I listened to the Senators on all sides. I wish to make a few points before giving the background to the framing of the National Development Plan, 1994 to 1999.
Job creation has been the highest priority of the Government. I want to make clear the position of the Government in relation to reports that Ireland's share of the Structural Funds will fall short of earlier expectations. We agreed an allocation in July and this agreement was endorsed by the President of the European Commission. This established our allocation from Structural Funds and the new Cohesion Funds at approximately £8 billion for the years 1993-99. It was on this basis that the Government gave its assent to the adoption of the framework regulation which is the legal basis for the disbursement of the new tranche of Structural Funds. We removed that obstacle to the regulations in the early hours of the morning of 20 July, which was three months from today. The Irish Government expects and envisages that the assurances given by the President of the Commission will be honoured in full. The National Development Plan has been prepared and will be implemented on this basis.
This morning the Taoiseach recalled the events which led up to the agreement of 20 July and outlined that:
Following on the conclusions of the Edinburgh European Council, the Commission prepared a draft framework regulation as the key legislative instrument for the implementation of the 1993-99 Structural Funds decisions and for that reason requiring unanimous agreement of member states for adoption. The draft regulation was considered by the General Affairs Council on 2 and 3 July. At that meeting Ireland did not agree to the adoption of the regulation.
The reason for withholding agreement was clearly laid down, as the Taoiseach put on the record of the Dáil this morning, in a statement jointly prepared with the European Commission and in direct consultation with the Belgian Presidency which was issued on 9 July. For the record, I will quote what the Taoiseach said this morning:
When the Council established its common policy on the six regulations on the 2 and 3 July, the Irish Government made it abundantly clear that its agreement on a final decision would depend on satisfactory assurances as to an equitable outcome on the question of the allocation of resources. The reservation it entered on the framework regulation has to be seen in this context. The Irish Government will not agree, in the Council's second reading, the overall package of the six regulations without such assurances. Since last Saturday a number of contacts have taken place both with the Commission and with the Presidency. These contacts have been helpful but need to be continued in order to reach a satisfactory outcome.
While maintaining its overall reservation in connection with the allocation of financial resources, the Irish Government — having obtained assurances from both the Presidency and Commission that the text of the six regulations in no way prejudge this fundamental issue — does not object to proceeding to the Second Reading of Parliament on the common position on the six regulations as transmitted to Parliament. It reiterates, however, that its final agreement to the formal adoption by the Council of these regulations will be subject to the satisfactory outcome being sought in continuing contacts.
The Taoiseach also said:
There was no doubt on the part of the European Commission, or on the part of other member states, of the Irish Government's determination to obtain assurances on an equitable share of EC Structural Funds and of the European Commission's acceptance that the determination was legitimate and could be met. The draft framework regulation was next considered by the General Affairs Council on 19 and 20 July.
The Tánaiste in his speech this morning put on the record the facts of that morning:
Early in the morning of 20 July last, following intensive discussion and negotiation between the delegation that I led and some of the most senior officials in Europe, I met with President Delors in the company of several of his officials and several of mine. We agreed that granted the quality of Ireland's national plan and the projects we would put forward, Ireland would ultimately receive 9.35 billion ECUs in 1992 prices from the new round of Structural Funds. That sum was to cover the period 1993-99.
We understood, as did the Commission, that ultimately the Commission would meet formally to agree indicative figures that would be allocated as targets for each of the countries affected by the nest round. These indicative figures would, in all likelihood, be expressed in ranges, or in what the Commission calls "fourchettes"— that is to say, a minimum and a maximum that could be achieved, depending on the quality of the plan put forward and on the efficiency of the member states in implementing their plans. The figure of 9.35 billion ECUs in 1992 prices translates into 9.7 billion ECUs in 1993 prices and into IR£7.84 billion.
That is the figure which the Tánaiste announced at the conclusion of those negotiations and which has been in the record since. I thought that it would be helpful to restate the position as outlined this morning.
Both myself and the Minister of State at the Department of Finance, Deputy Fitzgerald, who had responsibility for the National Development Plan, are glad to have this opportunity to outline the work, the views and the underlying aspects in the preparation of this plan which we presented to Brussels ten days ago. In addition to the £8 billion EC aid, associated investment by the Irish public and private sectors will bring the total investment package to over £20 billion. The plan set out the main priorities for the largest investment programme ever undertaken in this country.
It is essential that these resources are invested prudently in order to achieve not only an impact on growth and jobs during the plan period, but also lasting improvements in the economy that will leave it primed for continuing growth into the next century. As I said at the outset, all considerations in relation to the plan were based on trying to generate growth and investment in the economy and to help develop our infrastructure and the economy in the long term.
The strategy set out in the National Development Plan follows on from the macro-economic policies which we have been pursuing. The plan builds on and improves policies which have contributed most to the recovery and growth in output and employment in the Irish economy in the recent past. The expenditure programmes for the EC Structural and Cohesion Funds incorporated in the plan fit into and enhance the effectiveness of the broad, integrated and consistent medium-term strategy which the Government are pursuing.
The macro-economic dimension of the plan must be evaluated in the context of Ireland's status and role in the development, integration and expansion of the European economy. The EC Structural and Cohesion Funds provide opportunities to consolidate the benefits gained by the Irish economy from the completion of the Single Market, the first Community support framework and the beginnings of the process of creating an economic and monetary union. It is essential, therefore, that we maintain our commitment to policies which will keep the Irish economy in conformity with the basic requirements for participation in building this new European economic order. Specifically this means continuing to adhere to the nominal convergence criteria contained in the Maastricht Treaty.
The central objective of the National Development Plan is to ensure the best long term return for the economy by increasing output, economic potential and long term jobs. It is further designed to reintegrate the long term unemployed and those at high risk of becoming long term unemployed into the economic mainstream.
The plan sets out the Government's strategy to achieve the national and European Community objective of greater economic and social cohesion. The basic elements of the strategy are investment in the growth potential of the economy in industry, tourism and services, agriculture and natural resources; investment in the country's productive infrastructure to improve the capacity and competitiveness of the economy; investment in the development of the skills of our people through education and training in order to increase productivity and growth capacity; and a special increased emphasis on harnessing local community leadership and local initiative.
This strategy will be given effect by a wide range of carefully selected development measures. I propose to give an overview of some of these measures.
The main vehicle for direct job creation in the economy will continue to be industrial development. The industry programme is, therefore, one of the most important and largest programmes put forward in the plan. Total public, that is national and EC, investment in industrial development will amount to almost £1.4 billion. Private sector investment associated with this public input will bring the total investment in industrial development to over £3.8 billion. At this stage, I stress the need for partnership based on a commitment to competitive excellence.
The industry programme will reflect the recommendations of the Culliton and Moriarty reports. There will be increased emphasis on the development of indigenous industry, with support being directed at encouraging Irish-owned companies to build on their competitive capability at firm level and encouraging the development of capability and expansion of capacity at industry level. There will be special initiatives in key sectors with identified job creation capacity, such as wood processing, the film industry, software and electronics services, aerospace and automobile components.
While developing indigenous industry is a priority, inward investment is also essential to job creation. Resources will continue to be targeted at bringing new industries to this country in the sectors and market niches where we have the greatest competitive advantage and also to the further development and expansion of foreign owned firms already located in Ireland. The benefits of inward investment must be maximised by the development of linkages between Irish owned and foreign owned firms. There will be additional funding for company led R and D and for marketing measures.
The food industry is one of the most important sectors of Irish industry, accounting for 22 per cent of total exports and about 20 per cent of all manufacturing jobs. Because of its potential to create national wealth and employment, the development of a strong indigenous food industry is a key Government objective. There will be a new special sub-programme for the food industry to deliver an integrated and coherent development package, embracing capital investment, marketing, research and development and human resources measures.
Total expenditure, including associated private sector expenditure, in the areas of agriculture, rural development and forestry will be over £1,450 million. When investment in food, which I have already mentioned, and human resources is added, the total package in this area will come to £2.2 billion.
The fishing sector has shown growth in recent years but remains underdeveloped. It offers potential for further development as a contributor to economic development in coastal areas and to output and exports nationally. Development measures will include fleet renewal through vessel construction and modernisation, aquaculture development involving both new installations and modernising existing areas, improved fish processing facilities, developments at fishery centres and fishery harbours and a programme of marine research.
The present operational programme for tourism has been very successful in terms of both increased foreign tourism revenue and job creation. The new programme will build on that success and has the aim of achieving an increase of £1 billion, or 50 per cent in real terms, in foreign tourism revenue by the end of 1999. It will also aim at getting a much wider spread of tourist income throughout the year. Total investment, between the State, the EC and the private sector will be over £580 million to 1999.
There will be increased investment in marketing and training, investments in product for specialist tourists, such as activity holidays and language learning and a programme of investment to upgrade and improve tourist angling waters. Ireland will be established in the top league of international conference venues with a major new conference centre planned for Dublin. There will be accelerated investment in arts, culture and heritage projects.
Investment of over £2.6 billion is planned in transport infrastructure. The primary objectives of transport investment in the period will be to improve internal and access transport infrastructure and facilities on an integrated basis and to improve the reliability of the transport system. We will continue to invest heavily in improving the national primary and secondary road network concentrating on four key corridors: north to south; south-west; east to west and the western corridor linking Sligo, Galway, Limerick, Waterford and Rosslare. There will also be an increased investment effort in regional and local roads of importance to local economic development.
Under the plan there will be an increased role for public transport. There will be major investment in upgrading the mainline rail links. The Dublin Transportation Initiative will be substantially advanced, including a light rail system, completion of the Dublin Ring Road, an efficient access route to Dublin port, quality bus corridors, upgrading existing suburban rail services and improved traffic management. Investment will also take place in the strategic ports of Dublin, Dún Laoghaire, Waterford, Cork, Rosslare and the Shannon estuary and in the State airports at Dublin, Shannon and Cork.
Environmental infrastructure is important from the point of view of both contributing to the development of industry and tourism and protecting and enhancing our quality of life. There will be substantial direct investment of £655 million in environmental services. Projects will include major coastal sewage treatment schemes in Cork, Dublin, Dundalk, Greystones, Galway, Limerick, Waterford and Westport and major water schemes in Dublin, Limerick and Tuam.
Total expenditure in the energy sector will be over £2.1 billion and will focus on improving the contribution of energy costs to competitiveness. Structural Funds aid will be directed at key strategic projects including a peat fired generating station, an energy efficiency scheme, pilot projects in the development of cutaway bogs, rural energy networks and the extension of the natural gas supply to the Shannon area.
There will be an investment of over £850 million in telecommunications over the period. The investment proposed will facilitate the completion of digitalisation, the expansion of the fibre optical network, significant improvements in international access and further developments in mobile services. The investment of £60 million in the postal services will include measures for the extension of the post office computer system in rural areas and the construction of modern mail centres located in the regions.
The Government has included a major health investment project, Tallaght Hospital, in this plan. It was mentioned during the Order of Business that the contract is to be signed this afternoon. This new acute general teaching hospital will fill a major gap in the development needs of what is now the third largest urban centre in the State.
The development of our human resources is essential to future growth and employment creation. Some £3.1 billion is to be invested in human resources over the period of the plan. The main objectives in this area will be to ensure the competitiveness of Irish industry and services through the supply of highly qualified and skilled personnel; to equip enterprise and workers with the skills necessary to cope with occupational, structural and technological change; to improve the attractiveness of Ireland as a location for new enterprise by having a highly educated, skilled, adaptable and versatile workforce; to promote equality in access to jobs and training and to help overcome disadvantage; and to maintain and enhance participation rates in education and training for the disadvantaged.
The National Development Plan places a major emphasis on local development, building on the experience already gained from the Pilot Area Programme in Integrated Rural Development, 1988-90, the current Leader programme, the area based initiatives under the Programme for Economic and Social Progress, the third EC poverty programme and the EC global grant for local development. All indicate that there is considerable potential to be tapped at local level to tackle long-term unemployment and to generate local development. Inherent in the programme is the targeting of areas and communities characterised by long term unemployment and social exclusion.
Some £1.143 million will be available to the local development programme over the period of the plan. The programme will have four elements. First, a countrywide local enterprise sub-programme to be administered through the county enterprise boards. The boards will provide support for local enterprise initiatives and will fill a gap which has been identified in the current support services for local enterprise initiatives. Some £114 million will be available from the Exchequer alone for this programme over the period of the plan.
Secondly, there will be an area based local development programme for areas characterised by a high concentration of long term unemployment, social exclusion and environmental deprivation. This measure extends the pilot initiative of area partnership companies introduced under the Programme for Economic and Social Progress which have yielded significant results in terms of enterprise and employment, community development and improved services for the long term unemployed. Some £100 million will be available for this programme over the period of the plan.
Thirdly, a substantially expanded community employment development programme will replace the countrywide social employment scheme. The CEDP contains a combination of training inputs and community work specifically targeted at the long term unemployed. The total available under this measure is £813 million.
An urban renewal programme will improve the fabric of the local environment with emphasis on architectural conservation and streetscapes. A second part of this sub-programme is the completion of the range of cultural facilities in the Temple Bar area of Dublin. The urban renewal programme involves expenditure of £116 million over the period of the plan.
The Government was determined to ensure that the development strategy adopted for the plan should promote balanced regional development. To this end it has taken fully into account the work of the seven sub-regional review committees which were established under the current Community support framework.
The Government has responded to the recommendations of the sub regional review committees to the extent to which they are consistent with the overall national objective of maximising sustainable employment and growth and having regard to the limits on EC and national resources available. Full account has been taken of the recommendations of the review committees in drawing up the development strategy which underpins this plan and in allocating resources to various sectoral programmes through which the plan will be implemented.
The detailed recommendations and proposals contained in the submissions from the sub-regional review committees also constitute a very valuable input to the drafting of the detailed operational programmes which will be submitted to the EC Commission for approval in conjunction with the plan.
As part of the arrangements for implementing the plan, the Government intends to develop the sub-regional dimension of the monitoring arrangements, building on the experience gained under the current Community support framework. The Government has decided that the regional authorities will have responsibility for the functions currently discharged by the sub-regional review committees. For the purpose of discharging these functions, the committees which will assist the regional authorities in this regard will include representatives of local authorities, other public authorities, Government Departments, the social partner organisations currently represented on the sub-regional review committees, the EC Commission and the voluntary and community sectors. Therefore, there is wide representation and involvement on the part of the various bodies with the regional authorities overseeing the various activities.
Resources under the plan are allocated to national sectoral programmes, not on a sub-regional basis. However, the plan includes an estimate of the likely breakdown of the expenditure by sub-region. Maintaining an appropriate regional balance was an important consideration for the Government in preparing the plan. Statements of proposed integrated developments in each sub-region are being prepared and will be made available publicly.
The importance of North/South crossBorder co-operation in tackling a range of economic and social issues is recognised not only in this National Development Plan but also in Northern Ireland's Regional Development Plan. Both plans include a common agreed chapter setting out the extent of existing co-operation and the prospects for further such co-operation.
There is already a great deal of economic co-operation between North and South and steady progress in promoting cross-Border partnership has been made over the past decade. In the context of the last round of the Structural Funds, for example, substantial support has been given to schemes designed to upgrade transport links between the two parts of the island, such as the improvement of cross-Border roads and the commencement of work on a major upgrading of the Belfast to Dublin rail link. The joint Ireland/Northern Ireland INTERREG programme has provided a particularly valuable focus for supporting cross-Border projects in many sectors. Other EC initiatives such as STRIDE and STAR have successfully promoted scientific and technical collaboration in the academic community and industry, a specific example being the optic fibre link between Belfast and Dublin assisted under the STAR programme.
In preparing the development plans for the 1994-99 period both the British and Irish Governments have paid close attention to the opportunities for expanding economic collaboration in the context of the next round of assistance from the Structural Funds. In the implementation of both plans the closest liaison will be maintained in all relevant areas to ensure this eventuality.
While reactions to the plan following its publication have generally been supportive, there has been some criticism that the plan does not contain in detail all the economic and social policies which contribute to employment creation and tackling Ireland's unemployment problems. I have made it clear that this plan is one element, albeit an important one, in the Government's economic and social strategy for Ireland's development. The plan sets out the programmes and measures in the structural areas covered by EC Structural and Cohesion Funds. Given the size of the proposed investments and the range of sectors covered, as you will appreciate from my brief description of the development measures proposed, the plan will play a vital but not exclusive role in the employment creation we so badly need.
It has been said the the job creation targets in the plan are too optimistic; other comments suggest that our targets are not optimistic enough faced with the magnitude of the task confronting us. It is essential that we are ambitious but realistic about the problems confronting us and the targets which can be achieved. I was very anxious, during the preparation of the plan, to set targets that were both feasible and sustainable.
In view of the budget strategy and incomes and fiscal policy, if we can do more it will be all the better. In previous years plans were prepared and, after a short period of their operation, their growth figures and underlying policies could not be maintained. The growth and output figures and employment targets in this plan are ones we can realistically attain based on present performance and an improvement in the European economic position. Many of the indicators show a start in the upward movement in 1994. I believe that it could be 1995 before we get a turn around of significance. Certainly the underlying trends are in the right direction.
In recent years our economy has outpaced that of our EC partners but our needs are also greater than theirs. Most importantly, unemployment here remains higher as a proportion of the labour force than in any other EC country except Spain. Our natural rate of labour force increase is well above the EC average. Although there has been some catching up in recent years, income per head in Ireland is still well below the EC average. Reducing unemployment and narrowing this gap in living standards are two of our foremost economic challenges.
Ultimately, the response to both these challenges — the need to create many more jobs and to bring living standards closer to the EC average — will have to come through efforts to accelerate the growth of market led output; we have learned from experience that the scope for direct job creation by the State in our circumstances is severely limited. That is why we have tended to be cautious.
In setting out growth and employment targets in the plan we recognised that policies and developments outside the ambit of the plan would have a major influence on these targets; they always do. Accordingly the plan sets out both the targets that we are confident can be achieved by the plan investments and the targets that could be achieved if competitiveness improved or if developments in the world economy are more favourable.
The development measures in the plan should, across the various sectors, produce about 200,000 jobs. Some of these are long term; some are short term arising from project construction. Without the plan investments we would not have these jobs. This does not mean that the numbers of those at work will increase by 200,000 over the period of the plan. Many of the short term jobs will replace current short term jobs and experience shows that some of the new long term jobs will be offset by job losses elsewhere. Our best estimate is that there will be net non-agricultural job growth of between 70,000 and 100,000 over the period of the plan depending on the level of wage competitiveness achieved and the strength of growth in the world economy. While this may sound low relative to our job creation needs it must be looked at in the context of the employment situation internationally.
Over the last few years the Irish economy has clearly shown its potential for rapid, non-inflationary, market led, economic growth. Turning to the future, it has to be said bluntly that the international economic background against which decisions must be made over the next couple of years is not a promising one.
We can heartily wish that it was otherwise. We will do all we can, in consultation with our EC partners, in international fora and elsewhere, to try to bring about a better outturn. The Government has made a constructive contribution to the formulation of a more growth orientated EC policy in the context of our submission to the EC White Paper on employment and competitiveness which will be discussed in December. However, there is no use closing our eyes to reality. Over the next couple of years at least strong international growth is most unlikely. At a recent ECOFIN meeting we looked in great detail at the position and, with the exception of Germany which has its own difficulties, prospects for the other countries in the second half of 1994 and 1995 are better. Vice-President Christophersen is certainly optimistic and we, too, should try to be positive. However, the next six months will continue to be difficult.
This year Ireland and the United Kingdom are likely to be the only EC countries to show much by way of growth. According to EC Commission forecasts, Ireland will be the only EC country, apart from Luxembourg, to show any employment growth this year.
While I have good reason to be optimistic about the prospects for employment growth even in unfavourable economic circumstances, I must issue a warning: we cannot expect employment growth or even employment stability if wage increases are uncompetitive. We must make solid gains in competitiveness if we are serious about reducing unemployment, and to make these gains there is no substitute for pay moderation. It is estimated that a sustained annual improvement of 1 per cent in wage competitiveness could add as many as 4,000 jobs to employment growth. That was one of the important statistics produced from the national model in the preparation of the various inputs of expenditure and taxation on incomes data during the preparation of the plan in the past six months.
In negotiating a new national programme with the social partners we must make employment the cornerstone in a way we have not done up to now. The new programme if it is to work must include, first, a pattern of pay developments in the economy that will secure a progressive and sustained improvement in our competitiveness from 1994 onwards. Second, we have to have a fiscal policy set in the framework of the Maastricht convergence guidelines. We are committed to that now. Even if there was no European Monetary Union or Single European Act these are the criteria that would be proper for the economy to follow. Regardless of the pace at which we are moving to stage three of European Monetary Union we have to follow that fiscal policy. To do otherwise would be a grave mistake. Third is the disciplined management of the public finances consistent with exchange rate stability and moderate interest rates.
I look forward to the positive suggestions and contributions of the upper House. The Minister of State, Deputy Fitzgerald and I in working on the national plan will take full account of the views expressed. The process for us now, along with ensuring our clear understanding of the agreement of 20 July is fulfilled, involves a huge workload. The plan moves itself into operational programmes. The document in front of Senators today is the National Plan and will be negotiated with the Commission over a number of months.
In its conclusion it will become the Community support framework which is effectively the Commission's response to our input, our national plan. The 12 or so operational programmes that will come from that are the ones we will have to negotiate in detail. Naturally all comments and points made here and in the debate which took place here prior to the summer will be taken into account and we would like to have those discussions wrapped up early in 1994. Based on what happened in 1989 it will probably take three or four months. Over that period the Commission will be examining the plan and the operational programmes will be discussed side by side. In due course we will have an opportunity of talking about them again.
