The purpose of this Bill is to establish the national training fund. The fund will support a range of training initiatives aimed at the employed and those seeking to enter or return to employment. The establishment of the fund is part of a wider strategy for the promotion of human resource development in response to the social and competitiveness challenges now facing us. We are living in the midst of a period of unprecedented economic growth. We are experiencing the positive effects of reformed public finances, increased competition and a pro-enterprise environment, a successful and focused industrial policy, low taxation and long-run investment in initial education and vocational training. Globally, we have experienced growing and increasingly diverse trade and a dispersal of the factors of production. We have seen the growth of the knowledge economy and the shift from "bricks to clicks", as it has been called. We have witnessed the growth and consolidation of the European Union as a trading block.
In Ireland we have been fortunate to experience the confluence of these two rivers of change – national and global. The steps we have taken to put our own house in order have allowed us to gain enormously from globalisation and the knowledge economy. This is why we attract 27% of all US greenfield investment in Europe. It is why we are the largest exporter of software globally and it is why young, dynamic Irish companies are now beginning to penetrate the technology powerhouse of the US.
Change has fostered prosperity, but that very prosperity and the change which fuelled it bring new challenges and new uncertainties. We are now at the point of full employment when viewed in classical economic terms. We are also on the cusp of a significant change in demographics, where the numbers of new entrants to the labour force will fall from 27,000 this year to under 12,000 by 2008. Concurrently, we will be faced with significant labour and skills requirements to service the expanding economy and address infrastructural deficits. Notwithstanding current labour market tightness, we need to treat the concept of full employment very cautiously indeed. We must not be complacent and feel that we have solved the unemployment problem. We must strive not just to cut unemployment, but to grow our employment rate also.
As far as unemployment, and indeed underemployment, is concerned, we still have 52,000 people who are short-term unemployed. We also have 28,000 people who are long-term unemployed. In addition to these people, who indicated that they are unemployed in response to the labour force survey, we also have a significant group of some 80,000 people who are marginally attached to the workforce. These people could benefit from work, given the right combination of circumstances and opportunity. In all, this represents a large number of people who could benefit from work.
There are also significant numbers of people with disabilities who want to work. My Department has fully embraced its responsibilities for the training and employment of such people. Both the national training fund and the Exchequer will provide the resources to ensure that people with disabilities are given the opportunity, means and skills to secure work. As well as people who are unemployed, we also have a large number of women who remain outside the labour force. By comparison to the best performers among our EU counterparts, our female employment rate of 51.4% is lagging behind. The rate in Denmark is in excess of 70%. In many cases, women need to equip themselves with specific skills in order to find jobs. Again, training is the key.
Many people find themselves in unemployment because of structural changes in the economy which devalue their existing skills set. People who left the education system early with marginal skills in the first place are demonstrably the most vulnerable in times of economic downturn. The quality of the training programmes we offer can be a critical determining factor in helping people back into employment.
The national development plan involves investment of £23 billion in infrastructural projects. Having the necessary levels of craft skills and craftspersons is a key success factor underpinning the national development plan. The apprenticeship system plays an essential role here and will be an important component of the national training fund.
Enterprises will be increasingly dependent on the existing workforce and its ability to adapt to technological and competitive changes. This is an inevitable consequence of our high employment rate and demographic change factors. It is a positive sign that enterprises themselves are already recognising this. The 1997 White Paper on Human Resource Development indicated that
spending on training by Irish firms was 1.5% of payroll costs. A recent survey of firms conducted by IBEC suggests that this has increased to 3%.
The survey revealed some significant improvements, but some continuing weaknesses also. For example, 45% of the companies surveyed had a specific budget for training and the average number of training days was five per annum. As against this, 40% of companies did not have a specific training budget, suggesting that training was pursued on an ad hoc basis. The remaining 5% of companies identified no spend on training at all. These data suggest that the picture on enterprise training is changing. There is increased commitment among firms, but there are still significant numbers of firms whose approach to training is ad hoc, and a smaller number of firms who simply do not train at all. It is also clear that firms find the costs of training too high and that the market in supply of training may not be sufficiently developed. Policy, and the structures through which it is delivered, needs to respond to these issues.
Today, almost 900,000 people work in the commercial services sector. This number has grown by almost 250,000 since 1990. Growth in international services has been particularly impressive, rising from 11,000 in 1990 to 49,000 by 1999. Manufacturing remains critically important and is continuing to prosper. However, our manufacturing base is changing significantly. This can be seen by the fact that the high-tech sector, including chemicals, engineering and IT, grew by 42,123 jobs from 1990 to 1999. Lower technology sectors, such as textiles, clothing and furniture, by contrast lost almost 11,000 jobs. Our approach to training needs to reflect these changing trends.
The Government is committed to partnership. We have worked hard with the social partners since we came into Government to develop the Programme for Prosperity and Fairness and to ensure that the partnership process remains capable of coping with the changing economic and social environment. The creation of the national training fund is the foundation stone for a new approach to training policy and enterprise training in particular. Our overall commitment to part nership has applied to the development of the fund. In January this year, my Department issued a discussion document on enterprise training, which addressed a wide range of topics, including apprenticeship, the respective roles of FÁS and Enterprise Ireland, and the question of the relevance and appropriateness of continuing with the statutorily defined industrial training committees.
Since issuing the document, officials of my Department have engaged in wide-ranging consultation with the stakeholders in training. These consultations have involved regular contacts with FÁS, Enterprise Ireland, IBEC, the Chambers of Commerce of Ireland, Skillnets and the Irish Congress of Trade Unions. My Department has also met with delegations from each of the industrial training committees. The overwhelming view that emerged from these discussions was that both employer and employee representatives want to explore new approaches to human resource development. They want flexible structures. They want a greater focus on certification and the development of certification models appropriate to enterprise. They want to work with the State to develop lifelong learning and, in particular, more flexible and easier access to the education and training system.
All the stakeholders have welcomed the dialogue which has been initiated. They want to be sure, however, that a structure is put in place for the continuation of the approach. In that regard the Bill provides for consultation with employer and employee representatives in respect of the fund. I envisage this consultation taking place via the national training advisory committee which I intend to establish early in the new year.
With policy consultation, my Department has worked with the social partners to develop practical new initiatives in training. The Skillnets initiative is an excellent example of this. It gives enterprises an opportunity to collaborate in identifying and addressing their shared training needs. Moreover, by pooling resources and group purchasing solutions to common training problems, the costs of accessing training can be reduced for individual network members. Skillnets has been enthusiastically welcomed and 60 projects are now in operation or getting under way.
The overall environment is changing dramatically and so is our approach to human resource development. Set against those changes, our statutory framework as embodied in the Industrial Training Act, 1967, is outmoded. It is based on the concept of designating sectors, establishing statutory industrial training committees to oversee training in these sectors and imposing sectoral levies to fund that training. This framework is increasingly at odds with the developments I have described. It is too rigid. It ignores intersectoral and value chain linkages, which are increasingly important to competitiveness, and it creates an artificial distinction between firm specific and sector specific assist ance. It is too focused on manufacturing to the detriment of the services sector. In terms of finance, the system of sectoral and apprenticeship levies reflects many of these flaws and does not provide an appropriate funding base for training. We, therefore, need new funding mechanisms and new structures, which must be flexible, responsive and client friendly. The Bill provides an essential statutory underpinning for this new approach.
I will now outline the principal features of the Bill. Its main purpose is to establish the national training fund and consequent national training levy. The fund will finance a range of schemes aimed at raising the skills of those in employment; providing training for those who wish to acquire skills for the purposes of taking up employment and providing information on existing and likely future skills needs in the economy.
The Bill provides for the payment by employers of a levy equivalent to 0.7% of the reckonable earnings of employees insured for the purposes of social welfare legislation under Class A, with the exception of community employment participants, and Class H employments. There will be no additional financial imposition on employers as the cost of the levy will be offset by a comparable cut in employers PRSI contributions. This cut will be effected by a ministerial order which will be brought forward by the Minister for Social, Community and Family Affairs to coincide with the introduction of the national training fund levy.
Section 2 provides for the establishment of the national training fund. The fund will operate a current account and an investment account. Any moneys which are not required to meet current expenditure will be transferred to the investment account and may be transferred back to the current account as required. The Bill will thus provide a ring-fenced source of funds for training. This section also provides for the Exchequer to make contributions to the fund, if required.
Section 3 provides for the imposition of the national training fund levy on employers in respect of relevant employees. Section 4 provides that the rate of the levy payable by the employer will be 0.7% of the reckonable earnings of relevant employees, subject to the ceilings which apply for payment of employers PRSI contributions and certain exemptions. This section also provides for the payment by the Minister for Social, Community and Family Affairs of a sum of £120 million from the social insurance fund to the Minister for Enterprise, Trade and Employment for 2000 to take account of the fact that those training schemes falling within the ambit of the fund's purposes have already been subvented by the Exchequer this year. The section also provides for funds from the former levy grant schemes which are now held by FÁS to be transferred to the national training fund.
Section 5 provides for the collection of the levy. The sums collected will be transferred to the social insurance fund in the first instance and from there to the national training fund. Section 6 provides that the Revenue Commissioners may supply information regarding reckonable earnings of persons in respect of whom the levy is payable.
Section 7 sets out the basis for making payments from the fund. It provides for payments to be made from the fund for schemes meeting the purposes I have described. The section also provides that a wide range of schemes may be subvented by the fund. As regards the selection of schemes to be funded, this will be determined by the Minister for Enterprise, Trade and Employment. I described a number of key areas such as apprenticeship, skills training for unemployed persons and those outside the labour force, in-company training and lifelong learning which need concerted and sustained attention. All these areas will fall within the ambit of the national training fund. The moneys to be allocated to particular schemes will be determined with the consent of the Minister for Finance in tandem with the annual Estimates process. This is essential given that many of the organisations subvented by the fund will also be in receipt of Exchequer funding. I have also provided in the section for consultation with representatives of employers and employees in relation to the fund.
Section 8 provides for penalties for specified offences under the Bill. Section 9 provides for the repeal of certain sections of the Industrial Training Act, 1967, and the entire Industrial Training (Apprenticeship Levy) Act, 1994. The principal items covered are the repeal of the statutory provisions covering the former apprenticeship and sectoral levies which were suspended in 2000 in anticipation of the introduction of the national training fund levy and those providing for the establishment and operation of the statutory industrial training committees which were integrally linked to the sectoral levy grant schemes. The remaining sections are standard provisions.
The boundaries of the competitiveness game are now well established. Increasingly, the issue is not about whether we are in the right ball park, but rather how skilfully we play the game. Our match fitness depends on the quality of our human resources and the developmental opportunities we can offer our people, whether they are entering the labour market for the first time, seeking to return to work or change career, or simply to advance within their chosen occupation.
We have made enormous strides at the level of competitiveness and social inclusion. We have achieved this in large part through investing in skills, especially in the initial education and training area. We need to take a broader approach, one which looks to the future and ensures the skills base we have built is maintained and upgraded to meet the challenges to come. The National Training Fund Bill and the policy approach I have outlined provide for precisely such an approach. I commend it to the House.