we do not have our own tourism officer or tourism manager at the moment. I have felt for a long time that Wexford needed a tourism officer or tourism manager of its own. I have to say, however, I am unhappy with the haste with which the decision to abolish the regional tourism offices was taken. They do excellent work in their own areas, although I have never been quite happy with my own county's fall-out from the regional office. I have made my views known on previous occasions on that, but the concept of regional tourism offices, if each county could have its tourism manager, is excellent given the enormous importance of tourism in our economy today. I would ask the Minister to look again at the proposal to abolish the RTO's. The RTO's could be represented on an enterprise board without being abolished. I feel insufficient thought has gone into that proposal and there could be more problems generated than the Minister realises in relation to that.
Why do these boards concentrate only on enterprises of up to 12 jobs? Already in Wexford I was negotiating with a man who had proposals for a 15 job enterprise. He was going into a local incubator unit, hoping to develop onto a greenfield site and build up his business. All large businesses were small businesses once. Is the 12 job limit sacrosanct? This man is now going for 12 jobs in order to get the support structures that are now proposed. He will not go for 15, which he already had in the pipeline. Surely a 20 job enterprise is a small industry today. I think we could be a little more generous at that level and I would urge the Minister to consider that.
I put those questions hoping that the answers will satisfy my concerns, because I would dearly love a concept such as the Minister has proposed to work. I would like it to work by augmenting the developmental role of local government, by augmenting the county development teams or offices in the different counties, so that the local government representatives can work in tandem with an augmented county development team. One can call that an enterprise board if one likes. Names mean nothing. At the end of the day this proposal will be judged on results only; it will be judged on jobs and job creation. I sincerely wish it well.
I would like to mention the market development fund for export aid and sincerely hope that those who need it will be in a position to benefit from it. There are certain trading criteria for each company to be eligible. The net trading balance on export sales with the UK must exceed 35 per cent of total sales, or the net trading balance in the Irish and UK markets combined must exceed 60 per cent of total sales. The company must be able to demonstrate that sales in Ireland are subject to severe price competition from UK imports, or that the net trading balance on exports to the UK and-or third markets, which the company can demonstrate are subject to severe price competition arising from recent European currency devaluations, exceeds 35 per cent of total sales.
I wish the concept well. I hope there is a fast track system to get to those companies in need, to secure the jobs that are perilously at risk at the moment because of recent currency fluctuations and the appreciation of the punt against sterling. I am not going to repeat my views on that; I mentioned it on 8 October in this House when we were debating it. I would just ask that the criteria should not be used to hinder or to slow up aid to the companies concerned.
I will not go through the jobs/economy document that Fine Gael have spent the summer discussing throughout the country. I will just say we had an enormously successful response. We have our own very strong views on how jobs and the unemployment problem should be tackled. Hence, when the Government refused to listen to us when they were creating the Joint Committee on Unemployment, we decided we would be constructive. We were not just knocking the Government. We would say exactly what we thought and put effort into the system to resolve the problem.
The main recommendations of "The Jobs Economy”, a policy document we published in May 1992, are as follows: The Government must get their own house in order, any Government must. They must reduce the overall tax take and introduce a systematic multi-annual scheme of budgeting to avoid concealed growth in public expenditure. We must reduce the cost of services provided by State enterprises — our document details how. We must introduce a proper efficiency audit system into public authorities. We want to promote early retirement and job sharing schemes in the public service to open up opportunities for new entrants.
We want to overcome major deficiencies in our transport network. An extra £80 million investment in our roads would directly employ up to 2,500 people in badly needed projects. We need an extra £10 million to develop our ports. We need a proper commercial structure for our ports, modelled on Aer Rianta, with private ownership where appropriate. EC structural aid is needed for our shipping fleet and airport infrastructure which must substitute for our lack of a land link to Europe.
We call for devolving initiative to local level and encouraging business start-ups. Under that heading we suggested allocating half the present budget of the IDA and the other agencies for five years to create a £500 million venture capital fund for business start-ups. We also want approved new businesses to be able to defer tax for the first two years without incurring penalty interest. Under the heading of removing restrictive practices that at present limit new business entrants, we have suggested that we remove licensing arrangements which cannot prove that restrictions are in the public interest.
We suggest educating our people to beat the best in Europe, introducing a continental language at primary level, encouraging competition in the provision of training by introducing competitive tendering from outside FÁS to run courses. We must look at the millions of ECUs or punts that FÁS gets from the Social Fund and the Regional Fund and analyse seriously whether we are getting value for money. In certain areas we are, but other areas we have to question.
Under the heading of cutting tax on work and enterprise, Fine Gael suggest that we widen the standard rate tax band through a programme of broadening the tax base. We want to introduce, on a phased basis, a tax break on labour intensive home delivered services like child care, nursing care, home repair and home help. We want to introduce tax inducements to attract savings into funding new business ventures and to overcome the trap where some families are no better off when they take up work, by making means tested schemes and support for children apply equally whether in or out of work.
We want to release the trapped potential of unemployed people by introducing a working dividend payable through the PAYE system that would guarantee take home pay of £25 per week over and above social welfare entitlements in payments and fringe benefits. We want to introduce new initiatives to support part-time work opportunities for unemployed people and a new "work to be done" scheme, similar to the social employment scheme, to replace the social employment scheme. Participants would be allowed to be retained for three years by non-profit making organisations. Think of the number of representations we have all received from schools when a caretaker has been whisked away after one year and a good person, who has established a rapport with the school management and the children, cannot be retained. We want those people in non-profit organisations to be able to be retained for three years and for two years for potentially commercial activities, such as waste recycling or summer schemes.
We would like to see a skills co-operative which would be encouraged to act as a referral agency for householders seeking tradesmen. Persons becoming redundant would have access to a personal training fund which they could use to take up retraining opportunities.
These are the recommendations from Fine Gael on the jobs economy. They are the areas we feel will provide long term, sustainable and viable jobs rather than an action plan or heaping another layer of crisis management on the existing situation.
I wish to make a final point in relation to district service companies. These are not my concepts, they are not even Fine Gael's concepts. These concepts have been debated in the media. I would urge serious Government attention to the potential of the creation of district service companies. The general concept proposes the establishment of a network of private limited companies, under the indirect control of the State, which would employ unemployed persons with certain skills who are willing to work. Think of all the jobs we need to have done but can never get anyone to do them — jobs in the garden, in the office, temporary secretarial work, small maintenance jobs, etc. Nobody wants small once-off jobs. These companies would employ unemployed persons who were willing to work. The unemployed person would apply to become an employee of the district service company and would sign over his social welfare entitlement to the DSC on being accepted. This would be returned to them, irrespective of whether they worked, in the form of a basic wage provided they fulfil the company rules.
The DSC would then sell the employees' labour in the form of a service on the open market, as with any other service activity. Payment would be made by the customer directly to the DSC and it would, I would hope, be tax allowable from the customer's point of view. That would direct work into the white economy rather than the black economy.
When we were debating the second part of our agenda here today — statements on the economy — perhaps we should have asked the Minister if the economy referred to was the black or the white economy. This type of work is usually done by people involved in the black economy; no one in the properly structured white economy will do small jobs around the house, garden or office. This also applies to badly needed work on farms, part-time or short term work and weekend work. I am talking about bringing this enormous amount of work into the white economy and translating it into jobs.
The employee would be permitted to earn a set amount over the existing social welfare entitlement before any clawback would commence. The clawback would rise progressively until an effective cap on total earnings was achieved equal to, say, the average industrial wage. The clawback would be refunded to the Department of Social Welfare, less the direct non-staff operating cost of the DSC. The staffing of district service companies would be achieved by using existing public sector employees from among the unemployed. Special incentives will be applied to potential employees in the private and public sectors. Customers would pay VAT at the rate of 10 per cent.
The essential features of an incentive package for potential employees would be that the district service company employee retains his existing social welfare entitlement on becoming an employee. He loses nothing by joining. The employee retains the first, say, £30 per week earned through the district service company, then a clawback on earnings over this threshold progressively reduces the amount retained through earnings until a cap of, say, the industrial wage is reached. The total amount clawed back from all employees would be returned to the State less a deduction of the non-labour cost of operating the DSC.
No income tax or PRSI would be payable by the DSC employees as the clawback would substitute for both. Indirect social welfare benefits available to unemployed persons, such as differential rates, education grants, fuel vouchers, medical cards, etc., would be maintained for the first six months of membership of the DSC and would only be reviewed if earnings exceeded a certain level during this period, and then only in such a way as to retain the overall benefit of belonging to a DSC. There would be incentives to employers in the public and private sectors and to individuals to use district service companies. As I said, there would be the enormous benefit of taking this work out of the black economy.
I find the concept of district service companies very important to rid the country of the dependency culture, and create a back-to-work ethic. It would allow people to work themselves off the dole without the fear of being hungry for the first three months or of not getting back their social welfare benefits if their efforts were not successful. This proposal could be so important in all those areas that it needs a debate of its own. It needs detailed investigation by the Joint Committee on Employment, the enterprise partnership boards, the Programme for Economic and Social Progress pilot projects or the Leader programme. The idea needs Government attention.
I am not claiming a monopoly on wisdom on this. It is an idea that has been gestating for a long time in the minds of very wise people. I have just been caught by the idea and pulled together the proposals with the help of many people. It is completely in line with the Fine Gael proposals and with what the Government are trying to do. It is in line with what our objectives should be: to allow those who want to work to get off the dole queues and reclaim the dignity and status of employment.
As a country we have failed to perform to our potential over the past 20 years as European Community members. We top the unemployment league in Europe. We have the poorest record of providing jobs from our economic growth, which has been supported well by EC funds. Present policies are failing and Fine Gael propose to put initiative back into people's own hands, to strip away unnecessary regulations, to reward excellence and to put an end to the dependency culture.
Having listened to Senator Doyle one could not but be impressed by her negative attitude. She has the distinction of being unable to offer a scintilla of commonsense that would lead to the creation of even one job. It is only a few years since Senator Doyle was in a Government that in 1986 fled this country as if they had been part of a bandit arrangement; they despoiled the land, destroyed its institutions and disappeared into the night. They left us with the highest budget deficit ever, a doubling of unemployment, an economy without growth, a currency devalued and small town factories closed. They then passed on to the incoming Fianna Fáil Government an inheritance that has strangled the potential of that Government to respond with urgency and the essential ingredients to correct a condition that would have been beyond help were it not that the Government changed. It is extraordinary to listen today to views expressed as if the speaker's party bore no responsibility for what happened at that time. Since 1987 the Fianna Fáil Government have reduced inflation. They have striven hard to ensure that costs are low——
By doubling the dole queues.
Senator Doyle is correct and is speaking from good memory now. If she had made that admission in her contribution I would not have had to say what I said.
The Senator's party doubled the dole queues.
It was Senator Doyle's party that doubled the dole queues with the unemployment figures. The response we have made in the intervening years to correct that negative trend is worth reflecting upon. If the economy now was in the same condition as in 1986 I do not know how we could sustain and protect those dependent on social welfare and those who need State support in all its shapes and forms. It is because this economy has grown strong and has proven its ability to generate wealth that we can afford current levels of protection and support to the many thousands of people dependent upon it.
Double on the dole queues.
It is important to recognise that a small economy like ours, often described as an open economy, the vast bulk of our produce being sold outside of our shores, is susceptible to changes social and otherwise which affect its ability to create the necessary number of jobs. We have all recognised candidly that the development of a strong economy is not necessarily a guarantee of job creation. Without having developed the economy, however, the moves made by Government this year to create jobs could not have been taken and would not be effective.
I notice that Senator Doyle omitted this observation either through lack of experience or an inability to fully appreciate the difference between sustainable jobs and the employment exercises she recommended as the real way forward for permanent and sustainable employment. The creating of a job for the sake of a job is not the way to go about it. The creation of employment must be linked to productivity, economic development and improvement. That is central to the thrust of the Government's exercise and efforts at the moment.
A number of factors have affected and made more difficult the employment creation function of Government and the economy. In some instances we have had an increase in population. We have had an enormous dependence on technology and the use of machinery at all levels. We have had the justifiable entitlement of women to equal employment opportunities. That did not obtain in the past. There has been a drift from agriculture, not peculiar to Ireland alone. We have increased numbers in education; one-third of our population is currently being educated. We have had an urbanisation of much of our population again not peculiar to Ireland. All of these factors make it difficult for Government to contend with the demand for employment. The whole idea of a sound economy is to ensure our ability to maintain competitiveness in the marketplace and to render support, as we do under schemes operated by Departments such as those of Social Welfare and Labour.
Senator Doyle criticised the Joint Committee on Employment. She reminds me of the hurler on the ditch; she neither wants to play nor go home. It is regrettable——
We played all summer. We have our own proposals in our jobs document.
The exercise that was engaged in during the summer was a great conspiracy and negative political exercise pursued for the purposes of trying to recruit to a party numbers of people who would make it viable but doing so on the backs of the unemployed. It was not a way or a method that I could——
Is the Senator accusing Fine Gael of conspiracy? That is an important matter.
I have no doubt that a political conspiracy was engaged in throughout Ireland in order to recruit persons to Fine Gael under the guise of creating jobs.
The pearls of wisdom from the former Cathaoirleach are such that I would invite his colleagues to hear them. I would like a quorum, please.
I ask the protection of the Leas-Chathaoirleach in the House.
Notice taken that 12 Members were not present; House counted and 12 Members being present,
I was dealing with the setting up of the Joint Committee on Employment and in fairness the chairman and committee members must be congratulated for giving thought and time to the construction of positive views that are being taken on board by the Government. It is regrettable that the major Opposition party, Fine Gael did not find it within their political capacity to participate and offer support. Negative politics are being played here. Some of the suggestions and documents that were read and reflected upon by the previous speaker might have been welcomed, little and all as they contained, if they had been put to the Joint Committee on Employment.
The Joint Committee was part of a number of exercises undertaken by the Government to develop the environment essential for sustainable job creation. The first phase of the Culliton report recommendations is another and we are constantly faced with negative criticism regarding the intentions of the Government in that area. The levy on employers to fund apprenticeship training and the exemption from PRSI payments in certain situations are all positive approaches by the Government.
The most generous response has come in the form of the enterprise boards and the funding. It has not been pointed out here until now that these boards for the first time are responding to public demand. We are all aware of local enterprise units set up by local communities in towns and country to mobilise talent and resources at local level. In this situation one of the central values of the enterprise partnership board is its decentralisation for the first time of the decision-making process. Furthermore, funding allocation has also been decentralised. Both of these aspects provide unique and autonomous conditions for these boards under which to operate.
The Government and the Minister of State involved must be congratulated for their far-sightedness and for their appreciation and understanding of the core feeling of many people in respect of the decentralisation of functions and decision-making away from central Government. The boards are drawing a number of strands together, not least the special position with the boards of the social partners at local level on a county basis. They have and will continue to support and help to generate activity not only in the manufacturing area but in the small services area, where jobs up to 12 in number can be assisted. In that regard special emphasis is being laid on opportunities in the service industry area. That has been well received by many people already.
The inclusion of a training and education dimension related to local development and local community activity is important and unique. Regarding the RTOs and the county development teams, comment has come from certain quarters that to absorb these organisations into the new enterprise boards is the wrong way to go, that it is destroying concepts central to the creation of economic activity and the promotion of various types of projects. I do not accept that argument. The new boards by providing for participation by these organisations will eliminate the present differing and costly strands of bureaucracy that lack cohesion. I was chairman of a regional tourism organisation for a number of years. These organisations contributed much to develop and generate awareness regarding tourism at a time when the economic potential of tourism was not fully appreciated, even by Government. Today it is an area of great hope, with a capacity to employ people directly and to transmit money into local economies.
The time has come when the regional tourism organisation's role has to be looked at and reviewed. Nothing should be presumed to be permanently fixed, as some lines of thinking seem to suggest. It is my belief that regional tourism organisations should, like every other organisation, be examined as to efficiency and ability to do the job they were intended to do. In recognition of changing times and various other influences, it is important that the role of these organisations be reviewed. Regional tourism operated on a wide basis in some instances. In the case of the Midlands organisation, its area stretched from Longford to Louth to Wicklow, an unwieldy, and inappropriate organisational concept for that area. Likewise, the Ireland West Regional Tourism Organisation had to assist and co-ordinate over very different and diverse conditions.
Devolving these organisations by participation in the new enterprise boards will allow for greater emphasis on a county basis. The new board will have proximity to local interests in the county, to those who for years have been silently and diligently promoting, investing and campaigning to improve the tourism product and to sell it in various marketplaces. They found it difficult to have direct contact with regional organisations because of their size and for the reasons I have outlined. In a county context it will be enormously beneficial and helpful to local interests that the tourism organisation, now through the boards, will be directly available for regular and constant contact in some cases. That is an important new change.
Equally, county development teams have done a good job down the years. There were certain deficiencies and certain conditions attached to them that made them differ significantly from what is proposed under the new boards. In reviewing that and in recognising these deficiencies and defects the new boards are seeking to allow for modern organisation methods. Boards will have power to fund and make decisions on the ground, to make assessments about various projects and to proffer the type of association essential to social partners, financial institutions and other organisations.
Reference has been made to the fact that local authorities are excluded. Local authorities are not excluded. They are represented at two levels: through their membership and the involvement of their chairman at one level and through the involvement and participation of their county manager as a member. Remember, regional tourism organisations are only one group appointed and nominated by the local authority. In this situation the county manager and the chairman, as persons previously involved in the county development teams, will have a specific duty to reflect the views of councillors. The local authority, as a developmental organisation, will be able to debate and discuss, and that will be of enormous benefit to the various project assessments and promotions that will be undertaken by the boards.
It would be wrong of anybody to over-emphasise the least important aspect of this innovation by saying that county councils are excluded and consequently the attempt is a failure. That is not so. I share the view of some that county managers should be considered for the positions of chief executive officers of these boards. That would make for greater cohesion between local authorities, and because of the special statutory and executive function of the county manager, it might be worth considering.
The objectives of these boards are to assist an industry employing up to 12 persons, and to be able to provide grant aid, loan subsidy and equity. We have had experience in part of County Roscommon in relation to the loan subsidy support which was given through the Arigna Enterprise Fund in assisting the creation of jobs and in attracting industrial opportunity into the area. It has worked significantly well. It has been very important for us to have been able to reflect on the way that that fund, which was small — admittedly only £1 million — but it certainly attracted persons with industrial projects into the county while it was in existence. I am quite satisfied that the support contemplated by these boards in that form will be of very considerable and significant benefit.
It is evident of a Government conscious, aware and understanding of the difficulties that beset industrial development, economic improvement and job creation in so many areas in the past. It is only achievable because this Government have been able to maintain a strong economy against all the odds, over recent weeks in particular. Were it not for the fact that we have a sound economy, we would not be talking just of job creation but of a crisis beyond anything imaginable. Ireland has been fortunate because the last remnants of our control regulations remained in place at this difficult time. The few barriers that remain prohibited foreign speculators from taking advantage of the punt and hammering it to death in the money markets of Europe.
There has been much comment and talk in recent weeks in relation to speculation. There was speculation, a very unpatriotic form of activity. While I want to compliment the banking and financial institutions for participation in the enterprise boards and for making very valuable and important contributions to their financial composition, nevertheless I have to say that there is a strong suspicion that Irish banks were involved in speculation. It would appear that instead of lending to agriculture, tourism and industry generally they used their own treasury departments to fund their speculation.
Have you reason to believe that?
When we have a Question Time in this House I will answer that. It is my belief that we should seriously consider remarks of others in recent days. Consideration should be given to examining the speculation that went on and those who were central to it. We should consider the introduction of legislation to tax the profits that were made as a result of that speculation. We are paying an additional 3 per cent interest and many people are in very difficult and extraordinarily dangerous circumstances. We should in some way try to restore to the economy some of the money that was made from speculation in a way that it can help, and perhaps minimise much of the damage that was done. We should continue to encourage the banks to use their resources for lending and investing in the productive sectors of our economy. I believe that will be achievable through the boards.
The banks at this stage should make a real gesture in the abolition of bank charges. It is an outrage that a simple phone call to a bank to inquire about one's account can result in a £5 charge. A consultation with one's bank manager can amount to a £20 charge. That is wrong. It is wrong that persons who are most in need are often further burdened by these new charges. It hinders them, it is a negative approach to the development of small industry and the opportunities that can be exploited and pursued by persons with good ideas.
One of the difficult areas at the moment is the provision of seed capital for high risk projects. That is an area that will have to be considered. I do not personally have an opinion on what would assist or in what direction we should go in that regard. We have to provide an opportunity and a fair environment for people to make headway with the developments in their counties.
We should, even at this late stage, invite the major Opposition party to reconsider their position of staying away from the Oireachtas Joint Committee on Employment. I ask them to be generous in the knowledge that when we are thriving again as an economy and when we reach new heights after the present difficulties have been removed, then we can play politics, and we will be able to afford to indulge in political exchange. In the present climate it is immoral to make contributions simply for political reasons.
I would like to compliment the Senator on an excellent maiden speech.
I want to make a procedural point before starting. As I am the third speaker in this debate and it is now 12.45 p.m., with no reflection on the previous speaker but in order to organise the business and get the work done, it is important that we would have a time limit on all speeches. Everybody speaking in this House should have a time limit so that people can make any necessary arrangements. This is no reflection on my colleagues. I am as much a culprit as anybody else.
I accept that.
I would like to touch on a number of different areas. I will begin where Senator Doherty left off and that is in a response to the business community. As far as I am concerned the business community has proved to be the greatest set of whingers over the past six months. They have got off lightly on all sides. I have seen three phases of their operation over the last month or so which we would need to look at very closely.
They have been sniping at the Minister for Finance for the last six months about the ability to work and operate the Finance Bill. They have taken every opportunity to have a go at the Minister for Finance about the Finance Bill. They have opposed it and have spoken against it, about the non-payment of taxes and how they would pay their taxes.
We then had the currency crisis. I am one of those who believes — and I speak from the Independent benches — that the Government handled it as well as they could under the circumstances. I would like to go on record as complimenting the Government on not moving one inch on the devaluation issue. That was important.
We then had the business community whingeing about the devaluation of sterling. I would like to put a few points on the record. Above 31 per cent of our exports are to the sterling area. Those exporters are claiming that they are losing out because of the change in the value of sterling, but what I have not heard from the business community is the other side. Thirty-seven per cent of our imports come from the sterling area. Many of those imports are raw materials for products which are exported to Germany which takes 14 per cent of our exports or France — our exports to France have not changed significantly over the last four or five months. Many people in the business community have made a killing because of the changes in sterling. I do not hear any of them talking about their good luck. We do not hear any word from them about their huge increases in profits. None of them is telling us they will increase employment on the basis of their new operation.
I would also like to make a final point on that subject. The strongest economies in Europe — France and Germany — have not devalued; their currencies are strengthening. I do not hear any whingeing from the business communities in those countries about losing jobs because they have a strong currency. The business community in this country needs to either put up or shut up. They are being given a strong currency and low inflation. They got greater productivity from Irish workers over the last ten years then ever. They are now coping with higher interest rates. However, the only people who are in trouble are those exporting to Britain. The rest of the business community should tell us about their good fortune.
The way that they are acting at the moment is unacceptable. I would like to speak seriously to the Government about their response. I wonder if politicians recognise what it means to the ordinary punter to look at the front page of the daily newspapers and see that millions of pounds are being provided to support our exporters. These are people who will have the interest rate on their mortgages increased by 3 per cent. They would say that Government intervention should be aimed in their direction as well. They are the people who are suffering, the people who are losing out. They are the people for whom we have done nothing.
I thoroughly agree with the points made by Senator Doherty about bank charges. They are disgraceful. At the moment I am compiling a list of bank charges in various parts of the country. I was speaking at a function in Mayo recently and I got an outline of the amount of money being paid in bank charges by people living along the west coast. It was an appalling amount which is being drained out of the economy. It is nothing short of disgraceful.
We talk about banks making money available for low risk, high risk, etc., as seed investment for industry. That is good, but I do not believe it will work. I will believe it when I see banks lending money for high risk ventures. They will not do it. They would be doing us a greater service — to small business, big business and mortgage holders — if they were to scrap their bank charges for a certain period, or at least reduce them. I put forward that view in order to keep money moving in the economy as well.
Finally, I wish the Government to outline the criteria which exporters to the sterling area who are whingeing and complaining that they have lost out, must comply with to qualify for support. I am saying this in the context that the punt is valued at £1.4p sterling. I would have the gravest reservations about the Government wasting taxpayers' money on the pseudo support for exporters who are making a major killing when they purchase cheaper raw materials in the sterling area. About 30 per cent of our exports go to the sterling area; 14 per cent go to Germany; 10 per cent go to France; 10 per cent go to the US and exports to other markets have not noticeably changed. There is a very fair balance in our exporting area.
In the Minister's submission the reference to education comes through all the time. I would like to develop that. More than half of the 287,000 unemployed have no qualifications beyond primary level. That is the stark reality and has to be addressed. If it is not, there is no hope for the future. We cannot build castles in the air or build houses from the roof down. The reality is that children leaving primary level should have the basic levels of literacy, numeracy and mathematics and if they do not, the primary sector has failed them. We have to look at why it might have failed them and what resources and changes are required to ensure improvement takes place.
I would like to put on record the fact that it is the view of primary teachers that at least 95 per cent of all primary school pupils have the ability to learn to read and if they do not learn to read at primary level something needs changing but as long as two out of every three schools in the primary sector in Ireland do not have access to remedial teachers, that will be a continuing problem. People may say I have said this time and again but this is the reality.
The Minister said that all evidence shows that unemployment is related to qualification, in other words, the more qualified the person the more likely he is to gain employment. That is true throughout Europe. Qualifications depend on one thing — the level of education and that is determined by the ability to move from one level of the education sector to the next. Once a person loses out at one level, he does not go any further. If people are leaving primary level without being able to gain the advantage of post-primary education they will not be able to develop their skills at post-primary level, nor will they be able to think of going on to third level. That is a reality. That means that the unemployment problem and its resolution begins at first level.
In yesterday's Irish Times Dr. Teeling wrote a most progressive, enlightened and informed speech. I wish more of the business community thought the way he has been thinking. He has talked about his great worry and the narrowness that is moving into education. I could not agree more. I know there is a growing view among industrialists and business people worldwide about the kind of person they require from the educational sector.
I want to tie this into the kind of problems we face in the world of work. The first problem is the lack of flexibility at all levels — management and workforce. Flexibility is one of the most difficult characteristics for a person to develop because it is dependent on confidence; it is dependent on experience. What is happening at the moment is very simple. Business has taken the easy option for the last 15 years. They have been encouraged by governments and by the Culliton report which is adding fuel to this fire and going in the wrong direction, unfortunately. The company which needs a particular skill gets the most qualified person in a very narrow way, whether it be in marketing, manufacturing or something like that. We now have a very qualified person in a very narrow area doing a job superbly but the more qualified that person is in that area the more competent he or she becomes in that sector and the less interested they become in other associated areas. Consequently, after five or ten years, when that industry moves on to a new stage, that person becomes almost unemployable or almost untrainable in another area.
What we need are people with intelligence, with broad general degrees, who have the competence to take on general areas of responsibility in industry. That is what is happening in American corporations now. Rather than take a marketing graduate they will take somebody with a broad general degree who has shown the ability and intellectual capacity to deal with a wide variety of areas. Such a person can be taken into a company and taught the basic needs of marketing, or whatever else they might require, over, say, a period of six months. Then if they want to change to do something else, they can do so afterwards.
I could not stress enough the need for a broad general level of education. It is critical. It begins at primary level. Let me tell you what is happening at primary level. Nobody needs to be an educationist to understand this. We all agree that the three R's are critically important. Children who are not able to read, write or do basic maths are not going to get anywhere. What do we now do? The present tendency in industry is to say that that is what it is all about. If we say we are going to measure the effectiveness of the primary system just on the basis of the three R's what now happens is that the peripheral areas like art, PE, drama and so on get ignored. How important are art, PE, drama and literature in the world of work? Let me spell it out very clearly. The people who will create employment in this country, who will lead industry, who will find a way forward, are the people with creativity and ability — people who understand teamwork, people who can take a risk and be rewarded for it, people who have learned success in doing that. You learn those things in art, PE and drama, the peripheral areas of the curriculum. The child who learns success on the sports field, the child who learns creativity in art, the child who learns to take new directions in drama, the child who learns to take risks in discovering something new — that child will carry that extra confidence right through education to the world of work. Those are the people who will bring us through into the next generation. It is not drones who are good at repeating information bytes or playing safe. We have no room for safety with 300,000 unemployed. That is not the way forward. We need people who will take risks, people who will make new moves and people who can bring us forward in a positive way.
In deference to trying to keep within a time scale, I will rush through a few more points on this. Science was taught in all primary schools up to the foundation of the State. We do not teach science in primary schools anymore. In our schools now at primary level there is neither science nor technology. I want to criticise the business and industrial community because of their lack of investment in research and development. In this country we spend approximately 0.5 per cent of GNP on research and development. That is a reality. In Germany and in France three times that amount is spent — up to 1.5 per cent. Where do we lose out on that? Let me give you one example that everybody will understand. We have a thriving chemical industry in this country based on chemical products which have gone outside their patent period — in other words, they have lasted beyond 15 years. There is now a European Directive to extend the patent period for chemical products to 20 years or more. That will destroy a huge industry in Ireland. We do not invest any money in research and development in order to develop our own new products. We take products, mainly used in fertilisers for agriculture and so on, that have been marketed under a brand name for 15 years. Once the patent runs out our people in Ireland start remanufacturing them as a generic product and we keep industry going that way. But the reality is that without science and technology being taught right through the school levels we do not carry this through to research and development and we are losing out on employment prospects.
I would like to give an example of the double-think of Government. The Minister will be aware of this. He will know of a school in his own area that has been looking for many years for a clerk typist. I have brought this example to the attention of the Minister for Finance, the Minister for Labour and the Minister for Education. The Government recently made money available for caretaking and school secretarial functions at primary school and post primary school level. When that was being negotiated I raised with the Government and with those three Ministers on different occasions the need to use that money, earmarked money, in order to reduce unemployment. I am more angry about this then I can outline in this time. That money, which will be paid every year and spoken for as part of the Programme for Economic and Social Progress, has now been given out on the basis of grants to school management boards around the country. The money is gone. It did not go out with a requirement that it be used to create jobs. It did not go out with a requirement that the person to be employed should be taken from the live register.
Let me tell you what is happening to that money. In a school two miles from here the money has gone to the school on the basis of £30 per pupil. There are over 600 pupils in this school. They are going to use that money to employ somebody as a school secretary. They have already chosen the person. That person will be employed but is not at the moment on the live register. It is a woman who is not on the live register at the moment, so it is somebody who has come back into employment. She will work for X number of weeks during the period of the school term until she has got enough stamps or credit under PRSI and will not be paid by the school during the holiday period.
I want to tell you the net effect of that. First of all, it will cost the State a packet of money because they will now have to pay PRSI to that person during the school closure period. Also, it adds another person to the live register. Somebody in Government is daft. There is a level of stupidity running through that kind of a decision which knocks me for six. I do not understand it. A figure of 170 jobs could be created with that money on the basis of full-time employment. They would be real jobs taken from the live register.
I have given you one example of how some of it will be used. I will tell you how more of it will be used. The money will go to the school. They will have the money there in front of them. There may be a broken window or a door that needs to be replaced. They will get a glazier up to replace the window and give him a few bob. The same for looking after the door. The money will be used correctly — there is no abuse of funds here — but it is just the incorrect use of funds in order to create employment. That money will be frittered away. Much of it will go into the black economy because the amount of money being spent is too small to require that the person be registered.
I think that is utterly daft. The money could have gone out to each school. Normally it is £15,000. The school should be told that they may employ either a school caretaker or a school secretary and that they are required to pay the stated rate, which is an agreed position, and also to pay PRSI. The person must be taken from the live register. I am not in Government, I am not involved in employment creation, but that seems to me a very simple level of operation. I have raised that with three Ministers and nothing has happened. If you do not watch the small things you are going to lose the big things. That is more jobs than have been lost in Cross, looking at the things that have made headlines over the last number of months. That is the kind of operation that we need. We need creative thinking in Government, I am just sick and tired of that kind of thing.
Another reason that this particularly bothers me is that under the SES we have made a proposal in the INTO to the Minister for Labour to include in the scheme an element of training for caretakers, secretaries and people working in schools particularly in view of the new health and safety legislation and other legislation with which they are required to comply. Such people would then be eligible for permanent jobs. That is another example of how we can tie a number of things together but if such suggestions are not taken up I worry about the direction this Government are going in on those kind of issues.
A child with whom there is a problem at six years of age in a primary school is likely to end up as a member of the great army of the unemployed 15 years later. I had a meeting recently with the personnel officer of a large dairy company in Munster and he made precisely that point. His attitude was if someone who had been thrown out of school or had been in constant trouble at school come to him looking for a job he would not employ them as they would also cause trouble at work. We must look at the unemployment problem and begin by investing at primary school level in order to ensure that we exploit the skill, ability and intellectual capacity of our young people. Our educational system must be such as to reward calculated risk, and reward success, to recognise creative ability and allow deicison-makers to emerge. It must encourage people to solve problems. That will create a nation of leaders who will lead us forward in many areas.
Education begins at primary level and it is there that we will begin to solve the unemployment problem.
I am pleased we are debating the report of the Oireachtas Joint Committee on employment and that we expanded the debate to include the economy in general. It is very difficult to discuss one without the other and that was a sensible move. I note that the Minister this morning concentrated on the report of the Joint Committee on Employment. I hope the Minister this afternoon will talk about the broader issues that are involved in the economy.
The Joint Committee on Employment has been meeting for some time and its rate of progress to date has surprised many, particularly as regards the production of its first report. Over that period of time the committee had representations and submissions from all the major players in Irish industry both in the private and public sectors. It is worth while noting there is a general agreement among the members of the committee who represent many different political persuasions about the way forward. The public would probably be surprised at that. It strikes me that if we could get more of that kind of consensus here and in the Dáil we probably would make more rapid progress.
A couple of clear points are emerging and one is that the use of schemes which the State has been developing over the past number of years, both those that are funded domestically and through Europe, will be an essential element of getting people back into employment. However, there is a difficulty in that there is resistance to the definition of employment. It is strange that in a country this size — it is worth mentioning because people do not like to believe it — we have a social ideology about what is classified as a job. This is rife in Irish society today. It is something one does not come up against in other countries. In many respects it inhibits the type of job creation activities that should be readily grasped by unemployed people, unions and employers. People automatically give a certain status to some jobs regardless of whether the job is well paid or worth while. If it has a title that does not appeal or if the perception of the job conveys a certain impression then there is reluctance to take up a course or scheme in that particular career.
What I do not understand, having had the excellent submission from Peter Cassells and Patricia Donovan in SIPTU, is the type of resistance throughout the country to the SES as it exists. It is clear from the committee and from all the submissions made that the way forward is through the expansion of these schemes into permanent activities. That is accepted at national level by all the players at the top but when we bring these projects and schemes into local areas we meet enormous resistance. My own area in Waterford is a clear example. We have hundreds of people who want to go back on these schemes and are unable to do so. Playing with the niceties of definitions is not acceptable nor does it contribute towards employment creation. It is a negative and destructive approach to take towards employment.
If the leaders in the community state their esteemed and self-important view that they do not like something about a scheme there is immediately an inbuilt reluctance to participate in the scheme no matter how valuable it is. People listen to those at the top. The unemployed look for leadership to encourage them and instil confidence and a sense of self-worth in them. They need to know they are a valuable asset, form part of the community and have a very definite role to play in their own area. We must get across the message that these schemes will be an essential part of the workplace and of employment. It is not something that is outside the employment area.
The very use of the word "scheme" seems to imply that it is different to being really employed. We must get away from that mentality. It is a small point but it is important. These projects are proving valuable to local authorities and communities and will be a central part of employment policy in the years ahead. One of the interesting things is that many projects are developing into long term projects. Much of the SES type of employment started off as a stop gap type effort lasting for three months or six months but given the volume of work available, people can be involved in such schemes for two or three years. That surely is real employment. It is not something that comes and go on a monthly basis. The projects are bigger and more worthwhile and they lead to permanent ongoing long term employment as well. Once people are involved in these type of projects I have no doubt their value will become even greater and more important to us as a community. The attitude at employer and trade union levels towards the possibilities that this funding opens up must change.
The divide between social welfare and FÁS moneys and the local authoritys' role is too splintered. Whether we like it or not, for whatever reason annually we make £3 to £4 billion between social welfare and FÁS payments and under some IDA programmes. There should be a proper centralised office — I hope the new county enterprise boards will assume this sort of responsibility — to use these moneys to create a job rather than taking a bit from this scheme and from that scheme. We must use the money we spend in a more focused way and get value for money both ways — value for the State in respect of what it is willing to pay and also value from the point of view of the person receiving it.
There should be some element of work and involvement in the community instead of the culture we have allowed to creep in — largely the fault of politicians — of the hand-out mentality. The day of the handout mentality must end quickly. It is double-edged sword: it denies self-worth to the person receiving it and creates a dependency culture in society. It must be stated until it becomes the accepted norm that you get nothing for nothing.
I have stated this before and I repeat it: I believe the Department of Social Welfare should be scrapped. It is outmoded. Its ethos and perception are outdated. Many of its functions could be incorporated into the health area. In its place we need a department of employment which would control the £3 to £4 billion we distribute in social welfare and FÁS payments which should be seen as and said to be employment moneys. This would be an important step towards changing old images and impressions. A department of employment is a positive statement whereas a Department of Social Welfare denotes handouts. When they are involved with the department of employment people will realise that they are actually talking about working, getting work and being paid for it.
The Culliton report was mentioned in the first Report of the Joint Committee on Employment. The Culliton report is a blue print for the way forward. When he wrote this report Culliton meant it to be taken as a whole and all the different areas together — be it tax reform, job creation or the streamlining of State agencies — create the whole. We cannot pick bits from it and implement them. If we do we will not get the results it envisaged. I believe the Minister for Industry and Commerce is intent on ensuring that the total package in the Culliton report is implemented.
Like every Member in this House, I appreciate the difficult times we face, and the constraints imposed on our economy. It is not acceptable to say that because we have those problems we cannot implement the findings in the report. We must move forward. I am talking about the tax reforms that Culliton and the Progressive Democrats spoke about. This type of reform must continue even given the difficult financial circumstances that exist at the moment. The forthcoming budget must move forward in this area even if it is not as great as we want. It will do two things: it will signal to the marketplace, to the employed and the unemployed, that tax reform is continuing and it will encourage employers to take on more people and will give those who are employed more disposable income. This would create further growth in the economy and create jobs. It is a simple concept in which I firmly believe. It is an essential element of job creation and without it we are in trouble. If we fail to continue this process we will feel the effects for a long time.
We all know there are people on the margins who sign on the dole and get a few bob for doing nixers. We must get those people back into the work ethic and into what is termed real employment and out of the black economy. The only way we can move people out of the black economy is by removing these horrendous rates of tax. The income rate has been reduced from 35 per cent to 27 per cent. That was a tremendous step forward but we must continue that downward trend. In my view nobody is unwilling to pay their fair share of taxation but they are frightened by Revenue and PRSI bills. We must simplify the tax system and remove all the layers that make up our tax code.
Another aspect that I want to deal with is education and training. We cannot separate them as they are essential for the unemployed. Only about 70 per cent of those between the ages of 15 and 19 are in some element of employment or training. In other words, 30 per cent of those in that age group are not progressing themselves in any way or acquiring new skills. In Germany the opposite is the case. Something of the order of 98 per cent or 99 per cent of people in that age group are involved in training or, some aspect of education. They are enhancing their skills in different areas. The other benefit that they gain from being involved is that their feeling of self-worth and their importance in society is retained.
We must get people back into education and training. That does not mean that everybody has to go to university or have so many honours and so many as in the Leaving Certificate. This is not what I am talking about. It is one aspect of it and our success in that area is well known throughout the world.
It worries me when I hear people talking about the local community and getting the small entrepreneur off the ground. My view of the small entrepreneur is not necessarily of a man who has a marvellous idea for a company and who employs people. Ireland had many entrepreneurs years ago. What was an entrepreneur? He was the man who trained as a plumber and developed his own business around that. He trained as an electrician or a carpenter. We seem to have a dearth of such well skilled and trained people in this country today. To me, he is as much an entrepreneur as the man who starts up a small company.
We are not just talking about high tech manufacturing output but about skills that were commonly used in this country years ago and that are desperately needed today both here and indeed beyond our shores. They are as relevant as the man or woman with a PhD or whatever. We must convey that to the marketplace and remove the class distinction which exists whereby people think that a highly skilled carpenter is not like a man who has a doctorate in something else. That person is as valuable and worth while and can make as good a living as anybody else in Irish society.
Companies can and must play a role by offering apprenticeships and training. I know that in my area there is a huge shortage of skilled people — not somebody who has completed a three month course, that is not enough; it is irrelevant and demeaning — who have been properly trained over a period of time. They are a valuable asset not just to themselves but to the community they live in. That is what we mean by training.
We are very poor at in-house training in companies. We are very poor at training our managers, be it at junior or senior level, or supervisors on the factory floor, given the changes in technology and advances in the marketplace. We tend to think that once a person has a skill that it is until he or she retires. That is not the case any longer and companies must make money available for continuous training. I have heard the CII talk about it but the companies they represent are not committed to training their staff on a continual basis. They do not want to spend money on it or give the time to it. That is a failing in Irish business today. The complete opposite is the case in strong economies of the world in that area and we are hurt because of it.
Many of our companies are successful to the degree that they are motoring along, doing all right and making a reasonable profit, but they are not getting the type of sustained growth we need. One of the reasons for that is lack of training in the company. These companies are not getting sustained growth and as a result they do not create jobs. That is where Irish indigenous industry is failing. Training is the responsibility of employers. It is a central ingredient in the development of Irish industry today.
The fourth area I want to deal with is the economy. I welcome the efforts of the Minister for Industry and Commerce and the £50 million package that has been made available. It is true to say that, as has been said here in this House already, the number of companies involved directly in exporting to the United Kingdom represents only 20 per cent of the manufacturing companies here. It may represent 31 per cent or thereabouts of our trade. Nobody spoke about the other 80 per cent. If we had in the face of, in my view, erroneous pressures devalued, we would have been doing so for the few rather than for the many and what a tragedy that would have been.
I compliment the Minister for Finance and the Government for holding fast in this area. It is essential that we keep a firm hand on the tiller in these troubled waters. We must look to the whole wellbeing of our economy, and we can say with some pride that we have withstood a lot of external pressure with a reasonable degree of satisfaction. It is not enough, however, because there are worrying signals on the down side. We cannot maintain our position if we are not developing. Any company which simply maintains its position and does not advance will not survive in the long term. A company must continue to develop and the same can be said of the economy.
On the Order of Business, the House agreed to adjourn at 1.30 p.m. I ask the Senator to move the adjournment of the debate.
In view of the fact that it was not anticipated there would be such lengthy speeches and the fact that the House will be suspended for half an hour, would it be possible for the House to resolve to allow the debate to continue? I would like to move that we so do that other speakers may be heard.
Unfortunately I cannot do that. The House agreed this morning to adjourn from 1.30 p.m. to 2 o'clock.
It seems very unfortunate.
If the order were to be changed it would have to come from the Leader of the House. My hands are tied at this point in time.
Perhaps the Acting Leader would so move.
I would prefer if the Senator would talk to him in accordance with the procedure of the House. This morning we agreed to suspend the sitting from 1.30 p.m. to 2 o'clock.
It is a pity.
I accept that fully.
Is it posible for the Acting Leader to so move? There would be general agreement on it. Most people would feel it is a good idea. It is a most serious debate and we have very little time. People anticipated getting in to speak. I spoke to Senator Ó Cuív outside and he thought he was going to get in to speak. I raise it as a possibility or perhaps it could be arranged that a similar debate could take place. We are debating unemployment and the economy and the debate is being chopped after one speaker spoke for an hour and another for three-quarters of an hour.
I am sorry. I sympathise with the Senator's views but unfortunately on the Order of Business this morning it was agreed that we would adjourn at 1.30 p.m. The Senator may get extra time in the afternoon if he approaches the Leader. I do not know. Certainly, as of now the House must abide by the rules made this morning. I ask Senator Cullen to adjourn the debate.
Before so doing the Chair is saying there is no mechanism whereby we could get the Leader of the House——
There is not at this point in time.
I suggest we ask the assistant leader of the House to speak to the Leader of the House during the half hour break.
Unfortunately there is no assistant leader of the House. He is Acting Leader.
Can we extend the debate or else continue it at a later time?
The Leader may do that later on.
Sitting suspended at 1.35 p.m. and resumed at 2 p.m.
The line the Minister for Finance and the Government have taken with regard to devaluation is correct. They should not be deflected by minority groups in business, those who want to see the Irish pound devalued. Some 20 per cent of our companies now deal directly with the UK. This trade does not represent the vast majority of exports and therefore it is essential that the stand being taken should continue. Obviously it must be assisted by the banks.
With regard to the European implications of the currency crisis, I am becoming concerned that there is a, perhaps minority, view in Germany and France that if the Franco-German axis stays together, that is what Europe is all about. That worries me. Europe is not about France or Germany or any individual or two countries together. In the context of what Europe has done and will do in the future, they are nothing without Ireland, Denmark, Greece, Italy and all of the other countries involved.
While I appreciate the difficulties that the Bundesbank has with the unification of Germany and the pressure that is bringing to bear on the German economy, the Germans, and the Bundesbank in particular, do not have sufficient regard to their responsibilities and their role in the development of Europe and the effect that they can have on the economies of other countries. They must play a central role and be conscious at all times of the effect that their movement in interest rates can have a economies such as that of Ireland. I am concerned that they increasingly see their own internal development, or the development of France and Germany together, as the way forward in Europe. I do not think that is good enough.
While decisions are being taken by the Bundesbank primarily in connection with their own internal affairs, because of the powerful nature of the Deutsche Mark and the German economy, they must at all times take cognisance of the impact of their decisions on other European countries, particularly countries like Ireland which have made such enormous strides to fulfil the criteria laid down at European level with regard to our own economy, our own borrowings, the control of our own finance and the restraint on public finances. We have played ball, we have done what has been asked of us. We have made a major contribution to continuing growth and interaction in Europe today. We need the assistance of these countries to ensure that the Irish pound stays strong, stays within the ERM and can maintain its position. That is an essential element, not just for this economy, but in the growth of a continuing relationship between European countries.
The thinking of the German Government and the Bundesbank must always be twofold. They must consider the European point of view and their own economy. That is what leadership in a community of nations involves. It requires them to be conscious of the weaker nations and of decisions taken internally which can have a detrimental effect on the economies of smaller and weaker countries. I hope that the Bundesbank will see fit, in the very near future, to start reducing interest rates, to start taking the pressure off the other economies, particularly the Irish economy. We will not be able to sustain in the long term the type of interest rates prevailing in this country today. These inhibit the ability of businesses to grow, to invest in technology and, more importantly, in people, in terms of employment. We are fully aware of that. Investment cannot be sustained at the current interest rates. Some companies will go under and others are barely hanging on. This is a time for leadership not alone in this country but at European level as well.
Since the vast majority of people in this country have mortgages and personal borrowings these very high interest rates cannot be sustained. The absorption of spare cash out of the individual's pocket is taking money from the generation of employment in local economies. The money paid by way of increased interest rates will be lost to the shops, hotels and pubs. That will have a further effect, and not only on job creation. We will see a surge in job losses and that is the opposite direction to the one we need to go.
The Minister must put pressure on the Central Bank within the present constraints. I am not satisfied that all the increases in interest rates are caused by events in Europe. Certainly they are a major factor, but, at times, the Irish banking system likes to seize opportunities to earn extra profit by citing external problems as the reason for high interest rates.
When we had high inflation we had high interest rates, but that is not the case now. Surely the low rate of inflation should have a compensating effect on high interest rates. I think the gap is too great and I do not think it is necessary. Somebody, somewhere, is making unnecessary profit. I am not saying the banking institutions should become a department of social welfare or that they should not make profit, but, like everybody else, if their profit has to be curtailed, let it be curtailed. They are too important and central a plank in the development of the Irish economy not to play their part. They do play a part but I seriously question the gap between inflation and our high levels of interest. The arguments put forward in the past are now reversed and yet the situation is no better.
The Irish people and Irish business will not be able to sustain those levels of interest beyond the end of this year and the Minister for Finance realises that. He must act in concert with the Irish banks and his colleagues in the Council of Ministers at European level. He must get that message across and insist that the Bundesbank and others take cognisance of our difficulties and the role we are playing to ensure that we can sustain growth in this economy. If we do not do that, our problems will multiply at an accelerated rate.
With regard to the question of privatisation in the Irish economy, this policy still has much to contribute to the development of our economy. People will say you cannot sell off institutions, such as Telecom or Aer Lingus, in the present climate, and I can accept that. The market is bad, money is scarce, share prices are down, etc. This question has slipped down the agenda, and that is not good enough. We must take out of the hands of Government responsibility for State agencies or State companies that are well developed and capable of sustaining themselves in a competitive environment.
I have no objection to the State looking to other areas to establish State enterprises which would eventually seed into the private sector. That is a positive area for a government or a state to be involved in. This issue is, however, being let slide and others are being used as an excuse to diminish this programme. The question of privatisation was mentioned in the Programme for Government and I want to see more activity, greater commitment and a plan of action to a move forward in the area. It is not acceptable to use excuses to do nothing. This must be part of the Government's industrial and economic policy and an essential element of it. Privatisation has the benefit of bringing much needed funding into the State and creating greater competition in the marketplace.
These things should be done. Telecom, aspects of the ESB and Aer Lingus must be looked at; even the postal services should be looked at. The liberalisation of the transport industry should be considered. I am not saying the Government should or should not privatise Bus Éireann or Dublin Bus but there is a need, which has been demonstrated by the private sector, for a direct involvement in the delivery of public transport by private companies and private operators.
I ask the Minister for Tourism, Transport and Communications, where is the liberalisation Bill? Where is all of the great talk we had at Government level two years go about the need for greater competition in this area? We must recognise that the private sector has an enormous contribution to make in capital investment in this area. We have identified transport, both the haulage and passenger side, as a substantial and major ingredient in the Irish economy yet this, too, seems to have slid off the agenda. One cannot allow these things to slide merely because other matters, important though some of them are, are on the agenda. They must be maintained at a pace on an ongoing basis. That is not happening.
I see privatisation as a major part of the development of the Irish economy, even in present difficult circumstances. It is easy to do things when times are good but it takes imagination and courage to keep these programmes alive in difficult times. That is what quality leadership is all about. I want to see them put back forcefully on the agenda.
The new announcements from the Taoiseach's office with regard to the county enterprise boards has a lot of merit. I hope they will be successful. The funding the Government have committed to the county enterprise boards is very welcome and positive but the question that arises is, who will have the ability, background and experience to utilise this kind of opportunity? I fear, for the composition of the boards. Unlike many other politicians who seem to be primarily concerned that politicians are excluded from these boards, I am not concerned with that, it does not matter to me. I sit on the South-East Regional Tourism Board but it is not my primary concern in a time of change, that I, or my colleagues, may be out of a job. That is the wrong approach and demeans the whole process.
There has to be a reason to be involved and you must have a useful contribution to make. I am concerned that membership of the boards seems to consist almost exclusively of people in the public sector. Admittedly there are excellent people in these areas and I am not saying they should not be involved, but where are the people at the coal face, the people in industry and those providing services who are fighting in a very competitive environment? Surely these people have a practical contribution to make rather than those who do not daily face the prospect of ruin.
I am not suggesting that the boards should be expanded. We should cut out some of the proposed representation and get people on to them who are doers, leaders, and employers, those who face all of these difficulties on a daily basis. They can tell one how bureaucracy hinders the development of small companies. If these enterprise boards are to work they must have simple methods of application for funding and decision-making processes to ensure that ideas are filtered quickly, decided upon quickly, supported by resources or finance, as necessary, and got off the ground.
The idea of local democracy and local decision making is worth while. I do not want to sound a note of warning, but I hope it is not local democracy gone mad. I am concerned about there being 44 different enterprise boards. Ireland is a very small country. My own personal choice would have been a development along the SFADCo lines, replicated perhaps in five areas throughout the country. I am willing to give this development every chance to succeed and every encouragement.
I also believe, however, that some areas will be very confused. I refer to the area of tourism, for example. I do not understand how each county is going to develop its own tourism policy and provide its own assets. When we had a regional structure there was a package for a tourist, whether domestic or international. The best assets of each county were developed. Those assets by and large were complementary to each other. A good broad base to bring tourists into the area was created because there were complementary things to see in a wide range of areas. There was a board which could make decisions, particularly with regard to funding. We did not have a Mount Juliet, a Celtworld or a Water-world in every county. Now, if a good idea comes along, there will be a tendency to replicate it. I want to know who will prevent that from happening? Who will have the courage to face down such parochialism, which will undoubtedly be part of the development of these county boards?
Regional tourism organisations have at present developed excellent redevelopment plans for the next tranche of Structural Funds. The South East Regional Tourism Organisation has produced an excellent document which had, for the first time, the enthusiasm of every county in that area. I am sure that goes for every regional area in the country. It was accepted that certain things would be developed in one area and others in other areas. The jigsaw would fit together and we would all benefit from it. That is the key point. Each area would benefit from the development of the other area because of the complementary assets being developed. I worry greatly that that could be diminished and splintered. Disunity will be created in the context of the county enterprise boards.
In reading all I have been able to get my hands on with regard to them, which is limited, it strikes me that the regional tourism organisations were an afterthought with regard to the county enterprise boards. I can clearly see the job creation potential and the need for local decision making. It is worthy. I seriously question however, the removal of regional development because it has been valuable. It has taken a number of years to break down the parochialism of each county. I find it extraordinary that at a time when that has been subdued, when people have risen above it and are working together, we now decide to break it all down again. I worry greatly about that.
In the area of tourism that sort of regional structure will have to be put back. I would ask the Minister to reconsider it. I am not saying it is perfect as it is, but there is a defined role for a dynamic group at regional level which should be maintained. I am not even saying who should or should not be on it. I would simply ask the Government, and the Minister responsible in particular, to look at that before it is too late. I think we will find a need at regional level for regional structures.
Finally, on the economy in general, Ireland has withstood an enormous amount of pressure over the last number of years. In many areas it has been successful. This Government have held firm in key areas. That is a major contribution to development of the Irish economy, but we cannot stop development even in difficult times. It is the Government's responsibility to encourage enterprise wherever that may be, whether it is in State development or elsewhere.
There are major developments occurring in Ireland today in various areas. The one I can best speak about, and it is of national importance, is the development of the new Europ Lo-Lo port in Waterford, designated by this Government and the EC to be the best point of access to deliver Irish goods into the European market at a cost effective price. That is an essential ingredient in the development of the economy. Because of that development we now find that, even before the completion of the phase one of this port that on the basis of inquiries and commitments, the new port is already at capacity. Because of the speed at which that port is being built and its success, the application has been made to go into phase two immediately. The cost saving of this would be enormous, because everything is on site and ready to continue. That kind of development, which is central to the Irish economy, should not be stopped or hindered.
I want to sound a note of warning. I do not want to see political interference in the development of this port on the grounds that it will affect Dublin, Cork or Foynes. That is not acceptable. This is a designated Euro port and everybody in the economy knows it is the fastest route to Europe. It has been designated and money has been put into it. Phase two should go ahead immediately because of the massive cost saving involved. That is a development central to the Irish economy.
I am sure there are similar projects in other areas which meet the same criteria. The facts stand up. It is not even just a development for the Republic of Ireland; it is a development for the island of Ireland. It will enhance the development of our economy and cater for our need for proper structures, our need to be efficient and modern and to deliver our goods and services into the open market of Europe.
We must continue to be confident about our ability to look after ourselves. It is very important at Government level we do not give up. We must continue to fight to get the message across that, not withstanding our difficulties, this Government are firmly in control of all aeras of their activity and committed to all the developments included in the Programme for Government I have outlined here this afternoon. If we do that we will come through the difficult times successfully. We will see growth in employment and we will see our economy continue to develop. We will reap the rewards of decisions being made now, in the balance of this decade and into the new century.
I welcome the Minister to the House. I agree with one of the last points made by Senator Cullen, that there should be no interference by the Government with the development of the ports throughout the country. I would be totally opposed to the present proposals from the Minister in the Murphy report to take over control of the ports, a development which would result in Ministerial appointments and the elimination of local authority involvement in them.
I strongly disagree with Senator Cullen's call for a continuation of the programme of privatisation. It is not the State and the semi-State bodies that are the problem in relation to job creation and the economy. The problem is largely created by the laissez-faire attitude of Government towards creating the right climate, abandoning any form of interventionist policy. Irish Life, Bord Telecom and the ICC are like fatted calves; the best of the public sector is prepared for privatisation and sold off cheaply contributing neither to the creation of jobs nor to the overall strength of the economy. This is not a solution to our present problems.
Our economy is in rag order. Interest rates are rising, our export market is threatened and our Minister for Social Welfare is introducing regular cuts. We have had 12 cuts in the past few months and 21 ministerial regulations on the matter. It is almost as though the Minister for Social Welfare feels that by reducing the number of people entitled to social welfare he is making a major contribution to the economy. That was well pointed out in the recent report of the Comptroller and Auditor General as detailed in one of our national newspapers. The headlines on the front page was, "the Comptroller and Auditor General in his annual report showed that £6.7 million in social welfare was being defrauded from the State" and in the middle of the national newspaper was the report of the figure of £2.5 billion in uncollected taxes. That is the type of prioritising I associate with the Minister for Social Welfare.
Recent figures from the OECD show that we are now 24th out of 24 OECD countries in terms of numbers of people unemployed. Last year we were slightly ahead of Spain and now we are behind Spain. We have slipped back a percentage point. We are now worst not only in Europe but in the entire league of OECD countries. No matter what the Taoiseach or anyone else says about no quick fix solutions, etc, we are experiencing a crisis in unemployment in this country.
At the beginning of the year the Minister for Finance declared that he did not expect the level of unemployment to rise beyond 275,000 this year. Scarcely were the words out of his mouth before that figure had been exceeded and it has remained in excess of 275,000 for the entire year and is unlikely to drop in the forseeable future. There is little reason to doubt that.
Unemployment in 1980 stood at over eight per cent. Imagine that 12 years ago only eight per cent of the population was unemployed. Now we have more of our workforce in long term unemployment than we had in total unemployment at that time. By 1991 the percentage of unemployed was 19.1 per cent and now in 1992 it is in excess of 21 per cent. Of course our artifically adjusted figures make it appear a lot less, something like 16.7 to 17 per cent. We must remember that the level of long term unemployment is perhaps the most worrying part of those figures. The actual numbers are extremely alarming and an increasing number are becoming long term unemployed. Now approximately 50 per cent of unemployed people have been unemployed for 12 months or more. That is a particularly worrying situation. It reflects the recent sharp increase in unemployment figures and our inability to make any dent in those figures.
We have signally failed under the Programme for Economic and Social Progress to fulfil the commitments given by Government that the private sector would create so many jobs or that training organisations would take people off the dole. Some 10,000 jobs were to be created under the job training scheme but I doubt if 100 jobs have yet been created under that scheme. It is absolutely farcical. Some 15,000 jobs were to be created under the employment subsidy scheme. The result was less than 2,000 jobs. We were told that 25,000 jobs were to be created by getting the climate right, reducing inflation, keeping interest rates down, keeping wage costs down, all of which was achieved over the last couple of years, yet no realistic move to fulfil the job creation commitments is evident. The 25,000 jobs that were written into the programme have been largely unrealised; more than 90 per cent of that commitment has been reneged on. That is at the heart of the matter. A social partnership comprising Government, employers, employee representatives and farming groups in this country was formed on the assumption that if the employment climate could be maximised upon everything else would fall into place. We got everything right but employment did not follow. That is the tragic failure of our Programme for Economic and Social Progress.
I highlight this point because by getting all of the fundamentals correct we have managed to achieve a wonderful export record over the last number of years both under the Programme for National Recovery and under the Programme for Economic and Social Progress. Our economy in strict terms of productivity and exports has been a considerable success. We can point to the figures of last year where we had well in excess of £2 billion surplus of exports over imports. In many months this year the surplus of exports over imports has exceeded half a billion per month, a colossal figure. This will now be threatened by the reduction in the value of Sterling and with the extra competition on the British market but overall this year will be another success in terms of exports.
It amazes me that despite our consistent level of export success there has been no consistent increase in employment. That is where I differ fundamentally with Government policy and say that we cannot retain a laissez-faire policy and economic climate and expect everything else to fall into place. Employment, the most essential objective has not been forthcoming.
We must examine all of those export figures. Where is the profit generated going to? Is it being repatriated? What type of tax avoidance area do those profits go to? Are they real profits at all? Is that real money garnered by this country? Are they mere statistics on a piece of paper bandied around between multinational headquarters in Ireland, Japan, America or elsewhere or are they part of our national assets and if so why are they not harnessed to the role of job creation? If wealth is created in this economy by the efforts of the workforce, why can that wealth not be harnessed to the creation of further employment? That is the key issue. I have not yet heard a Minister, an economist or a politician respond adequately to that point. I direct the Minister's attention to it and that of the Minister for Finance, the Minister for Labour, the Minister for Industry and Commerce and Dr. Hillery in the Oireachtas Joint Committee on Employment. I would like them to examine what steps might be taken to avail of that resource, if it is a resource. I would like to see the anomaly tackled and dealt with because at present it is a grey area or a great black hole swallowing exports, effort and money and generating profit from which there is no return for Ireland. I cannot understand that.
I would like to go into detail on social welfare cuts, but seeing Senator Honan arrive I will not impose on her a diatribe on the dirty dozen cuts of the Minister for Social Welfare and the various regulations he has introduced other than to say that in terms of unemployment the cuts have been aimed at reducing the level of social welfare payments and at reducing the numbers actually in receipt of payments. I regard the two approaches as unsatisfactory in many ways, particularly regarding the manner in which persons in receipt of social welfare are prevented from declaring work they obtain over a period of time, because whatever they have gained thereby will be deducted in total from their welfare payments for that week. This ensures that nobody leaves the social welfare net or indeed the black economy. I do not like measures taken over the last couple of months regarding the return to school allowance. That was supposed to materialise but has been a fiasco. Nothing has happened in that respect. I do not like the idea of ID cards, which the Minister wants for a section of the community. If we introduce identification papers in this country it must be done on its merits right across the board, not targeted at a section of the community making them vulnerable or stigmatising them as dubious recipients of social welfare.
Unemployment figures are being reduced artificially by means of calculation. The reduction from 58 years to 55 years in the early retirement scheme qualification has taken a few thousand artificially off the live register. People working 50 per cent of the previous four weeks in terms of week-on, week-off have been taken off social welfare, which has reduced the figure by something like 1,500 to 2,000. The elimination of the self-employed who are in receipt of unemployment assistance has taken another 4,000 off the live register. These self-employed people have such low incomes that they are in need of unemployment assistance. They should not be taken off the live register. Thus by artificial means the formal statistics have been cut from over 21 per cent long term unemployed to under 17 per cent. It is merely an adjustment.
The social employment scheme was referred to strenuously in the Minister's remarks at the outset of this debate when he talked about the Government plan to expand the scheme. I am annoyed at the way the Government have operated this scheme. It was established in the mid-eighties by the last Government when Deputy Quinn was Minister for Labour. It was a good idea. At present up to 11,000 or 12,000 people are employed on it. The requirement for the establishment of this scheme was the introduction of an element of training in order to qualify for European funding. What does our wonderful Government do? They forget or neglect to put in that element of training with the result that we are not able to claim the European funding that would otherwise be available. What is the result of that? We have about 11,000 on the scheme. The Government have to budget for its cost which is about £74 million this year. We have run out of funds because we underbudgeted; there has been an unexpectedly high demand for the scheme and we are not able to avail of European funding. If we had in the first instance ensured that the proper training element was included we would now have no problem with funding the scheme. It would have been able to take more people off the live register permanently than all the tinkering of the Minister for Social Welfare and the artificial adjustment of statistics.
What do the Government tell us? They are going to expand the scheme they are already contracting. How are they going to expand it? That has been one of my major criticisms over the last number of months. Good practical schemes that existed in my area on the northside of the city have been closed down for months for lack of Government funding. We are not talking about expansion existing schemes remaining open. One of the biggest schemes is right on my doorstep and 28 people are employed in it. Those people would not have a hope of getting gainful or paid employment otherwise. They are doing good work in the community in relation to the schools and the church; they produce a magazine, provide security and so on. Much good work is being done there for the welfare of the community. No objection has been made whatsoever by the trade unions. Then we hear that local authorities will curtail the operation of the social employment schemes. If we are already closing down some of the existing schemes why then should the Government be talking about expansion?
I find the remarks in relation to the social employment scheme totally unacceptable. I ask the Government to get their act together in relation to this matter. Instead of aborting the existing scheme, with the pretence of expanding the scheme, they should fulfil the requirements of the European Social Fund to ensure that the scheme may be developed to its potential.
I find it hard to take the Minister for Labour's pronouncement a couple of months ago that FÁS were going to place some 10,000 Irish people in Holland.
I would like to interrupt you for a moment, Senator Costello. I would like on behalf of all of us to extend a warm welcome to Congressman Brian Donnelly.
On behalf of the Labour Party I would also like to welcome Congressman Donnelly. We all know of his good work in Congress, particularly on behalf of Irish citizens, and that is not totally unrelated to the present debate where we are discussing the economy, emigration and so on. The Congressman is very welcome to the House.
In relation to the FÁS scheme, I find again the old story that I have been describing in relation to the Programme for Economic and Social Progress, where 10,000 jobs were to be created by the job training scheme and 15,000 jobs by the employment subsidy scheme, yet virtually 90 per cent of those jobs were not created. Here the same rabbit is being pulled out of the hat again. FÁS are to create 10,000 places in Holland. I ask the Minister to tell us the precise numbers of jobs that have been created by those schemes. How many Irish people have got employment or training in those schemes?
Housing is one of the great crisis areas in the country at present and particularly in Dublin where this year we are building 100 units of accommodation, 50 of them as a result of the detenanting of Sheriff Street over the past couple of years. We are not creating new accommodation, merely replacing the existing flats. In all, a maximum of 50 units of accommodation are being provided which compares starkly to the 2,000 houses or thereabouts that were provided per annum in the mid-1980s. This is another indication of recession in the construction industry and the unavailability to the local authority of funding which would create jobs in house construction and give people a roof over their heads.
Jobs is the key economic issue. They put bread and butter on the table and allow people to contribute to the Exchequer. Extra money is generated in tax receipts for services. Also, we have a responsibility to ensure that those on low incomes have a roof over their heads. At present we are not doing that and the annual report of Focus Point on the homeless reveals that 6,000 people or thereabouts every night are looking for accommodation in Ireland. Hostels are full which underlines their inability to contain the problem. Much needs to be done that cannot currently be addressed.
Youth employment is also at the cutting edge of current economic problems. We have undoubtedly reached the era of the "yellow pack" worker. Young people, well educated at second level to the age of 17 or 18 and many who have received third level education, are working in employment which is not properly remunerated or unionised and which does not meet standard conditions of work under employment legislation and under the 1977 legislation dealing with young persons. Such inadequate employment is increasing in fast food outlets, in the hotel and catering industry and in public houses where young people are let go when they reach the age of 18 when they become eligible for statutory entitlements.
I will quote an example of one person I came across working in an electrical shop who had to do three interviews to get the job. He works 48 hours a week, a minimum of one late evening per week, one Sunday in every three, has a tea break of 15 minutes, lunch is officially one hour but could be five minutes or a sandwich at the counter. A day off depends on staffing levels; he sometimes works three weeks without a day off; gross wage is £329 per month and that includes overtime. That works out at £66 after tax for a 48 hour week. He does not know his entitlements with regard to annual leave; he will have to work Christmas Eve and St. Stephen's Day; he must give four weeks notice but could be dismissed without notice and, finally, under the social welfare requirements he cannot leave as he would have to wait nine weeks before he could sign on.
That is the profile of a young person of 19 years in Dublin who would receive the same money on an SES scheme but would work shorter hours, perhaps half a week. That is the type of employment prospect youngsters are facing. It is tragic that young people coming out of school where ideals have been instilled in them about caring for the Third World, about showing concern for the environment and employment and so on should have to face such exploitation. It is a sad situation and augers badly for the future if that is to be the first experience of work that youngsters receive. They are used as fodder; they are going to be used and abused because they are surplus labour to requirements and employers can do as they wish.
I read the Joint Oireachtas report and the Minister's contribution this morning. I have no real complaint about that. However, I reject the reference to expanding the social employment scheme; the criticism of local authorities in relation to that is totally out of order. I emphasise to the Minister that it is up to him to get his house in order and to fulfil the criteria for the social employment scheme when I have no doubt that we will be able to operate the SES much more effectively.
I have problems also in relation to a feature of all statements relating to the economy nowadays. That is the contention that many young people are without marketable skills and, consequently unable to avail of employment. There are no jobs. We have a highly trained young population, a fine FAS apprenticeship scheme and excellent third level colleges; technology is taught in our regional colleges and there is a large input of training and education into apprenticeship schemes. I do not believe that lack of marketable skills is a factor in our unemployment levels. Large numbers of people with second and third level education are competing for the few jobs that arise. It is easy to quote the statistics and to say that by far the largest percentage of people out of employment are those with the least educational qualifications. That is true but even if they had the finest of qualifications there would not be jobs for them. We cannot simply blame the educational system and say that the marketable skills are not provided.
I refer the Minister to the recent statement by John Teeling about the Green Paper where value of technological and enterprise education is emphasised. He calls it a load of rubbish saying that it is not education, that it is bringing youngsters to a dead-end, that it is a narrow form of training and does not foster the qualities that allow for enterprise and entrepreneurial skills to develop. I am sympathetic to that viewpoint. People need broadly-based education to bring out their skills and abilities before we focus on the narrow constraints of preparing somebody for the commodity world of buying and selling. People become cogs in the wheel if technical skills become the focus of second level education. I have reservations in relation to that.
What is the Government's response? We have had a standard response from the Government on virtually everything. The Taoiseach says no quick fix solutions, no good rushing into anything, this is a complex matter and must be dealt with carefully and so on. Behind that attitude is a laissez-faire policy under which the private sector will, presumably deal with everything. We still have the privatisation programme as though that was a solution in itself, which it is not; it is just a diversion. We have unseemly wrangling over the Cullition report between the Coalition partners, with point scoring regarding which agency will be charged with creating jobs or attracting industry. There is dispute over the role of IDA. We are falling between two stools and creating nothing at the end of the day.
We have the enterprise partnership boards. I think they are a good idea. In the light of the report of the Joint Committee on Employment, I consider it a worthwhile initiative. The Joint Committee is not something that should be geared purely to our present crisis, but should be there permanently. We congratulate the Government on the initiative in establishing it, even though the idea initially came from the Congress of Trade Unions and the organisation for the unemployed. Our own party favoured the idea and are participating fully in the Joint Oireachtas project. It should be a standing committee and we should operate within that framework at all times.
The enterprise partnership boards are also a good idea. They attempt to apply in the local areas the ideas from the Joint Oireachtas Committee. However, I am not sure if it will work out too well. It will be a very bureaucratic organisation, considering its wide representation. There should be a good representation from the employers and the traders and some mechanism for bringing together all of those actually involved in job creation. They should discuss local initiatives and see where a job can be retained or another job created. I am not sure that the structure is right for doing that.
I also feel that Dublin is being neglected in the allocation of money. We are talking about £150 million. Dublin with a third of the population, would get £25 million. The sum should be double that amount. Because of the major unemployment problems it has, Dublin should have a third of the £150 million. That £150 million seems to be doing the rounds. It is the £150 million for the Joint Oireachtas Committee and now it is the £150 million for the enterprise partnership boards. There does not seem to be any new money. It is all the old money that has been got from the various institutions. None of it has done anything so far. We should like to see more of it in the Dublin area.
We have to get away from the laissez-faire strategy. Perhaps I could quote what the previous Taoiseach said at the introduction of the Programme for Economic and social Progress in January 1991:
This programme, is a strategy to accelerate economic and social progress in the Nineties. The strategy is simple. It is to maintain a low inflation economy with a stable exchange rate which can compete internationally and give us the higher standards of living and improved social services to which we aspire.
That is a lovely idea, but I think the strategy was more simplistic than simple. It was a laissez-faire strategy of getting the climate right and leaving it to the private sector to do everything. Where the public sector was functioning effectively and profitably, as in the case of Bord Telecom, it was put under threat. Irish Life was taken over and privatised. That is the old 19th century strategy of non-intervention, the strategy of the Government standing aloof, putting what they call the fundamentals right, but disregarding the fact that that does not create employment. You have to go another step down the road to ensure that employment is created. We cannot simply sell off the national silver, as though that is the problem. Senator Cullen suggested that this was a major part of his party's programme for dealing with the economic problem.
It is critical that we have a job retention policy. There should be a mechanism to examine business enterprises at risk, before the receiver goes in, and before it becomes too late and the jobs are gone. It is a lot easier to retain jobs than to create them, because the background work and research has already been done. That is associated with another major complaint of mine — the lethargy among our business sector in relation to research and development.
It is important, too, that we continue to attract foreign companies, but we must tighten the control on the profits. This merry-go-round of patriation of profits and tax avoidance must be examined to ensure that the money does not disappear without benefit to our economy, but is ploughed back into this country.
The report suggests the setting up of ancillary industries to existing large business enterprises whether indigenous or multinational. Where there is a firm industry, with a good export market, a good employment and a strong trading base, we should explore how we can provide the raw material and ancillary equipment or services that are required. Again, like retention of jobs, that is an easier way than the strict creation of new jobs.
We must emphasise our own national resources and create indigenous root industries in this economy. There is still plenty of scope in relation to farming. Farming has been let go without proper controls. We can see the difference between the dairy side of the industry and the beef side. One has gone wild and is out of control; the other has been properly organised through the co-operatives and has had a strong basis in the economy over many years. We have not yet come to terms with the totality of our farm industry either in respect of direct raw products from the land or of the marketing of those products to the maximum.
We have the fishing industry and tourism. We talk so much about what is being done in regard to tourism, but we are doing very little. Our tourist industry is very small by international standards. A great many visitors come to our neighbouring island and do not come across here. They could be induced to come across. Dublin, for example is never properly marketed as a tourist centre. Last month we had the Homecoming Festival but nobody here hardly knew it existed. Perhaps Senator Conroy would have come across it; he might have tripped over something in the street but I bet he did not trip over many foreign tourists who had come to our Homecoming Festival, even though we have 70,000 Irish people abroad with roots in Ireland. We did little or nothing to market the festival properly.
They are all getting off at Shannon.
When we get the stop at Dublin they will come. Can we take it from that, Senator Honan, that you will be a supporter of the Shannon stopover being terminated and the planes going straight to Dublin?
Over my dead body.
These are the main areas. There are many other matters I could dwell on. We talk about our economy, our Oireachtas Joint Committees and our local enterprise boards, but the one thing we have not done is to create jobs. We are forever talking about getting the fundamentals in the economy right. I will recognise that we have got any of the fundamentals of the economy right when I see a significant improvement in our job creation programme.
I will just continue on from where Senator Costello ended. What matters to the individual at the end of the day is a job — a worthwhile job with a future. It is dear from evidence over the last few years, and even the last few months, that if one is hung up on some sort of ideological idea, such as the creation of jobs, one inevitably ends up with the appalling tragedies which we are seeing in Eastern Europe of totally uneconomic industries which cannot compete and thousands of people being laid off. If you go on the other extreme of the Margaret Thatcher approach you end up in a similar position as we have seen in the United Kingdom Government when they decided to close the coal mines. This means 30,000 miners will be laid off as well as approximately 60,000 to 70,000 people in associated industries, with appalling personal and economic consequences.
I was delighted to hear Senator Costello referring to entreprenurial skills. There is hope for us when the Senator is willing to agree. We are becoming more flexible. One of the reasons this Government have done a great job over the last few years has been their co-operation with the trade unions, the employers, and with the farming community. Another recent example of that has been the consensus in Japan which brought Japan from being almost a joke in terms of employment, prosperity and competition into a different situation. Let us not be hung up on particular ideological approaches.
In any approach, we must have a sound economy. For a while it would be very easy to create artificial jobs, very easy to do, such as national service or in State industries that will collapse in a few years' time, but that would be uneconomic. There are a number of ways one can have a transient increase in the number of jobs but there will be tears at a later date unless they are based on a sound economy. The fact that we have been able to survive the last few weeks of financial crises is evidence of our sound economy.
It is no harm for a moment to recollect and compare. It is important to look forward. We forget the transformation that has occurred over the past few years under this Government, but it was not achieved by the Government alone. It was achieved with the co-operation of the social partners. In 1986 we had a very severe balance of payments deficit. Ireland is one of the countries with the strong balance of payments surplus. That is very important from a financial point of view. In 1986 we had the highest budget deficit in western Europe, and the highest in the history of the State. Now we have the lowest budget deficit in the European Community. Six or seven years ago our currency was in a shambles, it was being devalued; capital was leaving the country. Now our inflation rate is among the lowest not just in the European Community but in the world. Six years ago we had a negative economic growth and there was not much prospect for jobs. Now, we have one of the highest rates of economic growth in the Community and in the organisation of developing countries.
There has been a tremendous transformation. It has meant that with great difficulty — and let us not underestimate the difficulties — we can hope to surmount the appalling financial crises of recent weeks and weather what looks like a worldwide resession. That will not be easy for us. We are doing a lot in that direction. If there had not been this improvement in our economy I dread to think of the suffering and unemployment that there would be in this country today, but that is not to say we can be complacent.
To the individual what really matters is employment, his prospects, and his family and we have grave problem there. It is a problem which we recognised directly not only at Government level but by setting up an Oireachtas Joint Committee on Employment. I strongly urge this way forward. We all want to see more employment, we all have a common interest and the same objective. Senator Costello acknowledges that entreprenurial skills are important. It would be a great advantage if all worked together, and we have done that by working with the trade unions. Why should there not be more co-operation in the Oireachtas?
I join the calls to the main Opposition Party to join the Oireachtas Joint Committee on Employment. They have a great deal to offer within that forum. It would make sense and would be part of the new relationship within the Oireachtas if they could see their way to do so, and it would not diminish their political role or view.
We have an extremely difficult financial situation at present. There is a tendency in our media and in general discussions to cast the Germans as the villains of the piece; our neighbours are strongly attempting to do that. There is no doubt that certain difficulties we are facing originated in the unification of Germany. It was tremendous that the Wall came down. From the financial and political points of view, that decision may have seemed reasonable and, in the short term, very good. The decision that the West German Mark be equal in value to the East German mark was against the advice of the Bundesbank which is being blamed for so many of our problems. That decision, a political decision imposed on the Bundesbank, was the start in Europe at any rate of the very severe financial problems that have culminated in the recent collapse of sterling and the difficulties the Germans are facing.
It behoves us to consider that for a moment or two because the German economy is the locomotive of Europe. We happen to be one of the few countries in the Community which exports more to Germany than we import. We are very fortunate in that sense. The German economy is developing its own problems. I would like to quote from a report that came out a year ago from Lehman Brothers on some of the implications for German debt.
Debt service charges for the unified German state must exceed DM 90 billion in 1995, some 3 per cent of the GNP....Assumptions about growth and wage inflation could generate a primary public spending deficit of the east of DM 120 billion in 1995 [originating basically in east Germany.] The total deficit (including off-budget bodies, interest payments and for all of Germany) would then exceed DM 180 billion....Total borrowing over the next four years (i.e., out to 1995) would exceed DM 550 billion.
This is something in the region of around £150-£200 billion. For any economy, even one as strong as the German economy, that is an appalling burden to attempt to carry.
As was wisely forecast in that report, other European economies are likely to pay a substantial price for the combination of German unification and the devotion to fixed exchange rates, assuming the latter survives. We have a very serious problem here as to whether these rates will survive. It now seems as though they may, but perhaps in a very different form from what we envisaged. If we end up with fixed exchange rates between Germany and France, the Benelux countries, perhaps Denmark, Austria, Switzerland, that is something we may find very difficult to join but we have at least the opportunity of considering joining it because of the strength of our economy and the strength of our finances. That is a far change from a few years ago. Nonetheless, it will present huge problems to us because our main market is still the United Kingdom. Most of our industry which gives employment is geared towards exports to the United Kingdom, even if it is a much reduced percentage of our total exports.
There are many problems ahead, but let us remember just a few things. If we want to have serious long term, worthwhile employment we have got to have a foundation of a sound economy. We have gone some considerable way towards achieving it, partly by Government policies and partly by working together in that direction but we have a long way to go yet. We have a very sick neighbour next to us.
There will be a summit meeting on Friday at which the British Prime Minister and the other Heads of State and Government will be attending. One of the things we will be trying to ensure is that steps are not taken which would be to our detriment, such as downgrading the role of the European Commissioners. When you see a situation where the UK Prime Minister has been subject to widespread criticism by his own backbench supporters, it is obvious a very grave crisis is beginning to develop over there and that is inevitably going to affect us. We must be very glad that we have a strong economy and that we are increasing the amount of employment in this country. We have more jobs coming along the line. It is not good enough yet, there is a long way to go, but at least we have made a worthwhile start. I am deliberately cutting myself a little short in order to enable my colleague on the opposite side to come in for a few minutes.
I want to thank Senator Conroy, as I know he has cut his contribution short to allow me in to the debate. I think this highlights the deficiency in the ordering of this very important debate here today, where unfortunately there was no time limit put on speakers. I am only the second speaker for our party and in accordance with the order of the House today, I have just about five minutes. I do not think that is good enough on a very important debate like this. I wonder if it is possible at this stage to change the order of the House today as I know there are other members of my party who want to come in.
We are debating the First Report of the Joint Committee on Employment and also statements on the economy.
It was a member of your party who went on for an hour, knowing the time limits involved.
I did not interrupt the Senator when he was speaking, I am talking about the ordering of the debate. I believe that in debates such as this that there should be a time limit. I have held that belief for quite a long time. I am merely highlighting what has happened now at this stage and that I have only five minutes to make a contribution to this very important debate.
This debate is very important at this time as there are many major problems facing the economy. It is the most difficult time in the history of our State where we have, as Senator Conroy has rightly pointed out, a very sick neighbour from the point of view of their economy. That has magnified the underlying problems in our economy — the problem of massive unemployment and indeed a disastrous drop in the incomes of a very large section of our community, whether they be the self-employed sector, the farmers or those people who are unfortunate enough to have large mortgages at a time when rates have increased by 3 per cent.
This is a 3 per cent increase in interest rates which, I believe, would not have been necessary had the Government taken the steps highlighted by our party leader, Deputy Bruton, to give certain guarantees to the financial markets. We have all witnessed over the past number of weeks massive financial killings on the financial markets by major investors and, I think, also by the major banking groups. Something should be done to restrict this type of gambling. At least, such people should be brought within the tax regime. They should be liable for tax on the huge financial killings made on the financial markets.
We are discussing the First Report of the Joint Committee on Employment. I read through the report with interest and also the contribution made by the Minister for Labour here this morning. Having read the Minister's speech, I do not see anything that gives me any great hope for the future. The Minister recognises the facts and the difficulties facing the Irish economy at the present time and those facing the 300,000 people who are unemployed. Of course, it has been rightly pointed out by Senator Costello earlier on that while that is the number signing on it does not reflect the number on the SES or the numbers on the youth training programmes. It does not reflect the elderly section of the unemployed who are no longer deemed to be unemployed. There is absolutely nothing in the Minister's report to this House today that would indicate the Government had a grasp of the real problem and of the misery caused throughout this country by unemployment. They do not seem to have any determined policy to tackle it. I regret that very much. I believe there are many things that could be done had the Government the will to face those problems.
Again, much has been said about the social employment scheme. Here is one area where the Government can directly take huge numbers of people off the unemployment register and give them meaningful employment. I know that throughout the country last year there was a gap of three months between the termination of one scheme and the commencement of another. The responsibility for that lay directly with the Government, and their failure to have the will or the determination to tackle that problem. Many more people could be employed on the SES. They could be given very worthwhile employment. This would give them a purpose in life and an opportunity to go out to work even every second week for a 12 month period but, unfortunately, the Government seem very lackadaisical about making the maximum use of that scheme. There is no question but that this scheme could have much more funding if it had an element of training. The Government must stand condemned for that.
This scheme was introduced in 1986 by the then Coalition Government but nothing has been done to revamp or modernise it to bring it into line with modern day thinking. That is a great pity. I think it was one of the best schemes introduced by any Government.
It would be inappropriate on this occasion to refer to the report by the Minister for Labour without also referring to the report I have received from the Taoiseach's Office on the setting up of the enterprise partnership boards.
On a point of order, without discourtesy to the speaker, I notice it is just slightly after 3.30 p.m. If the Minister is detained is it proposed to continue this debate until 4 o'clock with Members participating?
Acting Chairman
The Minister is on his way.
I want to refer to the composition of those boards. They can have a useful role to play provided they have adequate funding and proper management. I had the pleasure of sitting on one of the county development boards, which have been abolished and incorporated into the enterprise partnership boards. One of our greatest problems was lack of funding. We could have created jobs but, unfortunately, we did not get funding from central Government. The county development team of which I was a member had no funding from August 1990 until January of 1991. Will the new boards face the same problems?
It is regrettable that the regional tourism boards have been abolished. They played a very useful role in coordinating and managing Ireland's tourist interests in different regions. I do not believe it is possible to have an isolated tourism committee in each county.
I must also put on record my disgust at the lack of local public representatives on the enterprise boards. We have but one elected member on those boards. That is a scandal and a major mistake. We seem to have room for community associations and other bodies but not for the elected representatives in each county. The elected members have made a major contribution to the development of their counties. Nobody is more au fait with the problems of a county than the local elected representative. To make matters worse, there are no elected representatives on the national management committee and the Government must stand condemned on that.
I note we have been joined by the Minister for Finance and I appeal to him to re-examine this matter and to provide for a greater input by the local elected representatives on the enterprise partnership boards and on the national management committee because I believe they have a major role to play. The local elected representatives know what is going on in their area.
With regard to a collapse in farmers' incomes, I appeal to the Minister to use his good offices together with the Minister for Agriculture and Food, to ensure that the maximum headage payment is made immediately in all areas. We are facing a major financial crisis in rural areas. The sheep industry has collapsed, as everybody knows. With the mechanism for calculating the sheep premium some £30 million has been written off for sheep farmers this year.
I appreciate the Chair's difficulty and out of respect for him I will resume my seat but I must protest at the way in which the business was organised. There should have been a time limit which would have allowed more speakers to contribute. I was here, as Senator Conroy and everyone else knows all day and all I got was ten minutes.
On a point of order, may I register a strong protest. This debate confronts the two most serious issues this country is facing. We started at 11 a.m. and one speaker spoke for an hour and another for three-quarters of an hour. We took half an hour for lunch and resumed with more lengthy speeches despite the fact that Members were aware that others wished to contribute. I think that is an outrageous undermining of the authority of this House and, in protest, I am now leaving——
Acting Chairman
My sympathies are with the Senator but the Chair has no control over that issue. I call on the Minister.
I accept that but in protest I am withdrawing from the House. I think it is a complete disgrace when there are so many people unemployed——
Acting Chairman
The Minister to reply, please.
The debate has covered many fundamental issues and has been very wide ranging. It has focused attention once again on certain home truths about the Irish economy. We have heard questions raised which go to the heart of where Ireland now stands in the European and in the wider international economy. Many related to the options now open to this country in the new and challenging situation in which the recent currency upheaval has left us.
A few weeks ago, the European Monetary System experienced greater pressures than ever before in its short history. So severe was the buffeting it received that two of its members suspended their participation in the Exchange Rate Mechanism. This was the first time any member had done so. Fortunately, the core of the ERM has withstood the trauma; and the more time passes, the more assured its future becomes.
It is pointless now to argue over what might or should have been done to avoid this currency turmoil — about whether prompter or more decisive or different actions by the European Community or by some of the member states or even by some individuals might have enabled the UK and Italy to avoid suspending their membership of the Exchange Rate Mechanism.
Equally, there is no point in trying to pretend that these events did not occur. It serves no purpose to bemoan the fact that there has been upheaval or to wish that, somehow, Europe could once again be restored to the position that prevailed before mid-September as if it had never occurred. These events have happened. They will have important economic effects on us, some good and some bad. They will affect us both in the shorter term and in the future. The challenge before us is to face up to what has happened, to analyse the implications dispassionately, and to respond in our domestic policies in a fashion calculated to make the best of our new situation, in particular over the longer term.
The turmoil in the EMS had a special significance for us in that the currency of our largest single trading partner left the ERM and floated downwards. The natural result of that development was that financial markets immediately tested the strength of the Government's commitment to a firm exchange rate within the ERM. No doubt, they recalled that, some years ago, a sudden and sharp fall in the value of sterling was followed by an Irish pound devaluation.
But the situation now is entirely different. In the meantime, Ireland has established a record of performance in the crucial areas of public finances and inflation — record which prompted the Council of Ministers to confirm last February that "Ireland at present complied with the objective criteria for the move to the third stage of European Monetary Union". Externally, since then we made major competitiveness gains against the UK, our dependence on UK markets continued to decline as Irish exports increasingly penetrated new markets elsewhere and our balance of payments improved from a current deficit of 3 per cent of GNP to a surplus of twice that order. Moreover, the original narrow band of the ERM has been stable since January 1987 whereas, prior to that, realignments had been quite common.
Faced with the crisis on the currency markets in mid-September, we had to make one very important decision straightaway. Should we stand firm within the ERM, or succumb to the speculative pressures and devalue our currency? In our view, the former course serves Ireland's interests best. I think there is widespread agreement both in this House and in the country at large that this evaluation is the correct one.
I do not propose to rehearse here all the arguments for and against this course of action. To my mind, there are two clinching justifications for the Government's stance. First, there is no guarantee that a devaluation of our currency would yield positive results: instead, the prospect is that it would lead to re-emergence of an inflation psychology, higher price levels and — whatever about the very short term — would in the longer run lead to lower levels of output and employment. Second, that approach would both impose a heavy budgetary cost directly and would shatter confidence in the Government's commitment to stability — a confidence which has been so painstakingly built up over the last five years or so. There could be no question of our putting the benefits of that achievement at risk by going for a quick-fix solution of, at best, very dubious value. External developments— for example, the inflationary impulse devaluation will impart in the UK — and sensible domestic responses, I am confident, will turn what may now seem a substantial obstacle into a shorter term, diminishing, difficulty.
We must all recognise, however, that standing firm within the ERM in these new conditions will involve temporary costs for many of our people — costs compared to the position before the currency turmoil. There is no denying or escaping that. I readily admit that the rapid depreciation of sterling creates particular difficulties for many businesses. As Senators know, however, the Government have acted decisively and quickly to address such difficulties.
We should not forget the other costs — in my view the far greater and more enduring costs — that would rise if we were to follow the other path. Let us consider some of those for a moment.
To devalue would have been to throw away most, if not all, of the confidence both at home and abroad which our prudent economic policies have earned in recent years. As I have already suggested, we could be quickly back into an inflationary cycle, like the one which plagued us for so many years and from which we finally escaped in the mid-eighties. Second, our case for entry into full European Economic and Monetary Union on schedule, at the very least, would have been seriously damaged, putting at risk among other things the currency stability which that will afford and devaluation would not have been the easy path to lower interest rates that it might seem to some — far from it.
I would like to elaborate for a moment on the consequences of a devaluation for interest rates and for budgetary costs. I feel that the implications in these areas may not always be fully appreciated.
Our experience of devaluation in 1986 is enlightening. Interest rates rose quickly, and remained high for a considerable time — until the financial markets developed a conviction about the stability of our currency. Within two months of the devaluation, retail interest rates rose by between 2 and 4.5 percentage points. Furthermore, sharply higher gilt yields followed quickly; medium and long term gilt yields increased from about 9 per cent in the first half of 1986 to 13.5 per cent by October 1986.
If we had looked to the supposedly soft option last month we could, I think, have anticipated that foreign investors would be unprepared to trust us with their money again for a long time — without exacting a premium in the form of significantly higher interest rates than those prevailing in Germany and other ERM countries. Instead of an outlook where we can reasonably expect our interest rates — as the turmoil eases — to return to a level little higher than those in Germany, we would be facing a stiff interest rate premium with Germany for an indefinite but lengthy period ahead.
The Exchequer, and hence the taxpayer, would also have lost heavily if the Irish pound had been realigned. At present, the Exchequer has about £8,900 million of foreign currency debt. A change in the value of the Irish pound would immediately increase this by about £89 million for each 1 per cent our parity declined; and would increase the cost of servicing external debt proportionately. The cost of servicing debt denominated in Irish pounds, of course, would rise and remain higher than otherwise, in line with the higher interest rates which a devaluation would entail.
The recent crisis has focused attention again on the choices we made firstly in joining the European Monetary System and latterly in positioning ourselves within the ERM: whether to opt for a strong currency within the ERM or to associate ourselves with a currency which has exhibited large and unpredictable swings and with an economy which, over the past 20 years has grown rather less rapidly than most of the "core ERM" economies. We should recall that our approach has brought many gains. They should neither be taken for granted as eaten bread to be soon forgotten nor hastily overlooked in the heat of crisis.
A firm exchange rate policy backed by appropriate budgetary policy and by restraint in wage and cost developments has lowered perceptions of risk and interest rates and underpinned the very substantial progress in investment, growth and living standards we have achieved since the mid-eighties. Investment rose by no less than 22 per cent in volume terms between 1986 and 1990. GDP growth averaged 6 per cent — well ahead of that of our EC partners. Our competitiveness greatly improved. Our exports increased their share of our external markets. This year our trade surplus will be over 10 per cent of GNP. Most important of all, employment grew substantially with total non-agricultural jobs up by 54,000 between 1986 and 1991.
Progress in other areas has been considerable also. Inflation is down to 2.8 per cent, one of the lowest in the EC and well below the current level in Germany. Indeed, the low inflation environment we have had over the last six years with price rises averaging about 3 per cent annually has facilitated the growth I have just mentioned. It has delivered external competitiveness gains, encouraged investment here, and, coupled with action on the taxation front, has enabled significant improvements in living standards to be made. Notwithstanding positive action on taxation, our Exchequer borrowing requirement has been reduced from 13 per cent of GNP in 1986 to well under 2.5 per cent.
As a result of their increased confidence in our economy and our currency, non-residents have almost quadrupled their holdings of Irish gilts from £1.1 billion at the end of June 1986 to £4.1 billion at the end of June this year. Our exchange rate policy has also allowed the National Treasury Management Agency to avoid the excessively high costs of borrowing Irish pounds just now. The confidence that we and others have in our exchange rate policy allows the agency to borrow in foreign currencies with lower interest rates.
Our impressive economic progress is being maintained this year despite an external environment which continues to be very difficult. Senators will recall that economic developments and prospects for the year were set out in my Department's "Economic Review and Outlook 1992" which was published in the middle of August. It predicted that GDP growth this year would be of the order of 2.5 per cent. This compared to the EC Commission's forecast of 2.25 per cent GDP growth in Ireland this year. More recent forecasts by other agencies have been more optimistic. In September, the Central Bank and the ESRI predicted GDP growth of 3.5 per cent and 4 per cent, respectively. All forecasters agree that economic growth in Ireland this year will be well ahead of both the EC Commission's forecast of 1.75 per cent growth in the European Community and the OECD's forecast of average growth of 1.8 per cent in the OECD area. In a word, we are continuing to out-perform our competitors.
As I predicted in the January budget, consumer spending is growing broadly in line with the rise in real disposable incomes. Retail sales so far this year are up by about 3 per cent compared to the corresponding period of 1991. Car sales, which had been very weak in the early part of the year, have shown some improvement in recent months. Despite the continued weakness of Ireland's external markets the volume of merchandise exports rose by an estimated 12 per cent in the first seven months of the year. Manufacturing output is up by 10 per cent so far. All of these indicators are impressive evidence of the resilience of this economy in the face of the downturn abroad.
Employment appears to be generally holding its own. In "Economic Review and Outlook 1992", growth in total employment of about 2,000 was projected. Allowing for some continuing reduction in numbers engaged in agriculture, this translated into non-agricultural employment growth of about 5,000. Up to the end of September, receipts from the training and employment levy show a year-to-year rise of 7.5 per cent. Taking account of income developments, this is an encouraging pointer on employment. Unfortunately, despite this the rise in our labour force and the continuing international downturn has seen registered unemployment rising again this year. I shall return to the question of unemployment in a moment.
From all of this I believe it is clear that the gains from pursuing our current exchange rate policy have been and continue to be substantial. Continuation of this policy despite the short run pain, it may now cause is, to my mind, by far the best course open to us in these difficult times. But, in deciding to make this choice, we should be clear what its implications are. We have to be prepared to make the adjustments in our policy and behaviour which this choice will entail. I will mention just a few of these implications and the responses which I believe are now called for.
As a result of recent events our currency has strengthened. But a stronger currency will erode competitiveness in some sectors in the short run. Business must take steps to restore competitiveness through tighter control over costs and otherwise. This must be the aim both in businesses exposed to UK competition and throughout business generally.
A stronger currency will lower inflation in the short term. Lower inflation effectively raises real incomes. Given the prevailing level of unemployment, we must consider the scope for adjusting our expectations for nominal incomes to reflect this new reality. Lower inflation will reduce nominal tax receipts and so tend to worsen the budgetary position. We must be prepared to accept appropriate reductions in expenditure to prevent Exchequer borrowing from rising and thus to maintain the benefits which fiscal responsibility has undoubtedly conferred to date.
Most immediately, the depreciation of sterling, the lira and the peseta relative to the Irish pound implies a fall in the Irish pound value of our exports to those countries. In turn, this implies a squeeze on the profits of enterprises which compete mainly with enterprises from those countries but which source the bulk of their raw materials either here at home or in countries which have not devalued. This squeeze on profits will continue until market conditions abroad permit those Irish businesses to raise their export prices in foreign currency — in sterling, lira or peseta terms — and until production costs at home adjust to the new situation.
While the depreciation of sterling and other currencies will erode Irish competitiveness against those countries, this erosion will unwind as prices and wages in the devaluing countries rise relative to those here in response to their devaluations. But in the meantime we all have to live; and there is no denying that recent events will reduce the competitive advantage we have gained in recent years and could place in jeopardy some of the output and employment gains which have stemmed from these competitiveness improvements. It is vitally important that we adjust our projected cost increases to this new reality.
There is no point in willing the end — a strong and stable currency within the ERM — if we do not at the same time will the means — decisive and effective action to preserve competitiveness and maintain jobs in the new and more difficulty trading environment. It was with this in mind that the Government decided last week to establish the market development fund of £50 million for the period up to the end of March 1993 to assist firms which have been seriously affected by the recent exchange rate movements. By helping firms to help themselves the fund will also contribute to the stability necessary to maintain Ireland's position in the ERM at a time of considerable difficulty for those firms.
The Government recognised that many manufacturing firms could be faced with serious problems in maintaining positive margins on sales in the UK market and also in those parts of the domestic market and in certain overseas markets which are subject to strong price competition from UK firms. The Government also recognised that such a situation could pose a threat to many jobs unless the firms concerned took immediate action to improve competitiveness in existing markets and to pursue actively opportunities to diversify into alternative markets.
In establishing the fund the Government emphasised that assistance would be targeted very specifically at firms which would have temporary difficulty in maintaining employment and in adjusting to the changes in the market place arising from the devaluation of sterling. Firms will need to demonstrate their ability, commitment and action to manage their way out of current difficulties.
The new scheme is now in operation. It will concentrate on providing help for firms where profitability and employment is threatened because of the devaluation of sterling. The Government envisage the scheme, which will be monitored regularly, continuing for about six months. There will be a formal review at the end of this year. The Government will keep the evolving situation under review in order to support employment in the light of a rapidly changing currently market situation.
One of the benefits of the recent movement in exchange rates is that inflation next year will be lower than it otherwise would have been. Consumers will benefit through an unexpected rise in real incomes. Industry, including those not really subject to UK competition, will benefit through a reduction in the cost of imported capital equipment and materials for further processing. It is crucial that the depreciation in sterling and other currencies, which will reduce the prices of many of our imported commodities, should be reflected as quickly as possible in domestic prices. There should be no question of firms which have had their costs reduced in this way taking windfall increases in profits. Indeed it is vital that they fully pass on lower import prices so that they feed into lower inflation generally, and particularly into lower costs for the sectors exposed now to greater UK competiton. Senators will be aware that my colleague, the Minister for State at the Department for Industry and Commerce, is watching developments in this respect.
I would like to take this opportunity to talk about employment creation and policy in relation to employment in a broader context. This is a subject at the forefront of many minds, especially those of Government members. It is not so much right but essential that this theme should get maximum attention. Unemployment is high, unenviably so. Our population's age structure means that we must anticipate strong growth over the years ahead in the numbers of job seekers. At the same time — certainly this year and last — the pace of job creation has been far below what we need. It is little consolation to those without work that for some years Ireland has outpaced in terms of economic growth most OECD and EC countries, nor is it much consolation that job creation here in recent years has also outpaced that in many of them. The plain fact is that more Irish people, pro rata, are now out of work than in other developed countries.
The challenge which faces us all, and particularly those in positions of power and influence, is to ensure that this does not continue, despite the prospect of faster labour force growth than elsewhere. Indeed, one could argue that there is an even greater challenge: to ensure that our actions, in the face of high and rising joblessness, are clearly targeted towards sustainable employment growth. Genuine concern to do something for the unemployed demands that we seek viable jobs. In my view, we could scarcely do worse than to chase short term solutions with short term jobs which will evaporate as economic realities force a change in course.
That is not the Government's approach. We are clear in our minds about the need for viable, lasting jobs — not make-work solutions or worse. We are also clear in our minds about the proper thrust of policy to achieve them. Our total strategy has several aspects. First, we are consistently pursuing fiscal, monetary and economic policies aimed at low inflation and stability. Let me emphasise that. The central objective of ongoing macro-economic policies — of "discipline", if you wish — is to expand employment. At times one feels there may be a public perception that these broad policy approaches are somewhat heartless. So I think it bears emphasising that the essential rationale is a caring one. Their objective is in the better interests of Irish people. Their fundamental aim is to enable total employment in Ireland to grow over the years ahead. It should be clear to all by now that less restrained approaches endanger jobs and living standards.
The Government's efforts do not begin and end, however, with setting the broad policy lines correctly. There is more which can be done. An economy can be inefficient while pursuing a sound macroeconomic strategy. We have been moving, therefore, to better structure the economy in the interests of jobs, for example, in the area of taxation.
Consider the main developments of recent years. Rates of income tax have been lowered and band widths increased, with undoubted improvement of incentives for work and for enterprise. Within the general restructuring of indirect taxes in the context of the Single Market, particular attention has been paid to cross-border differentials on key items to minimise or remove trade distortions, with positive effects on domestic economic activity. We would be facing more severe problems now had we not done so. At the same time the whole structure of corporate taxes has seen major change. The standard rate has been brought down appreciably with the effective subsidisation of capital relative to jobs through accelerated depreciation allowances now much reduced. The latter was often the subject of particular criticism since we are an economy with a surplus of labour. Quite apart from their effects on incentives, tax developments in recent years have also helped to facilitate income moderation and so have had a twofold beneficial outcome from an employment viewpoint.
Structural steps in the interests of jobs has not been confined to taxation. I do not propose to bore Senators with a litany of developments — just one or two to instance the broad picture. One good example is the much closer linkage between jobs performance and industrial grants. Another is the recent initiative on training introduced earlier this year with EC assistance. While the uptake of this new scheme and of the accompanying EC-backed employment subsidy scheme has been disappointing to date, they are a further instance of the Government's commitment to measures which can enhance sustainable employment prospects.
A third strand of overall strategy recognises that many outside Government have a potential contribution to make in the search for more rapid employment growth. Again, I would invite Senators attention to a range of initiatives in his respect. In some areas there is a high concentration of long term unemployment. The Government and the social partners agreed in the Programme for Economic and Social Progress to implement an integrated area-based approach to tackle this problem through the “area partnerships”. They bring together in a unique way the social partners, the local community and public agencies to implement a community response to long term unemployment.
You are all aware of the Culliton report on industrial policy, incorporating the considered views of a group of business and other experts about policy to best promote development. The Government immediately set up a high level task force, under the chairmanship of Mr. Paddy Moriarity, to consider how the recommendations of this report could be implemented, and work is moving forward on this.
Perhaps less well known is the special Task Force on Employment, established under the Central Review Committee, with membership drawn from experienced people in business, trades unions and Government Departments. It has been examining the present job situation in depth, and exploring possibilities for new job creation and factors that might be impeding jobs growth. To date, it has submitted 15 reports to Government, constituting a useful input to employment strategy.
In addition, earlier this year the Government proposed an Oireachtas Joint Committee on employment. This committee, with three sub-committees, was established, inter alia to examine and make recommendations on strategies to enhance the rate of growth of self-sustaining employment. The committee got down to work with admirable speed and is, I think, proving a valuable innovation in addressing employment issues.
I have touched on three strands to overall policy — a macro-economic approach, structural reform and openness in Government aimed at harnessing expertise from all quarters. I hope that I have begun to make clear how all three are particularly directed towards our key requirement — more, lasting jobs for a growing labour force.
I would like now to say a few words about recent interest rate developments. One of the most unwelcome consequences of the recent currency turmoil has been the rise in interest rates which took place at the end of September. The increases in official and retail interest rates were delayed as long as possible but they were the inevitable consequences of the disruption in the wholesale markets.
The first thing I want to say about this is that Ireland is not the only EMS country to have experienced higher interest rates as a result of the currency crisis. There have been considerable rises in short term money market rates in France and Denmark, two countries which also have strong and well managed economies. The increase of three percentage points in the Central Bank's short term facility interest rate on 28 September was a balanced and reasonable response to the turbulence on the domestic money market in the previous week and should be seen as a necessary short term measure to help restore order to the market. Similar action was taken by the French authorities who raised a key interest rate by 2.5 percentage points in the previous week in order to defend the value of their currency.
I expect that the recent increases in official and retail inerest rates will only be temporary. I am confident that in a few months at most, retail rates will fall back to previous levels. However, I cannot — nor can anyone else — say precisely when rates will come down but an encouraging sign is that already wholesale money market rates are well below their peak. The factors which will ultimately determine the speed and extent of the reduction in interest rates will be the restoration of stability in the EMS and the resumption of normal currency flows. There are also signs that the German authorities will soon be in a position to reduce further their interest rates and this will help ease pressure throughout the Community.
There have been suggestions that, as a response to the recent rise in interest rates, full mortgage interest relief should be restored and that the ceiling should be raised to £5,000. This proposal would be very expensive. Mortgage interest relief currently costs the Exchequer £184 million per year in terms of tax foregone. Restoration of tax relief to 100 per cent of the current £4,000 ceiling would cost about £50 million. Much as I am conscious of the pressures on mortgage holders, I do not believe that such a costly response to a temporary rise in interest rates would be in the national interest. It is much more sensible to direct scarce resources at the seat of the problem — as we are doing through the market development fund.
At the end of the day a strong currency must be based on a strong economy and on strong fundamentals. Today our fundamentals are strong. Our ability to sustain our position in the EMS has been recognised by our Community partners and has been reflected in the increased take up by foreign investors of Irish Government securities in recent years. We intend to continue with the prudent economic and budgetary policies which have proved so successful in recent years — and within those constraints, to adjust quickly and decisively where necessary to the changing requirements which external developments may demand.
I want to thank all who spoke in this debate and the Chair for giving me time. A number of questions were raised of which we have taken note. I have some replies here. Wherever there are relevant questions, I will see that the individual Senators get a response.
Question put and declared carried.
An Leas-Chathaoirleach
When it is proposed to sit again?
At 2.30 p.m. on Wednesday next.