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Seanad Éireann debate -
Thursday, 13 May 1993

Vol. 136 No. 4

Employment Through Enterprise: Motion.

I move:

That Seanad Éireann

—notes the publication of Employment Through Enterprise setting out the response of the Government to the Culliton report;

—approves the decisions to implement changes recommended by the Culliton report in accordance with the suggestions of the Moriarty Task Force; and

—asks the Minister for enterprise and Employment to report on a six monthly basis on the progress made in achieving the implementation of changes that have now been mandated by the Government.

May I ask that we comply with the suggested time-frame? The Bill will be discussed in the Seanad within the next five weeks.

As this is an important issue and the Minister is present, the time limit proposed will make it difficult for speakers to develop a theme or support their arguments. They are restrictive and I do not think we can do justice to the subject.

I welcome the Minister. I believe it is his first visit to the House since the election and his appointment as Minister.

It is the Government's intention to introduce in the Seanad the Bill, which gives effect to the agency restructuring following the ratification of the Culliton report, where it will be debated for three to four weeks subject to the usual constraints.

The seriousness of the problem facing this country is evident from the figures contained in Appendix 7 of the report Employment Through Enterprise, which was published in response to the Culliton report. This table gives a breakdown of the job numbers gained and lost in both Irish and foreign firms in the country over the six year period 1987 to 1992, inclusive. During that period we managed to create an impressive total of 118,500 jobs but unfortunately this was accompanied by total losses of 108,600. So effectively, the net change in the period was only just under 10,000 jobs.

In a period when unemployment figures have grown to an unprecedented level of 300,000, this net performance was not good enough, especially as foreign owned firms were responsible for whatever net gains that were made. In fact, Irish owned firms managed to lose 600 jobs in this period. It was against such a background that the Government established a task force in February 1992 to report on the implementation of the Culliton report. The Seanad will recall that it was within a period of approximately seven to eight months that the Culliton committee met and delivered its report to the then Government.

The Culliton review concluded that the performance of indigenous industry had not been adequate and they identified the deficiencies that had to be overcome to address the problem. As Culliton had considered industrial policy in a broader context than had been customary, the Government was set the task of responding in a more integrated way to ensure that our competitiveness was increased. Culliton advised that this be done by improving the working of labour markets, infrastructural services, ports, taxation and education.

The task force was chaired by Dr. Patrick Moriarty of the ESB and it reported, over the period May 1992 to January 1993, on the different issues raised in or arising from the Culliton report. The text of their deliberations together with the response of the Government was published on 3 May 1993 and this report in turn sets out the specific improvements that must be achieved in each policy area.

Every change and reform brings gains to some interests, but losses to others. Unfortunately the losers can usually identify their losses better than those who might gain can identify their own potential to benefit, but in this instance, it is my firm conviction that the gains — in terms of increased numbers of people at work — from doing better and more business will be so pervasive and in the interests of everyone, including the large numbers of people seeking work, that there must be a clear understanding now that these reforms and changes are to be carried through. For that reason, those who read this document and fear that a change or reform mandate by Government will represent a loss to them should realise that they will benefit indirectly or indeed directly, from the improved performance of the economy.

Of course, the reforms and improvements covered in the report, though essential, are not the entire public policy for business and enterprise. For stability, growth and development, the "macro" policies are important. Public expenditure, the exchange rate, the market for money, the wage formation process and the underpinnings of competitiveness are vital, as is the economic health and growth of our partner countries. While this document gives assurance of positive and determined action in upgrading and improving goods and service markets and infrastructural factors, people and businesses need reassurance also in relation to the "marco" policies and directions I have mentioned.

This Government is providing the economic policy and the stable environment for growth and improvement at home. We will contribute to the evolution of co-ordinated EC policies for business investment and expansion in Europe. Such things are not, however, the point of this document. This document is about structural and "micro" policy initiatives at the level of particular markets, and for those who operate in markets, in order to improve our national performance.

Ireland needs more entrepreneurs: people with initiative and ability to innovate and compete with the best in the international marketplace. For this reason I attach a particular importance to the Culliton group's and Moriarty Task Force's recommendations on education and training. With the Minister for Education I will be seeking to add a new enterprise dimension that those two groups correctly identified as lacking in the system at present. I agree with those groups also that a new enterprise orientation will not detract from the attainment of high academic standards or from the full, rounded, cultural, social and spiritual development of young people.

This enterprise orientation is of great importance for our long term development. Without it, other policy changes now proposed will be less effective. We need to take a clear sighted, long term view now on how to achieve a better economic performance. Education must play a role in bringing into sharper perspective what is required so that people and enterprises will work successfully. Education for enterprise is one of the most far-reaching structural changes we can make. It must be truly educating; mere learning of facts, current information or even up to the minute computer applications would be inadequate. Education for enterprise is only part, but an important part, of education for a better life in Ireland.

Training and retraining are also crucial elements of industrial and employment policy. A transition to standards based on higher skill levels will be introduced. The contribution which a highly qualified labour force can make to increase competitiveness, economic growth and employment prospects is well recognised. However, a high quality and flexible training system is also an instrument for promoting social cohesion. It is a means by which vulnerable or disadvantaged groups, including those situated in areas of high unemployment, the disabled or the elderly can be provided with an avenue back into productive and sustrainable employment.

A specific comment is appropriate on the responsibility of businesses for training. If we want to see the dynamic, innovative, competitive, expanding industry which the actions detailed in this report are aimed at promoting, then it is imperative that employees not only equal but surpass the skill levels of trade competitors. Primary responsibility for raising skill levels and improving the technical competence of those at work rests with employers and company management.

The Culliton report comments with respect to the skills gap between practice in Ireland and best practice in competitor countries, as well as the relatively low levels of training afforded to employees generally, indicate clearly a need both for a change of attitude as well as the development of new approaches in this sphere. The Government will do its part in this task. At the end of the day, however, if the deficiencies recognised by the Culliton report are to be put right, a more prominent and pro-active role will have to be undertaken by employers in their own self-interest in relation to training.

Obviously, however, it is not sufficient to have people on the ground who are motivated and capable if the conditions for doing business are not right. I believe, for example, that the Government decisions relating to the introduction of more competition into energy markets and for transparency in relation to industrial tariffs can only be good for business.

Equally, the Government's commitment to accept the recommendations in relation to the movement of goods, people and information through all our networks — roads, rail, air, telecommunications, post and ports — will have the necessary effect of reducing transport and communication costs entailed by our peripheral location. Bodies charged with overseeing these networks will be required to examine their operations with a view to increasing efficiency, introducing competition and cost reduction measures.

As can be seen from the report the Government is also committed to enabling State owned businesses to operate as such. We intend to implement the recommendations which will allow State enterprises pursue agreed strategies and business plans without excessive bureaucratic interferences. These enterprises will, in turn, be required to meet absolute standards for the competitiveness of their prices and services.

A vigorous competitive environment was recognised by the Culliton report as being essential to the successful development of Irish industry. Under the Programme for a Partnership Government, my Department is charged with the development of competition in all sectors of enterprise. The Competition Act, 1991, has created an important vehicle through which competitive conditions can be created. The emphasis in that Act was on putting mechanisms into the hands of business to enable it address anti-competitive behaviour in the market. While there has been some use of these provisions by business, more might have been expected. This is one of the reasons my Department is reviewing the provisions and operation of the Act.

Legislation will not, of itself, remove all restrictions on competition. The Culliton report highlighted the need to ensure that "economic sectors not exposed to international competition should nevertheless be induced to operate in an efficient, low-cost way". My Department is examining how, in particular terms and separate from the Competition Act, this can be done. On the issue of taxation the Government accepts the overall approach of the recommendations in the Culliton report.

What we want is clearly spelled out. We have undertaken to proceed with the changes needed to achieve the broadcasting of the tax base, the reduction of the incidence of tax on the low paid and those approaching average industrial wage levels, closer co-ordination of the tax and social welfare systems and the simplification of the tax code.

These are the objectives set out in the Programme for a Partnership Government in response to the Culliton recommendations. These are the objectives, but no one can realistically expect that the detailed provisions of the coming and subsequent budgets can be laid before this House today. We have set out what we intend to do in the Programme for a Partnership Government and we will follow through on those commitments.

There has been some criticism by the media and elsewhere concerning the delivery of services under the proposed new arrangement for our enterprise support agencies. The logic behind those arrangements is straightforward. The present structure of the agencies is not satisfactory as it does not place the necessary emphasis on the development of indigenous Irish managed firms.

The Government concurs with the Culliton and Moriarty recommendations that all grant giving and advisory supports should be integrated in one agency for the development of indigenous firms. Hence Forbairt, which will be organised sectorally with a strong regional base and an emphasis on developing areas of recognised weakness, such as marketing and innovation. On the other hand, the business of attracting overseas investments to Ireland is a different operation. It involves the selling of a location to companies which already have sufficient strengths in marketing, technology and business know-how. This will be the function of IDA Ireland. It will also operate to a wider brief than heretofore by seeking to attract internationally mobile investment to Ireland not only in the industrial sector but in many service sector areas also.

The function of Forfás will be to play a co-ordinating role and to help ensure greater linkage between the indigenous and international sectors of Irish industry.

I also accept that the Department of Enterprise and Employment has a special role to play in fostering the climate for enterprise in this country. I have accepted the recommendations of the Moriarty Task Force and I am currently working on a programme of implementation covering all issues raised. These include the continued move from grant aid to industry to repayable forms of finance via the agencies, the review of operations in my Department and the achievement of more effective restrictions on State aids for industry in the more developed regions of the European Community.

As chairman of the Cabinet sub-committee on the implementation of the Culliton report which has been retained for a three year period to April 1996, I will be happy to respond to this House on a six monthly basis on the progress made in achieving the implementations of the changes which have now been mandated by the Government.

I welcome the opportunity to open the Oireachtas debate on the Culliton report in the Seanad and to confirm that it is my intention in three to four weeks, subject to the normal constraints, to move the legislation which will give effect to the agency restructuring. I have also provided for the publication of the summary of the Culliton report, copies of which are available from my office for those Senators who wish to obtain the summary rather than the full report which costs £10.

I welcome the Minister for Enterprise and Employment, Deputy Quinn, to the House. In the past he made an important contribution to the proceedings of the House. I am glad to see him here in his role as Minister.

I have listened to the Minister's speech and there is nothing in it with which I disagree. I am concerned that certain proposals in the Culliton report are not included in the document, Employment Through Enterprise. I welcome the Minister's statement that he will be happy to report to the House on a six monthly basis. This will give us an opportunity to monitor progress and to look at further initiatives for creating a positive and effective climate for enterprise. I also welcome the Minister's proposal to introduce legislation in the Seanad to give effect to proposals arising from this document.

In the context of developing a climate for enterprise and the encouragement of risk taking the Culliton report puts considerable emphasis on the necessity of tax reform. According to a headline in the Irish Independent this morning, a worker earning £8,000 is better off than a worker earning £15,000. A married man with four children earning £8,000 has £200 more in disposable income than his counterpart who earns £15,000.

We talk about job creation incentives, rewarding risk taking and the creation of a pro-enterprise culture yet we retain a tax and social welfare system which allows a person earning £8,000 to be financially better off than a person earning £15,000. This calls into the question the sanity of this debate.

I wish to refer briefly to an aspect of the employment situation and to our attempts to develop an enterprise and business culture. The Minister represents the Government of this country. He is answerable to this House and ultimately he is answerable to the people. However, there is also in this country what has been described by other commentators as a permanent government which is neither affected by elections nor answerable to this House; perhaps to a certain degree it is answerable to the Minister and his colleagues.

In my view, that permanent government has acquired over the years a far too powerful role in the determination of national affairs. I am concerned that within that so-called permanent government, groups have come to dominate which are conservative and reactionary and which have little vision as to how this country should develop economically. Hence, we have that extraordinary anomaly highlighted in the morning newspapers in relation to the tax and social welfare system.

When Culliton spoke of an Irish anti-enterprise ethos he was correct. There is continuing opposition to the idea of rewarding enterprise and risk taking and hence, the more radical and worthwhile proposals made in the Culliton report have been doomed from the beginning. The 1992 budget and Finance Bill were anti-business and anti-enterprise to an unbelievable degree. While the Finance Bill and budget of 1993 have made some grudging concessions, these have been restricted by so many conditions and red tape that their real value has been virtually undermined, reflecting the continuing power of the reactionary element of the so-called permanent government of the State.

I suggest to the Minister that it is time for the Government to challenge the power of some of the people to whom I have referred. I am concerned about the influence which these people continue to exert, diluting and obstructing worthwhile economic progress.

Some high profile events in recent times, notably the financial crisis and the subsequent devaluation and the quality of advice which was available to the Government over that period, call into question the competence of some of the people tendering this advice. The additional apparent inability to police and uncover unacceptable practices in State and semi-State sectors confirms my point. If further confirmation were needed, the undoubted undermining of much of what was worthwhile in the Culliton report reflects the power of the elements to which I referred.

The motion asks us to approve the document, Employment through Enterprise, and to approve certain changes recommended by the Culliton report which the Government now proposes to implement. First, the Government does not propose to implement the Culliton report in its entirety, it is implementing selected parts only. Some Government decisions already taken are in conflict with the thrust of the Culliton report. Recommendations, particularly in relation to tax reform, have been deferred indefinitely. The Culliton report gave a stark choice to the Government and people of this country — enterprise or emigration. According to the report there are two fundamental national factors — the national debt and the unemployment figure which at the time was 270,000 and is now 300,000.

The report spoke of an anti-enterprise bias pervading many sectors of Irish life and said it was particularly entrenched within the decision making apparatus of the State, which is illustrated by the fact it has taken 18 months to publish this response to the Culliton report. There was an inevitable tug of war, if we can believe reports, within the Cabinet about the individual responsibilities of Ministers and Departments. That went on for four or five months and this response represents the most that the Minister could expect from that exercise.

Time does not allow me to go through each recommendation of the Culliton report or the report of the Moriarty Task Force to see if it has been implemented. The reality is that the ideology of the Culliton report has been largely ignored.

I wish the Minister success with what is left of the Culliton report and I would like, on a positive note, to remind him of a statement which he made shortly after his appointment. He said that he and the State, as far as possible, should stop obstructing business and enterprise and allow it to prosper, and I support that attitude. I believe it represents a welcome change because heretofore the policy of the State was to surround business, particularly small businesses, with red tape and bureaucracy to a suffocating extent.

The Culliton report recommended reduction, reorganisation and streamlining of State agencies involved in the development and promotion of industry. Despite what the Minister said in his speech this afternoon, the Government has largely gone in the opposite direction because instead of one IDA, as it were, we now have three, and instead of the regional bodies which the report recommended, we have a layer of County Enterprise Partnership Boards. We have extended layers of bureaucracy which have no positive effect for the encouragement of risk taking in business. I believe if we are to achieve economic progress and create employment, risk taking must be encouraged. That is fundamental to progress.

The Finance Bill contains proposals for income tax refunds for people starting up new businesses, but it imposes so many conditions that few will qualify. The Culliton report is direct in its proposals and Moriarty is clear in his recommendations. Yet, the Government response is neither Culliton nor Moriarty, but a few careful and feeble steps in their general direction.

The Culliton report repeatedly called for the current anti-enterprise culture to be changed to a pro-enterprise culture if real progress and employment is to be achieved. That so many of Culliton's recommendations are being ignored shows that anti-business and anti-enterprise culture is still entrenched in the policy making machinery of the State.

I want to refer briefly to a question that has assumed headlines in the last few days, that is the so-called rebalancing of telephone charges. I regret the Culliton report has been cynically used by the Government; in this situation what has happened is not what the report proposed. Telecom Éireann has been bailed out of competition on overseas telephone services and the Government has engaged in a subtle tax gathering exercise of substantial proportions. Some of my colleagues will develop that point further.

Irish firms doing business overseas will gain from the change. However, small Irish businesses doing the bulk of their business on the home market, domestic phone users and other vulnerable groups which have been identified will be the victims of this decision. Apart from the economic aspect, it is an appallingly stupid political decision, but that is for others to rectify.

There is a demand for positive action in view of the massive current number of unemployed. I suggest to the Minister that the Government build on this mood, before fatalism sets in. Tax reform is vital. A pro-enterprise culture will not develop unless risk-taking is encouraged, there has to be an acceptance that small businesses and the self-employed are entitled to share in whatever rewards are gained through their risk taking. If part of the State apparatus continues to regard with envy, as it were, the rewards of risk-taking, and continues to strangle with bureaucracy the efforts of those prepared to take risks, then nothing worthwhile will be achieved.

Again, I welcome the Minister's statement shortly after his appointment that the State should get out of the way of business. If the taxation proposals recommended in the Culliton report are implemented even in the limited steps envisaged in the Minister's proposals, and if we can get away from the anti-enterprise culture, we will create what the Minister described as an economic climate within which progress can eventually be made. I believe we have the resources and the goodwill and there is now a mood for action on which we could build.

I hope the Minister will succeed in extracting the other positive proposals contained in the Culliton and Moriarty reports and that, over the coming months, he will begin to put these into effect in addition to the proposals contained in the document before us. I have never spoken in this House simply for the sake of opposing. The situation we are faced with is far too grave for political arguments. I genuinely believe much of what is valuable in the Culliton and Moriarty reports is not being put into effect. I strongly encourage the Minister to use what muscle he can to bring forward the remaining proposals contained in the Culliton report and supported by Moriarty.

The most important proposals are those relating to the provision of tax incentives and the elimination within the State decision making apparatus of the anti-enterprise culture which looks down on risk taking as something to be discouraged. Unfortunately, in recent years that attitude has been sufficiently dominant to create many of the problems we now face.

I do not find myself in major conflict with the Minister on this matter. My concerns are simply that only bits and pieces of the Culliton report are being put into effect. I will conclude by again appealing to the Minister to endeavour to bring into use to the advantage of the entire community the parts of the Culliton report that have been dropped.

I welcome the Minister for Enterprise and Employment to the House on his first visit and I wish him well in his new broadly based duties. Senator Howard mentioned that the Minister was a Member of this House in the past; I served with the Minister here some ten years ago. Our respective positions now are a reflection of the fortunes of politics. I wish the Minister well; he is charged in functional terms with helping to solve the most important economic, social and political problem facing the country, namely, unemployment.

One could say that employment is the bottom line for this Government. The primary aim of the Programme for a Partnership Government is tackling and alleviating the unemployment problem. In that context, I want to strike a somewhat positive note; the initiatives taken in recent weeks, like the Government response to the Culliton report before us and the Finance Bill, are steps in the right direction. The Finance Bill has received a unique welcome from a wide range of interests groups in particular, the trade unions, the business community and the unemployed. That should be encouraging for the Government because it needs positive thinking and encouragement, consensus and co-operation.

I want to focus for a few minutes on education and training which are highlighted in the response to the Culliton report. I am glad the Minister has highlighted the importance of these subjects in our discussion today. I can think of no more apt quotation in this regard than from the Culliton report itself:

Education and training are a most critical element of policy affecting not just industry but overall economic welfare. In an increasingly integrated and competitive world, skills and knowledge constitute one of the few areas where an economy can command a differential competitive advantage.

On the same theme, Michael Porter, the distinguished academic and international commentator in his recent widely publicised study on international competitiveness concluded that one of the most important ways in which Governments can help improve international competitiveness is by education and training policies — and this is an important point — which are geared to the generation of knowledge and skills relevant to industrial performance. Here we are in the midst of a technological age different from many earlier eras.

We have a good education system. I know that from my academic work in UCD and from the recognition, acknowledgement and encouragement given by academic institutions in other countries towards students who wish to study abroad. Our system is not without its defects if it is considered from the perspective of international competition. There are shortages and deficiencies in skills and knowledge in the education system. The top third of our educated young people, particularly those who go on to third level, who gain degrees and enter white collar employment generally do well. However, economic competitiveness is as likely to be determined by the skill levels of the entire workforce as it is by the top academic achievers.

This raises the question of broadening the syllabus at second level and introducing technical subjects. This question was tackled in the early 1960s when Dr. Patrick Hillery, the then Minister for Education, took the initiative to implement the recommendations of the investment in education study. The idea at that time was to broaden the curriculum to ensure — and I know this was Dr. Hillery's personal desire — that technical and academic subjects were granted equal status. Regrettably that objective has not been achieved. It has not been achieved in Britain either but it has in continental countries, and that is an important point. The idea behind investment in education and subsequent studies was to accelerate the development of education. Arising from that study the regional technical colleges were established, and these have been successful institutions.

The intention at second level was that a majority of students who were not comfortable or not good at abstract teaching and a range of academic subjects would acquire skills for productive employment. Regrettably this has not happened in practice. This is illustrated in a study undertaken for the Culliton report. The Roche Tansey study found that the majority of pupils in comprehensive, community and vocational schools were taking academic type subjects in the leaving certificate. However, the same study shows that by examining manpower needs in individual EC countries, there will clearly be a demand and jobs for technicians and for third level technical graduates.

Some commentators believe that the Culliton report calls for a severe reduction in academic subjects amounting to a threat to these subjects. However, a close reading of the Culliton report does not support this view. What the report calls for is a certain de-emphasis on academic subjects, not their neglect or exclusion. If calls for a better balance between academic subjects, which have their valid place, and technical subjects.

The Government accepts the need for an emphasis on vocational subjects leading in turn to practical and usable skills, especially at second level. This is also the finding in the report, Employment through Enterprise which emphasises the importance of modern languages. Although matters are improving, there are still far too few pupils taking modern continental languages at second level.

However, there have been important innovations in the deployment of language skills at university level, including University College Dublin. For example, and I have first hand knowledge of this, the BComm (International) is a four year programme where students take four years of business subjects. The third year is at a continental university business school in one of four languages, namely, German, French, Spanish and Italian. There are at present 80 students in that programme and there are already dozens of them in continental universities. Not alone are these students getting valuable business subject training for three years in UCD but they are also attending business courses in continental universities. Furthermore, they take the relevant language to degree level within the college and also have the invaluable opportunity of 12 months in the host country as part of their studies.

Another positive initiative in the context of languages is the IBEC European Orientation Programme where placements are provided in industry on continental Europe.

It is possible, and indeed necessary, to have the liberal arts represented on our curriculum at second level together with appropriate technical subjects, especially for those who are not in the 30 per cent of the top academic elite and who may have strengths that can be developed by the availability of these technical courses. We live in an age of technology. Michael Porter's international study claims that investment in education has been a key competitive weapon in achieving the necessary standards in the goods and services of Germany, Japan and Korea, countries who devote substantial resources to technical education.

The Minister has spoken of the need for more entrepreneurs. There is still too much of the employee culture in Ireland. We rarely meet people who start up their own businesses. I am sure Senator Quinn will have much to say about this later. He will be able to talk about his own experience because he is the case that proves the exception. We should have more emphasis on programmes to encourage enterprise. We are doing a certain amount at university level by supplementing the courses in the Engineering and Science Faculties with courses from the Faculty of Commerce, but we need to do more.

The Culliton report identified a shortage of venture capital as a key requirement for indigenous industry where the need is greatest. This was confirmed by the Oireachtas Joint Committee on Employment on which both the Minister and I served. It is in this context that I welcome the imaginative initiatives and incentives in this year's Finance Bill, especially the new seed capital scheme which is targeted specifically at employees. Those who may be in safe jobs, or in less than safe jobs, will now be encouraged to start up their own businesses. In addition the scheme will encourage people who have become redundant and who are not employed but who have a range of skills to obtain critical money to start up. They then can go to their banks who will be more accommodating, because one of the first questions any banker will ask is how much the individual is contributing. In that context the business expansion scheme is being renewed for a further three years and the life time cap is removed which is another incentive in the right direction.

The area of research and development was barely touched on in the short life of the Oireachtas Joint Committee on Employment. Research and development is the life blood of business activity, relevant for existing businesses and for new businesses. We must invest a lot more in R and D if we are to compete internationally. There is a specific provision in the Finance Bill whereby R and D projects can quality for BES relief. In addition, county enterprise partnership boards will be geared to meet local initiatives and local start-ups, in particular where finance and other services such as training will be available. In the case of the county enterprise partnership boards, £100 million venture capital has been arranged with the banks and other financial institutions on favourable terms together with the back-up expertise of these financial institutions. I am optimistic about these boards and in particular the valuable capital that could follow the initiatives in the Finance Bill by way of further capital, because capital gearing and capital base are crucial for any enterprise.

I wish to refer to an area the Minister highlighted and this is the skill level in the workforce. The Minister made particular reference to the importance of employer recognition of the value of training as an investment. One of the problems, and this was raised at the committee, is that employers focus on cost, which is understandable after the recession of the eighties. It is good business to focus on cost but many employers look upon training as a cost rather than an investment which would add value to what they produce.

I am glad to pay tribute to Senator Quinn. In his business investment and training are key components of his human resource policies. This shows up in the performance of his employees, in their customer interaction and the quality of service. We found last year, and it is still the case, that the problem is not skill shortages but skill deficiencies. I am glad to see in the response to the Culliton report that there is a new emphasis on lifting skill levels to the highest international levels as, for instance, in Germany.

The specific recommendation, with a time limit on it, that a new division of FÁS will be established within a matter of months to focus on training for those at work in addition to those not at work is welcome. I am also glad — and I know the Minister had this in mind — that there is to be a certification process for various courses. There is a need for a national independent certification board and I am glad that a time limit has been set — October 1993 — for its establishment. Ultimately the Culliton report and the Government will be judged on action and implementation.

I welcome the fact that, in the response to the Culliton report, employment and enterprise are considered and clearly stated to be the business of all Departments and agencies. We need a new sense of urgency about the structures we are putting in place and the follow-through in all Departments. Every Department and agency must put job creation and job maintenance at the top of its agenda. It is in that context that I am very glad the Minister is the chairman of the Cabinet sub-committee to oversee the implementation of the Culliton report at the highest level.

I am still concerned, as many are, about the level of bureaucracy for small and medium sized industries. I welcome the charter for small businesses that was initiated recently but there are obstacles to start-ups of small companies. Regarding indigenous industries, there are many unnecessary hurdles to be crossed which hinder the development of small firms. Bureaucracy stifles initiative and devours time and effort and there is too much time spent on form filling and we need more streamlining as a matter of urgency.

We need to urgently review all the State apparatus to see that it is enterprise friendly and responsive to the needs of people who are trying to engage in business and economic activities. The real risk is that on the one hand we will offer more incentives, like the Finance Bill, and on the other we will frustrate those incentives if we do not smooth the path in that regard. The scale of the unemployment problem is such that we must act now. We need a new sense of urgency in the State apparatus and elsewhere.

I am delighted the Minister is the chairman of the Cabinet sub-committee on the implementation of the Culliton report and that there are dates for the implementation of specific steps which he will be overseeing. In addition, he will be back in this House within a number of weeks with the restructuring proposals. I look forward to his six monthly visits to report progress on the implementation of the recommendations in the Culliton report. I wish him well in that task because it is that follow-up which is the key to our unemployment problem. I wish the Minister well and he has the support of everybody in this House.

I welcome the Minister to the House. I know he was here many years ago. The crucial question in looking at the Government response to the Culliton report and to the Moriarty Task Force is how fully the recommended strategy is being implemented. Will the Government implement a little of it, half of it or all of it? Will it create, as the Minister described, the required change of attitude? I wish to examine these details.

The details of the Culliton report strategy come under four pillars. The first pillar is to do with lowering costs and removing barriers to industry; the second relates to infrastructure and covers training, education and speeding up and initiating legislation; the third deals with State agencies and the confusion and overlapping that occurs and the fourth and the most important, deals with taxation. If those are the four pillars of the Culliton strategy, how do the Government decisions match them?

Under the first pillar, lowering the costs and removing the barriers to industry — the decisions are broadly good. They can be viewed as a real attempt to attack the cost of energy, transport and telecommunications and to remove bottlenecks and barriers in areas such as ports. These measures will make an important difference when they are fully implemented.

The specific proposals for rebalancing telecommunications are ill-judged and it is important that we do not blame the Culliton report. It did not suggest reducing the cost of business telecommunications by raising the costs for domestic users. The report stressed bringing down Telecom Éireann's cost structure which it considered to be out of line with international standards. That is where Telecom Éireann should be looking for reductions in costs. The reduction in the charges for international calls is necessary but the present proposals will not work. They should be replaced by a gradual introduction of the changes in tariffs and accompanied by a massive and serious attack on Telecom Éireann's costs. Overall the verdict on the first heading must be positive, and I welcome most of those decisions.

Regarding the second pillar, the infrastructural issues have a good outlook. Senator Hillery referred to training and said that many employees regard training as a cost rather than an opportunity. The Culliton report said we need to realign education and training with the needs of industry. I was pleased to hear the Minister mention the need to promote social cohesion in training by helping those in disadvantaged areas, the disabled and the elderly. The report proposed the creation of totally separate vocational and academic streams at second level education. That has not been accepted and I agree with the Government decision. Instead, it is proposed to give more emphasis to the vocational dimension at a unified leaving certificate level. That solution responds to the needs of Culliton, worldwide trends in education and the aspirations of parents and students.

There are many good proposals under that second pillar, infrastructure. I particularly welcome the proposals to speed up the legislative process. The inclusion of this element in the Culliton strategy is a reminder to all in these houses that the need for Oireachtas reform is not merely a housekeeping matter. It has a bearing on how well this country performs in the years ahead. I hope that we as legislators will be to the fore in implementing our part of the Culliton strategy. In relation to two of the four pillars I mentioned the Government has done well.

Now we come to the bad news. Pillar three is the streamlining of the State agencies supporting Irish owned industry. The Culliton report stated the multiplicity of State agencies meant support for Irish owned companies was diffuse in impact and confusing to the client companies. The Culliton committee believed that the IDA was split between its two roles, the first is the attraction of foreign industry and the second is support for Irish owned industry. The report said the dual role was preventing the IDA doing either job correctly. The committee also found it was inefficient and wasteful to have separate overlapping agencies to support Irish owned industry. Instead of having the IDA, An Bord Tráchtála, EOLAS and FÁS tripping over one another, the committee recommended one agency. Meanwhile the job of attracting overseas investment would be given to an agency dedicated solely to that purpose.

The Culliton report suggested one agency to bring together all the support services for Irish owned industry. That would be better for the State because it would provide one focused agency with a clear and simple mission. It would be better for the client companies to have one agency to deal with instead of a whole range. What is proposed now is the reverse of what was suggested by Culliton. Instead of streamlining the system it is proposed to complicate it even further. The important and essential simple proposal of Culliton has been held up by disputes over responsibilities and red tape.

By far the most important amalgamation recommended by Culliton was the amalgamation of the Irish operation of the IDA and An Bord Tráchtála. This is critically important because they are both in the business of helping companies develop. An Bord Tráchtála is not merely an overseas sales office or a purely promotional agency, it is also a vital development agency. A most important aspect of developing markets for Irish companies is developing the capabilities and strategies of the companies themselves. In this function these two agencies overlap and it was correct to bring them together.

Instead, it is proposed now to drive them further apart. This has already been partly done. Until the new Government took office in February both agencies were under the aegis of the old Department of Industry and Commerce. Following the publication of the Culliton report the Department reorganised its handling of the two functions to ensure that the same people in the Department were looking after both agencies. That was excellent co-ordination and a good preliminary step before a final merger.

All of that went by the wayside with the new Government. In a move that almost beggars belief An Bord Tráchtála was taken from the Department of Industry and Commerce and given to the new Department of Tourism and Trade. These two agencies whose co-operation is all-important now report to two different Ministers. It was clear from that day the amalgamation envisaged by Culliton would never take place. This is borne out by the Government decisions we are now discussing. One of the vital parts of the proposed agency to support Irish owned industry will be dealt with elsewhere. Further, as if the Culliton report had never existed, someone invented the county enterprise partnership boards, another set of support agencies for Irish owned industry. While I am in favour of locally based effort, it is not a good idea to add an additional layer to an already top heavy bureaucracy, as referred to by Senator Howard.

The problem with a multiplicity of State support agencies is that everybody concerned, including the agencies, spend much of their time co-ordinating their efforts rather than getting on with the job. The people supposed to help companies are sitting on committees all the time. The companies are wasting time and effort going to these two agencies when they should be focusing attention on the marketplace and on customers.

The Culliton report called for a "one-stop-shop". Instead, we have given Irish industry a big shopping centre. It is worse than that, for at least in a shopping centre everything is convenient. The new arrangement will be anything but convenient for the companies it is supposed to help. The report recommended the establishment of Forbairt. The Government will do that but at the same time will maintain An Bord Tráchtála, the county enterprise partnership boards and will set up Forfas also. Forfas is a new super agency intended as a holding company for the IDA and Forbairt. It is nothing more than another unnecessary layer of bureaucracy.

The Government decisions regarding the third pillar are wrong and fly in the face of the Culliton recommendations. They will make the situation worse, not better. The most constructive thing to do is to drop them altogether. If we are not to have the simple structure recommended by the report, we would be better off keeping what we have now.

In relation to the fourth pillar, I am delighted the Government accepts the overall approach of the Culliton recommendations on taxation. Those were the words the Minister used a few minutes ago. Let us be clear about one thing. The Culliton committee saw taxation as not simply one issue among many but as the central issue. The personal tax system was described as "oppressive and unfair. It tends to stifle enterprise; high marginal tax rates apply to single persons with modest earnings". The report also said the allocation of savings was misdirected by the taxation structure. This has been made worse by the introduction of the special savings account at an unnecessary low rate of tax.

On reading the Culliton report one can be in no doubt that it sees the present tax system as the most important set of barriers to growth and more employment. The Government's response to Culliton dodges, fudges and dilutes the tax issue. It is not a response to Culliton but is, sadly, an attempt to evade it. The Government's response has run off the rails, it contains fine talk about accepting the broad intent of the Culliton recommendations but the hard reality is that it intends to do nothing on the lines of the radical restructuring of the tax system recommended by Culliton.

Tax reform is not a complicated issue. It does not mean lower taxes for all as it has been misrepresented by some of those who seem to rubbish it. The concept, as Culliton reminded us, is very simple. It means, on the one hand, broadening the tax base and, on the other, ending the system under which two out of every five taxpayers pay 55 per cent of their incomes in tax and PRSI.

Broadening the tax base means sweeping away most of the plethora of reliefs and exemptions that have developed over the years. It means raising revenue from areas which have been exalted into ritual no-go areas by people who wish to avoid making decisions which are even temporarily unpopular. Broadening the tax base means abolishing or reducing tax relief on mortgage and VHI payments. It means introducing a broadly based property tax and extending VAT at a low rate to, say, food and books. That is the painful side.

The positive side, in return for which I believe people would be willing and prepared to endure the negative effects, is the use to which this extra revenue could be put. We could use it to lower dramatically the tax burden on the average PAYE taxpayer by widening the standard band to the point where the overwhelming majority of wage and salary earners pay tax at no more than the standard rate. We should aim for a situation where no more than 5 per cent of taxpayers pay at the higher rate. Everybody else would pay tax and PRSI at a rate no higher than 33 per cent.

Such a tax strategy would help us create more jobs straightaway. First, it would be cheaper to employ people in the middle range income, and second, we would have restored to the system a stronger incentive to earn more, an incentive that is now effectively destroyed for many workers. It cannot be emphasised too often or too strongly that radical tax restructuring can be revenue neutral as far as the State is concerned. We can do it now if we have the political will. "Revenue neutral" means it does not cost us anything, it balances out. Tax reform does not have to wait for improved public finances as it need not result in any loss of income to the State.

It is clear from the decisions of the Government on both the Culliton and Moriarty reports that this opportunity to sweep away the disincentive in our tax system has been avoided. I deeply regret that and urge the Government to rethink its attitude even at this late stage. There is now a national need to look beyond the narrow perspective of the mandarins in Upper Merrion Street and for the first time to consider our taxation system in the context of our employment and industrial development needs.

Culliton gave us the option to fundamentally change our approach to industrial development. It is clear from the Government decisions that the option has not been taken. While applauding the decisions that have been taken and looking forward to their speedy implementation, I can only regret that the heart of the Culliton strategy has been ignored. I hope this will not be the end of the story and that in the months ahead the Government will realise that the decisions announced last week are insufficient on their own. I hope they will agree that they are only scratching at the surface of the Culliton strategy and will give us the new start Culliton mapped out for us and which, I suggest, is more necessary now than ever.

Debate adjourned.