I welcome the Tánaiste and the Minister of State at the Department, Deputy Treacy. I also welcome the Department's officials, Mr. Roddy Molloy, Ms Miriam Brophy and Mr. Martin Lynch. The Supplementary Estimate for the Department of Enterprise, Trade and Employment for 1998 is the only item on our agenda today. As we are considering supplementary estimates only issues relevant to subheads which are proposed to be increased may be discussed. We cannot broaden our debate to include the entire Department. It is not open to the committee to recommend an increase or decrease and we are not allowed a vote.
Estimates for Public Services 1998
Vote 34 - Office of the Tánaiste and Minister for Enterprise, Trade and Employment (Supplementary).
I apologise in advance, because I have to leave this meeting at 4.45 p.m. to travel with the Taoiseach to meet the British Prime Minister, Mr. Blair. My Minister of State will take over from me if we have not finished our deliberations at that stage.
I am pleased to have this opportunity to elaborate on aspects of the Supplementary Estimate for my Department's Vote. It would be useful to begin by pointing out that I am introducing this Supplementary Estimate in the context of an economy that is witnessing substantial levels of growth. GDP has increased at an average annual rate of 8.5 per cent in the past five years. We have translated this very strong output growth into extremely strong employment growth.
The standardised unemployment rate for October 1998 is 8.7 per cent. The unemployment rate has now been almost halved compared with a rate of nearly 16 per cent in 1993. The monthly fall in the live register of 11,320 in September 1998 was the largest monthly fall on record. The annual fall in the live register to October 1998 of 31,502 is the largest on record. We have now reached a stage where the live register is at its lowest in 14 years.
The vast bulk of the supplementary funding requirements which I will now detail arises as a direct result of the accelerated pace of economic activity and job creation.
The grant for building operations includes expenditure on land for industrial purposes. In the original Estimate for the year ending 31 December 1998 IDA Ireland was approved for grants of £6 million towards its building operations budget. The supplementary requirement of £7.6 million in 1998 is to allow IDA Ireland to pursue the acquisition of 50 per cent ownership of a 95 acre land bank at the City West Business Campus. The purpose is a joint venture development of a new digital park. City West is an established business park with a proven marketable location and, therefore, a very good location for our first digital park.
The City West Digital Park will be served by significant broadband telecommunications capacity and already both Telecom Éireann and Esat have 34 megabits fibre connections to the site. The City West Digital Park is expected to attract a cluster of overseas high technology, communications, software development type firms with the potential to make full use of communications infrastructure and to engage in electronic commerce.
Under the subhead grants to industry, the Shannon Free Airport Development Company Limited makes grant payments to manufacturing and service companies in the Shannon free zone. The 1998 Estimate for this subhead was £3.38 million. The second half of 1997 and early 1998 saw an increase in the rate of project approvals for the zone, some of which were particularly large. Most notably, two very large projects were approved in late 1997: Consolidated Financial Insurance, which is owned by GE Capital Corporation, is engaged in providing back office administrative services and supporting software development to the insurance industry; and Global Consumer Finance, which is also owned by GE Capital Corporation, is a call centre performing credit card debt collection by telephone on a pan-European basis.
Taking account of these and other approvals in the interim, the drawdown of grants is ahead of expectations and a further £3 million is required. This expenditure is matched by a net increase of 590 jobs in the zone in the first six months of this year which is an increase of 9 per cent. As members of the Committee will be aware the State withdrew from the provision of export credit insurance early this year. This was a Government decision made on foot of proposals I put forward at Cabinet. This now means that no new export cover will be given. The State still has obligations however on foot of a small number of contracts where insurance cover was given prior to the cessation of the scheme. No subsidy payments were made in 1996 or 1997. The requirement for 1998 was estimated at £50,000. The exact amount payable in 1998 could however only be determined after claims for interest subsidies were furnished and examined in my Department. Claims received in 1998 for payment of the interest subsidies on loans covering the period from January 1995 to June 1998 indicate that the total payable amounts to £96,000.
The number of investigations recently carried out and currently being carried out by my Department under insurance and companies legislation is 13. These include ten investigations under section 19 of the Companies Act, 1990 arising from the report of Mr. Justice McCracken. These investigations are ongoing.
An investigation under section 14 of the Companies Act, 1990 into Bula Resources (Holdings) Ltd. has concluded. It will be recalled that on 27 October 1997, I appointed Mr. Lyndon MacCann as inspector into Bula Resources (Holdings) plc under section 14 of the Act 1990. The very substantial cost of this investigation was met by my Department. In the context of reforming the company law code, we need to make provisions whereby in certain circumstances, for example, a company which is the subject of an inquiry or any person inappropriately benefiting, should meet the considerable costs involved.
Mr. MacCann's report was submitted on 22 July 1998. The findings are a matter of public record. I have sent the report to the DPP, the Central Bank and the Garda Bureau of Fraud Investigation for whatever action these authorities deem appropriate. The report was also sent to the company and the Stock Exchange. In addition, I have requested advice as to whether ministerial prosecution of certain summary offences is warranted. Needless to say I am very pleased the High Court did not grant leave to Mr. Jim Stanley for a judicial review of the inspector's report.
Two investigations under the auspices of the High Court are ongoing pursuant to section 8 of the Companies Act, 1990. These relate to National Irish Bank Ltd. and NIB Financial Services Ltd. and are being conducted by Judge John Blayney and Mr. Tom Grace. It is appropriate to state that my involvement in these inquiries relates to my responsibilities under the insurance and company law codes. It should be noted that the costs of these inquiries, which to date amount to £529,393, are being met from the Vote of the Department of Justice, Equality and Law Reform. The inspectors' investigations are ongoing. We are currently awaiting the outcome of an appeal made to the Supreme Court by NIB staff on the issue of whether or not they are required to reply to questions.
Enforcement of company law is an issue which has attracting considerable attention. There are over 250 criminal provisions under the Companies Acts. The committee will be aware that an expert group is currently concluding an examination of the issues involved with company law enforcement. I am happy with the progress of the expert group and look forward to its recommendations. It appears likely that new legislation and resources will be warranted. I shall bring the group's report to the Government as soon as it is finalised.
A saving of £10 million is expected to be realised on IDA Ireland's grants to industry budget. Grants to industry are provided in the form of employment and training grants, grants for new skills, technologies and fixed assets.
In the original Estimate for the year ending 31 December 1998, IDA Ireland was approved £134.4 million towards its grants to industry budget. In addition IDA Ireland has own resources of £12 million at its disposal, £8 million of which comes from the European Social Fund and £4 million from repayment of capital grants. IDA Ireland has now indicated that it expects an underdraw of approximately £10 million in 1998.
Grant payments in 1998 arise from approvals made over a seven year period from 1992 to 1998. Both the IDA underdraw and Shannon Development's additional requirement should be viewed in that light. The timing of applications for grant drawdowns is determined by the agencies' client companies. Some projects will always overdraw and some will always underdraw on expectations.
Party spokespersons are now entitled to make a short submission.
The Minister mentioned that she needs additional money for IDA Ireland to acquire 50 per cent ownership of a 96-acre site in Citywest business campus. I understood that some time ago Deputy Harney as Minister issued an edict to the IDA to dispose of various lands. Could the Minister explain why this shortfall exists, why the extra money is needed and why that money was not earned from the sale of their lands?
I have seven pages here regarding IDA land ownership. If the IDA sells land, what does it do with the money earned from it? Why, in this instance, could it not have estimated that it was going to need the money? Was the decision to acquire half the ownership of a 96-acre site in Citywest business campus a sudden one? I am not against it, but I would like to know why it was not budgeted for and why an additional £7.6 million is needed. Obviously nobody wants to thwart the IDA in its activities. I would like an explanation as to why it is necessary for us to agree an Estimate.
There is also the issue of the savings the IDA is making. That also worries me. Recently there was an argument regarding the Vote of the Department of Health and Children. There was a saving and it is not going back into health. I am assuming the IDA saving on the Exchequer allocation is due to the IDA not receiving applications to spend the money on investment this year. I wonder about that as we have seen a number of job losses recently. There are potential job losses in Donegal and last Friday it was announced that 36 jobs in Betatherm Automotive Sensors Ltd. in Ballinrobe will be lost. Today we heard that 150 of 200 jobs in Kells will be lost, albeit because of the loss of orders to another part of the country. If the IDA finds it has spare capital, why has it not been able to draw it down through investments in places such as Ballinrobe where jobs have been lost. Those jobs did not go very suddenly, it would have been known for some time.
I do not see an additional Estimate for Enterprise Ireland. Does the Minister think that, with the merger this year, there will be overruns on its budget which might not be sought until 1999? What are the implications for the merger? Are they all budgeted for? Is the Minster satisfied there is enough money to ensure Enterprise Ireland is properly funded? What are the cost implications for the staffing in Enterprise Ireland if, as the Minister indicated, voluntary redundancies might be required where there is over-staffing on some sectors which have merged? Has the Minister a budget for voluntary redundancy payments to people in Enterprise Ireland? If not, will she have to budget for it in 1999?
I do not know whether the Minister wishes to answer Deputies individually or collectively. Perhaps she could signal her intentions in that regard.
I am happy to answer Deputy Owen because as I explained before she arrived, I must leave to meet the Taoiseach and the British Prime Minister. Deputy Treacy will take over from me. However we have another 15 or 20 minutes before I must leave so Deputy Lenihan may continue if he wishes and I can answer them all together.
Like Deputy Owen I am interested in the Citywest project. It has job creation potential for the constituency. It is predicted to be bigger than the financial services centre in employment terms particularly in the whole area of digitalisation and electronic commerce. I would imagine there will be a greater call on the Exchequer so that Digital Park goes forward in light of the job creation aspects. I would like to hear views generally on that area.
The Taoiseach made his view very clear at the Fine Fáil Ard Fheis on making Citywest a world class location for electronic commerce. I would like to hear the Tanaiste's policy view on how that will evolve and develop from her own Department in conjunction with Department of Public Enterprise. It is very important to a committee formulating reports on the formation of electronic commerce for small business.
What is the Tánaiste's overview of the 13 inquiries. Many people are cynical about inquiries. Are these company law inquiries the proper vehicle. They were established to avoid us getting into the public tribunal scene but are we getting to the heart of the matter?
There seems to be a number of call centres cropping up. It is stated that these call centres will become the sweat shops of the 21st Century in so far as they pack many people together. They can be objectively assessed to see whether they are achieving certain targets. While this country is becoming a centre for call centres I am concerned that our young educated people will not be exploited.
I welcome the Minister's report on all the good news and I welcome the Citywest business project. However in the south-east people are depressed about what will happen. If the country is divided into regions for EU funds the entire south-east may not have further industrial development and we must compete with Dublin, Cork and Limerick and other bigger cities. If regionalisation is approved some areas will qualify for up to 50 per cent grants while the south-east will qualify for a 20 per cent grant. I would like the Minister's view on that.
What is the IDA's policy on advance factory buildings? Poor areas are the areas that find it hard to attract industrialists. The IDA have found it hard to attract industrialists to places like Gorey, Enniscorthy and New Ross that have potential for good development. Unfortunately factories locate in Dublin or around Dublin. Advance factories are a good development because they attract prospective industry into an area and show them the potential for developing their businesses. By and large the IDA were very reasonable in their approach to the start up of advance factories. Is that completely discontinued? Will the IDA have a further programme of advance factories in the poor areas?
I support Deputy D'Arcy's comments. I have been approached by Northside Partnership on the need for incubation units and for development of industry particularly for the Northside of the city.
Another issue in which I am interested which I could tie into the Commissions committee on special inquiries, is the difficulty in the construction industry regarding the criteria in union membership. The Department may be able to do something to address that and prevent what happened with regard to the bricklayers.
I am somewhat surprised and saddened that there is a £10 million under draw on the IDA budget. I am dealing with a case where a person applied to the Enterprise Board for a grant for a hairdressing business which employs 11 people. Unfortunately he was denied the grant. We should put special emphasis on moneys being used to beneficial effect in creating employment.
On a point of order in the Estimate under paragraph Q(ii) should it read " claims received in 1998" and not "in 1988" and in the Minister's speech she referred to grants payments in 1988. Are we going back that far?
No, 1998 were the figures used.
I noticed that when I was reading the speech.
It is also in the estimate under the credit financing of certain capital goods.
I thank members of the Committee for their comments and I will seek to address them. On the IDA's industrial land portfolio on buildings and land the previous Government gave the IDA full responsibility for that which they took over on 1 January 1996. The policy is, and has been for years, that the private sector get involved generally in the provision of advance factories with some IDA support. In recent years a number of advance factories have been provided with BES funding and where the IDA have not been able to get a taker for them immediately, they have engaged in rent subsidy for a period of 12 or 18 months to facilitate private sector development. That is the way we are going to proceed generally. However I realise that in particular areas we will not get either through BES related schemes or other private sector type developments. In recent times two very fine enterprise incubation centres have been opened in Tallaght on foot of decisions made after the Tallaght taskforce report in light of the Packard Electric closure. They are extremely successful and we are endeavouring to take that model elsewhere without pre-empting things that might happen. Over the next few months we hope to be in a position to choose other areas in the country where we can provide some incubation space. Clearly it has to be provided in an area where there is a strong possibility that we can get local enterprise and create an enterprise culture particularly in areas of high unemployment.
We are coming back with the Estimate because the expenditure of public finance is decided by the Oireachtas and there has to be transparency and openness in how money is spent. To some extent we are juggling the figures around. The IDA needs £7.6 million to get involved in CityÍwest but is handing back £10 million that they could not spend. Money has to be spent on the subhead for which the Oireachtas voted for that money to be spent. That the IDA does not spend in one year all the money allocated to it does not mean there has been any decline in the number of industrial projects. Money spent in any year is usually for projects approved in advance because virtually all the money is employment related and paid as jobs are created. There is always a gap between the announcement of a project and the creation of jobs.
On industrial aid for employment, there has been a reduction in the grant aid from more than £33,000 per job a number of years ago to approximately £11,000 now. This varies from sector to sector. The more capital intensive projects receive higher grant aid per job.
In relation to Deputy Ardagh's comments, in recent years Ireland has attracted approximately 60 different pan-European call centres. This is a new area of business employing approximately 6,000 people and employment growth is expected to reach approximately 10,000 in the next few years. It offers employment for young people with language capacity. Recently Deputy Owen and I attended the opening of the Hertz call centre in Swords.
The furthest thing from a sweat factory one could find.
There are people of 22 different nationalities working there. On average, salaries are approximately £10,000 to £11,000; the base salary can be low, with the top-up based on productivity. That is the case for call centres throughout the world. For call centres to set up here we must have a communications infrastructure, be able to supply services at competitive rates and have people with the necessary skills. Approximately one third of those working in our call centres are from abroad. Not everyone has languages. Those employed do not necessarily have primary or post-primary degrees. Many of the jobs being created in this knowledge based era require people with high standards of education. In some cases, up to 75 per cent of new jobs are grant aided. Various projects may require, at minimum, a primary degree. We are doing well in these areas. As a percentage of population we have more graduates in engineering and sciences than any other OECD country and, as Professor Arrow from Stanford University said in a recent address, this is one of Ireland's main competitive advantages. Employment must be provided for those with a range of skills.
As a new business, call centres are suitable for peripheral locations and basic telecommunications infrastructure is required. They provide very useful and valuable employment. That is not to say somebody will spend his or her life answering a telephone. People have challenges in their lives from a career path point of view and for those operating call centres the challenge is to provide additional facilities and offer a reasonable career path to employees. Many of them seek to do this by bringing in other businesses also.
On the Citywest development, Deputies are probably aware that when the Government took office Forfás was asked to carry out an analysis of the requirements for developing this economy and ensure new areas of business, particularly in electronic commerce, would evolve. Last year we lost a project from Microsoft because we did not have the telecommunications infrastructure to have a site in Ireland. That was a great pity. We are committed to developing the concept of digital parks and providing the telecommunications infrastructure to compete for electronic commerce related projects.
UK consultants advised Forfás that two sites were needed - one in the outskirts of Dublin, the other in the city centre. Citywest was chosen as the site on the outskirts of the city for a whole host of reasons. It has matured well, notwithstanding its infancy, and it is a very marketable location. The gasworks site was chosen as the city site. Both sites will be developed in addition to acquiring the land. The State is involved in the acquisition on a joint venture basis to ensure it develops in line with Government policy and that competitive leases and rents can be offered, otherwise we may cost ourselves out of the market. A lot more money will be needed and, in the context of upcoming events, money must be provided rapidly to develop the capacity at these facilities. The challenge for Ireland is to be always ahead of the posse. As we are a peripheral economy the infrastructure must be provided and completion must be ahead of the deregulation of Telecom Éireann. Acquiring projects in the telecommunications industry ensures a bigger market, although further providers will be required. It is like having more roads in that one must have more than one channel to get the business in and out.
The Minister and Deputy Lenihan are glad it is in their constituency.
At present it is very marginal to my proposed new constituencies, which keep moving.
I must declare an interest——
I take the point made on the Southborough project at Kells which is an Enterprise Ireland company. Two hundred people are employed, of whom 150 are dependent on business from Dell. A new company located in Tullamore appears to be securing the business from Dell. This company was not grant aided by the IDA for the obvious reason that it might displace employment elsewhere. As one can imagine, a great deal of pressure was put on the IDA from the locality to grant aid the project in Tullamore. Employment grants were not given for the project although it had secured the business from Dell. There are obvious implications for Southborough about which I am concerned. I have agreed to meet in the next few days representatives of the company to discuss its future. This is a major setback to a town such as Kells where 200 people are employed and also to a company with a very good record. If companies become uncompetitive vis-à-vis their competitors either here or elsewhere the business and jobs will be lost.
On the IDA side, last year approximately 15,000 new jobs were created and approximately 5,000 jobs lost, a net gain of 10,000. Currently 1,000 jobs are being created per week and I hope this record level of job creation can be sustained. There are still high levels of unemployment in this economy and we have the unique situation that, as Minister for Enterprise, Trade and Employment, one of the most frequent complaints I get from employers, notwithstanding the boom in this economy and the 8.7 per cent unemployment rate, is that many companies are finding it difficult to employ people. The wider issues such as taxation and incentives must be addressed.
The 1998 Estimates show an increase in the budget for Enterprise Ireland. It has been given additional money because, as Deputies will be aware, there are approximately 40 different grades with the amalgamated organisations - it is incredible that there are so many grades in the wider public sector. I hope the IR issues will be dealt with in a satisfactory manner and as quickly as possible. Additional money is required next year over and above the separate budgets of the constituent parts which were amalgamated. In time, a single organisation should not require more money than the separate organisations operating individually. In the initial phase more money was required and the grant is substantially higher on the administration side. We have not got the 1999 Estimates here but they were published and Deputies may review them if they wish.
It is difficult to carry out inquiries, bring them to a conclusion and ensure the public can see that those responsible for wrongdoing in our society pay a penalty. There have been issues on constitutional rights and natural justice which Members have been following in the courts with as much interest as I. Litigation has slowed down these inquiries considerably and added to the cost. Notwithstanding that, the inquiry procedure under the Companies and Insurance Acts is a very worthwhile one and is inexpensive relative to tribunals of inquiry. We must go a step further and ensure mechanisms are put in place to enforce company law naturally rather than through an inquiry route. We cannot go on indefinitely with inquiries. The expert group is due to report to me in the next few days or weeks with recommendations and when they are made I intend to have them published, bring them to the Government and I hope it will bring forward amending legislation. In the context of Bula where wrongdoing is established the company or individual who may have benefited and whose activities warranted an inquiry should have to carry the cost of the inquiry. Such a procedure does not currently exist and an amendment is necessary to deal with this and other matters.
I take it this will not just apply to Bula.
No.
It will apply to banks——
Yes, I was giving an example. Obviously there may be inquiries which are unwarranted and when concluded do not establish any clear wrongdoing. In such a situation it would be wrong for companies to have to pay costs. However, the taxpayer should not have to carry the cost where wrongdoing is clearly established and where somebody has benefited as a result of it, as an individual did in the case of Bula. We all know what happened in relation to previous tribunals, etc.
Has Mr. Stanley been interviewed yet?
He was not available for interview. I am sure the Deputy read the report. The inspector went to Moscow to interview him.
He is now in Ireland.
The report has been finalised and its conclusions are very clear. Mr. Stanley sought a judicial review which was refused yesterday in the High Court. The report, which is clear and definitive, is with the Garda Bureau of Fraud Investigations, the DPP and the Central Bank. Other advice is being taken on the matter.
Will he be arrested?
I understand we should not be discussing a matter relating to a person who is not before the committee.
I wish to raise the issue of electronic commerce and the necessary associated infrastructure. What work is being done by the agencies to identify the shortcomings which exist in terms of infrastructure? Can this business be brought to the regions? The Tánaiste and the Minister of State, Deputy Treacy, are aware that there are opportunities in the regions to expand this kind of activity, which might halt the numbers leaving western areas to seek employment.
And the growth of Dublin.
The disease is spreading down the dual carriageway towards Kildare. It is almost impossible to get into the city from the City West Business Park. I can get from home to the business park faster than I can get from there to the city.
The city is being burdened with development of this nature to the detriment of the regions. The infrastructural broad band can be provided if there are shortcomings in that area, especially in places such as Shannon and Cork.
I thoroughly agree with Deputy Daly. A number of issues must be considered. Broad band capacity is necessary, something Shannon Development has put into Plassey Business Park. Another issue is the capacity which is necessary in multiple high volume form for particular activities. It is not possible to provide this everywhere as it is extremely expensive. Initially, such capacity is being provided in two regions in Dublin because of the efficiency and benefit which will accrue. Clearly, the issue of capacity is one for the Minister for Public Enterprise. She has given strong commitments and is moving rapidly in this context.
Securing projects once we have the capacity is a matter for the agencies. The IDA is involved in securing electronic commerce projects for Ireland and the regions. Different projects will be located in different regions. Last year, 75 per cent of new job announcements went to areas outside the Dublin region which extends to the traffic lights in Kildare town. I believe this is good for Ireland and Dublin, although I represent a Dublin constituency. The city is congested with traffic. All services are over-congested because of the sheer numbers requiring them. In other parts of the country we cannot sustain public services at times because the numbers of people necessary to justify them do not exist. I am a strong advocate of regionalisation which will be very good for the country.
An issue often forgotten is that after 2000, under the new regional aid guidelines, Ireland's capacity to grant aid projects will be severely restricted. We will be able to give grant aid of between 10 per cent and 20 per cent for projects in the country with a top up of 10 per cent for small to medium sized enterprises, i.e. enterprises employing less than 250 people. Most inward investment will involve much larger employment numbers. We will be able to provide 40 per cent in Objective One regions, with a top up of 15 per cent. Grant aid is not always the issue - other issues include availability of skills, corporation tax, general business environment, access and telecommunications. However, when there is competition with another region, it often comes down to grant aid per job. Northern Ireland, although it will not be an Objective One area, will effectively have higher capacity and be in a position to provide grant aid of 40 per cent, plus a top up of 15 per cent. Everybody knows what will happen if we try to bring projects to Counties Sligo, Mayo or Donegal, for example, and can provide only 20 per cent in grant aid, while Northern Ireland could give double that if the project set up in Derry or Belfast, as could Wales or Merseyside. This is one of the big issues in the regionalisation debate which, unfortunately, has been sidelined. Most people think it is simply about pounds, shillings and pence, but it concerns must larger issues and, in particular, will have a huge effect on our capacity to grant aid industrial development. The possibility of giving higher grant aid in areas along the western seaboard and in 15 counties is very beneficial.
The Border, the west, Kerry and the midlands have suffered recently. The first really decent projects are two which we secured in the past year. I am not taking credit for this, but it must be recognised. We secured a replacement for Klopman, the German company, while Rofenbluth, the travel management company, has set up in Killarney. They have been the only two significant foreign investments which have set up in Kerry for a considerable period of time. It is necessary to have a bias in favour of certain counties which are quite peripheral.
We appreciate the Tánaiste has another engagement. I wish to take this opportunity of thanking her for coming before the committee and to wish her continued success in her duties as Tánaiste and Minister of Enterprise, Trade and Employment.
Having listened to what the Tánaiste said in relation to regionalisation, it must be acknowledged that other areas will suffer as a result of it. I wish to raise the BES scheme operated by the IDA. Is there a limit to the number of factories that can be built under the scheme annually? Some advantage will have to be given to the south east in view of the fact that grants can be as high as 55 per cent in the west. This is a serious matter in our area where a grant of only 20 per cent can be allocated. The debate is in full swing and I know regionalisation has not been finally agreed, but it appears there will be regionalisation for at least 13 counties in the west - I am not sure what will happen to Kerry and Clare.
I am not satisfied about what will happen in the south east in respect of any future industrial development. The area is at an awful disadvantage. BES factories are not being situated in the area. I have been informed by the IDA that there is a limit on the number it can build. The Tánaiste said the private sector will provide factories, but that sector is not providing the necessary money. Incubation units were very useful in the context of start-up enterprises, but I assure the Tánaiste that there will be a very serious debate in respect of the south eastern counties regarding industry. We cannot allow the complete elimination of our area from any further or future industrial development.
I endorse what the Tánaiste said regarding Objective One status and regionalisation. We must understand that we have national responsibilities to discharge. Of course, our mission is also to make local representation on behalf of our areas and constituents. The only change is that a decision will be taken to establish two different regions, namely, an Objective One area and an Objective One in transition area. The amount of money and the opportunity to draw down money in both regions under the next round of Structural Funds will not change. The change will take place after this.
We must ensure we are playing for Ireland and that the world, and Brussels in particular, listens. We must ensure we maximise the opportunity for all our people. That must be done for everyone in Ireland. We must look at Northern Ireland and the Border region as well as disadvantaged and handicapped areas that have not had investment, topography or infrastructure to create indigenous industry to sustain economic development. The southeast has a unique track record of quality land, dedicated people and tremendous indigenous companies which are some of the best in the country. It is not for me to tell anyone what to do, as I must learn from those around me, but I am confident that where there is local leadership and links with chambers of commerce in all the towns of the southeast, there is no reason the operation of the tax laws and incentives will not ensure that investment will be made in infrastructure to attract both indigenous and foreign direct investment to the region. My constituency is not far from Galway city, but we have not had any foreign direct investment in the area for three decades, which people might not believe. I understand people's position on this matter.
I am confident that the construction market is very buoyant. Competition is very intense and performance opportunities are very high, and consequently the incentive to create local infrastructure such as advance factories may not be a major priority. I know that in most towns there are competent builders and investors with local commitments. All that is required is for the local leadership to put a package together to ensure that a structure is in position to allow an option for a site to multinationals and indigenous entrepreneurs.
As long as we are in Government we will take a macro-view of the nation, but we will also take a regional view. I am confident that over the next year we will see incentives in the Budget and in the Finance Bill that will provide national resources where we feel they are required, based on the demand and statistical information that justifies them. Those decisions will be made in the interests of positive activity and for areas that deserve those opportunities.
I compliment the Government on its proposals on regionalisation, particularly the decision to include Clare and Kerry in the proposal. The original proposal was for 15 counties, though there may have been some discussion as to which were to be included. Within each region and county there are disparities. County Clare has been the subject of some discussion again today with the publication of figures on GDP, but the reality is that the industrial estate and airport at Shannon have attracted huge investment. The bulk of additional funding is required to meet increased grant allocations for the Shannon industrial estate, where one company alone will employ 1,000 people.
Nevertheless, the population of the western part of Clare has fallen. In a recent revision of local authority areas, a whole electoral division has been lost. The Miltown Malbay electoral division, which had five seats in the last local authority, is now effectively abolished. The population does not sustain those five seats and the seats have been put into the adjoining Kilrush area. There has been a huge shift in population from the western seaboard which has been devastating. Unless some serious action by way of increased grants or initiatives is taken to deal with it, whole communities will disappear.
I am not sure it is generally recognised how serious this situation is. In one electoral division in north Clare, there were 200 people on the electoral register when I was elected 25 years ago; in the last election there was nobody. If one goes through the electoral divisions for north Clare townlands one finds a population ageing at a rate 40 to 50 per cent above the national average. Young people are leaving, and communities are breaking down. They cannot put football teams together, and garda stations and post offices have closed. Communities have been devastated, despite the fact that the population in the new town of Shannon has grown, distorting the figures for Clare's GDP. Unless some initiatives are taken, seaboard communities will disintegrate if they have not done so already.
I urge the Department, and particularly the Minister of State, Deputy Treacy, to take some initiatives such as was done before in establishing pilot projects with the support of the Government, the IDA and the private sector. We must come to grips with what is happening in towns like Scariff, Ennistymon, Kilrush and Kilkee. These are the most scenic parts of Ireland, but they are being devastated by what is happening. The prospects for the future look very bleak, even with Objective One status. We have had that status but it has not helped.
Some serious initiatives are required from the development agencies, and I am sorry we have not seen any up to now. I was led to believe from experts in Telecom Éireann that we had one of the most modern and sophisticated telecommunications industry in Europe. We now find admissions that the infrastructure cannot meet requirements and that companies are leaving areas to seek infrastructure. I am appalled that there are two major projects in Dublin in electronic communications which appear to be to the detriment of areas that need that help most.
I know Deputy Treacy has interesting views on the county enterprise boards. What are his views on the development of the county enterprise sector after 1999 in the context of the Estimates? Funds will begin to run out then, so I am interested in how he feels we can encourage start up firms and micro-businesses. This will be a huge area for job creation in the future, and the credit unions should be involved at some level with the county enterprise boards.
I am fighting for an answer on the BES funded schemes. Are they limited on an annual basis? I have listened to Deputy Daly, and the provision of incubator or small factory units would be as suitable for Clare as they would be for my area. If one wants to encourage people into an area one must have something other than grants to encourage them. Grants are just one part of it. Private sector investment will come forward, but that cannot compete with the IDA. Is there a limit on BES funded factories, and if so, how are the locations for those factories selected?
I welcome the Tánaiste's reference to the two new incubation units in the Tallaght area but I wish to put a marker down to make contact with Padraig White, chairman of the Northside Partnership, who identified a need. Whether it is through State aid or encouraging private enterprise, I would appreciate it if the Department would look favourably on the request by the Northside Partnership for incubation units.
Will you comment on regulations within the unions, particularly in light of the difficulties lately with the bricklayers and the BATTLE union. It is probably outside your brief but it deals with the area of committees, commissions and special inquiries. If this matter is allowed to fester it will require a special inquiry.
In response to Deputy D'Arcy, there is no limit to the amount of factories that can be built but there is an upper limit on the taxation incentives allowed annually.
Would that be an inhibiting factor?
Perhaps to a certain degree. A balancing scenario must be built into the Book of Estimates and the budget so that income, expenditure, allowances and incentives are not distorted, otherwise, we could not progress. By and large, these projects are self-selecting. Priority is based on location, the proposal and a high chance of getting a project into the location, for example, if there is an indication that a project will be on line within six to 12 months. The incentive is built in, for example, with rent allowance of which the IDA must be part. Certain criteria are laid down and if they can be met there is no problem with a project going ahead. The Department of Finance and the Revenue Commissioners, which employ very shrewd people, always look at everything with a critical eye but it is more critical during the second half of the year than the first to make sure the figures are balanced. Anybody who submits proposals between January and June has a much greater chance of getting them through than between July and December.
There is tremendous merit in the incubation units and the Department, in consultation with State agencies, is giving consideration to this issue. We would love to be able to proceed with a programme but we want to identity criteria, a structure and a system that could be replicated around the country. This is currently being examined. From the point of view of small projects a facility is available from local enterprise boards whereby they can grant-aid a project to the tune of £50,000.
Enterprise Ireland has an even better facility. If one wants to build a local enterprise centre it can provide 50 per cent in grant-aid up to a maximum of £100,000. There are at least two facilities that allow projects to come on stream.
Incubation units can and I visited Sweden a number of months ago to look at its science parks and incubation units. It has a tripartite system whereby one goes into an incubation unit for one year. If one wants it for one hour more than one year, it is unavailable. One enters for a year, signs a contract and, unlike Ireland, no representations are tolerated whereby one says that those involved are nice and need another chance.
That scheme would not work in Ireland.
They are losing out.
The Minister of State is becoming very European.
One enters the incubation unit alone for one year. One can enter a bigger incubation unit and is entitled to assistance for a second year. If one succeeds after the first year, one is allowed into phase two. If one fails the analysis at the end of the first year, one is out. If one survives, one is into phase two and an analysis is done at the end of that. If one qualifies, one is placed in a business park and given a commercial opportunity in a modern complex. We are looking at that but I do not know how quickly we will be able to respond. However, I have a particular interest in it.
The enterprise boards began in 1992. They were given a target, which was to create 8,000 jobs over six years. However, over five years they created more than 11,000. An independent analysis was carried out this year on the local enterprise operation. It was chaired by the Department of the Environment and Local Government and had external and departmental experts on it. It involved the Department of Tourism, Sport and Recreation in terms of local partnerships and one representative from my Department was on it. Its report included a unanimous verdict that city and county enterprise boards had done an outstanding job and it contained a recommendation that the enterprise board initiative should be permanently focused and maintained in future. The report was sent to Government where it was accepted unanimously and a decision was taken that the boards will stay in the enterprise family in the Department of Enterprise, Trade and Employment with Enterprise Ireland and the IDA reporting to the Minister.
We will look at the various measures in Europe which could assist local micro-enterprises. We will negotiate a national development plan in consultation with the European Commission to establish which programme suits the micro-enterprise effort. That is very reassuring for the public, current and future entrepreneurs and politicians who have such a wonderful interest in this area.
I thank the Tánaiste and Minister for Enterprise, Trade and Employment and the Minister of State for the forthright manner in which they answered the questions. I also thank the officials who provided documentation and back up information - Roddy Molloy, Marion Brophy and Martin Lynch - and Members. Following the Minister of State's declaration of his interest in the European elections the committee wishes him well. I have no doubt he will be of enormous benefit to the region he will serve as an MEP given his ability and experience. On behalf of the committee, I wish him every success.
I thank you very much for those good wishes. There is a long road ahead which I will not discuss here but until such time as the adjudication panel decides that I should be elsewhere, I will serve the country, Department and committee for as long as I am charged with the responsibility to the best of my ability.