COMMITTEE of PUBLIC ACCOUNTS díospóireacht -
Thursday, 8 Feb 2001

Vol. 3 No. 3

Special Report of the Comptroller and Auditor General.

Chairman

We are here to deal with the 1999 Annual Report of the Comptroller and Auditor General and the Appropriation Accounts, Vote 34, Department of Enterprise, Trade and Employment. We are also dealing with a special report of the Comptroller and Auditor General on the prompt payment of accounts.

The attention of witnesses is drawn to the fact that as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, grants certain rights to persons who are identified in the course of the committee's proceedings. These rights include the right to give evidence, the right to produce or send documents to the committee, the right to appear before the committee either in person or through a representative, the right to make a written and oral submission, the right to request the committee to direct the attendance of witnesses and the production of documents and the right to cross-examine witnesses. For the most part, these rights may be exercised only with the consent of the committee.

I want, first, to welcome Mr. Billy Bell, MLA, Chairman of the Northern Ireland Public Accounts Committee and his colleagues, Ms Sue Ramsey, vice-chairman of the committee, John Dallat, MLA, Séamus Close, MLA, and Donovan McClelland, MLA. I welcome also the Comptroller and Auditor General of Northern Ireland, Mr. John Dowdall, the Clerk of the Committee, Mr. Michael Rickard, and the Deputy Clerk, Mr. Joe Campbell. We are very honoured by your attendance, you are most welcome.

I ask the Comptroller and Auditor General to introduce the Vote and the special report, which we will take together.

Mr. Purcell

There is no report on the Vote proper. I draw the attention of the committee to the effects of the buoyant economy on the outturn of the Vote. Allocations under several subheads were underspent because of the lack of provision for an expected level of training of unemployed people. Most significantly, there was a saving of £18 million on grants to industry through Enterprise Ireland. It is explained on page 263 that very little expenditure was incurred under the new Community Enterprise Centre Programme owing to the capital nature of the projects involved, which require a certain lead-in time between approval and draw-down of grant. That is all I have to draw the attention of the committee to on the Vote proper.

As suggested, I will introduce my special report. The report before the committee this morning sets out the results of an examination into how public bodies within my audit remit coped with the requirements of the Prompt Payment of Accounts Act, 1997. It also deals with the main issues which had to be addressed in implementing the legislation, together with reporting and auditing considerations. The origins of the Act lie in the volume of complaints from the private sector that public bodies were tardy in making payments on foot of goods and services supplied and that the excessive delays lead to cash flow and other difficulties for suppliers, particularly small businesses. A study was carried out in 1997 which confirmed that there was a significant problem. The Act came into effect at the start of 1998, with the aim of reducing the level of late payments made by public sector purchasers by requiring them to pay their suppliers within a specified time or to pay penalty interest if they did not. Essentially payment to suppliers must be made within the period specified in the contract or, where there is no contract, within 45 days. Clearly special conditions have to apply in cases of disputed invoices, receipt of goods and so on.

The evidence available from my audits, supported by feedback from the organisations representing suppliers, indicates that for the most part public sector bodies paid the vast bulk of their bills on time in 1998 and again in 1999. While this improvement is to be welcomed, it masks a number of problem areas which the examination brought to light. Some organisations have not put systems in place which would enable them to comply with the legislation. Although this criticism applies across the State, semi-State, health and education sectors, it was most prevalent in the vocational education committees where it was the rule rather than the exception. Clearly if there is no system that enables organisations to identify the dates on which invoices are received, they will not be in a position to know whether there is a liability for interest when making payment.

We found that some organisations adopted the practice of not paying small amounts of interest, for administrative efficiency purposes. We are talking about amounts between £1 and £10. While on the face of it this seems like a reasonable approach, it is not in conformity with the Act and legal advice confirmed that this was the position. It appears that amending legislation would be required to give legitimacy to the practice. The matter is likely to be resolved when Irish legislation is amended to give effect to an EU directive on prompt payments which is due to be implemented in Ireland in 2002. The directive allows a threshold of five euros for interest payment purposes. There were other aspects of the legislation where legal assistance on interpretation was needed, principally, how one defines a supplier and whether a foreign supplier should be covered by the Act or whether interdepartmental transactions would be covered by the Act. There was also the possible use of contract periods as a means of circumventing the Act. The Department will need to clarify the position in these areas to organisations where it has not already done so.

The Act provides that organisations should report annually on their payment practices and on the timeliness of payments, either by way of an insertion in its annual report or by way of a report to the Minister for Enterprise, Trade and Employment who in turn is required to present any such report to the Houses of the Oireachtas. The reporting aspect of the arrangements was weak. The information in the reports did not meet what was specified by the Department, many organisations omitted to send in their reports and those that were submitted tended, in general, to be late. The lack of diligence on the reporting side means that suppliers and potential suppliers are not informed about the payment performance of public sector purchasers. The Department could have been more proactive in its monitoring of the reporting arrangements.

While the Act has been instrumental in improving the payment performance of public sector bodies, there is much tidying up to be done before the EU directive comes into force in Ireland in 2002.

Chairman

I welcome Mr. Paul Haran, Secretary General of the Department of Enterprise, Trade and Employment. Perhaps Mr. Haran will introduce his colleagues.

Mr. Haran

I am accompanied by Ms Pat Lynch from the finance unit, who helped me in the accumulation and assembly of the brief, Michael McKenna, the new head of corporate services in the Department, Ronnie Sheehan, our finance officer, and Paul Cullen, our recently appointed attaché to Brussels who is the expert on the prompt payments legislation.

Chairman

Mr. Dermot Quigley is from the Department of Finance.

Mr. Quigley

I am accompanied by Mr. Adrian Finneran and Mr. Alan Zambra.

Chairman

You are welcome. There are also other observers from the Department of Enterprise, Trade and Employment. They are Mr. Bill Roe, Mr. Gerry Murphy, Mr. Turlough O'Molloy and Ms Catherine Carroll. Mr. Haran, do you wish to start by making a brief statement to the committee?

Mr. Haran

I can discuss either the prompt payments or the general report.

Chairman

I would like you to make your points on the Vote and then discuss the prompt payments, in that order.

Mr. Haran

On the Vote, the Comptroller and Auditor General is correct that the buoyant economy has helped on the overall outturn. A lot of effort over the years has gone into addressing the unemployment problem and trying to help people to get back into employment. There have been some individual savings as well on certain subheads, some of them caused by buoyancy, others caused by late or slow draw-downs from particular areas where it is difficult to anticipate the precise outturns that might be required. Supplementary Estimates generally address those but in IDA Ireland we had a supplementary estimate to reduce the overall Vote in that area. Similarly, in Enterprise Ireland there were delays in drawing down certain funds.

On the special report on prompt payments, the Comptroller and Auditor General's report is very useful to us in trying to review our current policy but, more importantly, in helping us to decide how to address the implementation of the EU directive which will extend to the general community the rules, obligations and practices of prompt payment. The Comptroller and Auditor General is right to draw our attention to deficiencies in the reporting structure. However, we feel the way we will address this might require changes in the design of the Act, in sections 12 and 13.

Fundamentally, we feel we should protect small suppliers from large purchasers. The State is a very dominant purchaser in the economy and it has a lot of power. The position for very small companies supplying to the State was one of weakness and it was important to introduce this Act to protect them. The Act has helped to improve the practice of payment in society. There is a 45 day rule in the Act. The EU legislation will reduce this to 30 days, which is similar to the rule in the UK, and it will expand it to all suppliers within the State. For that reason, we will have to consider how best to ensure its practice. We are looking to the review group on auditing and the proposals it has about looking at positive statements of compliance from auditors about practices within organisations.

We feel strongly that the de minimus rule is needed. The Comptroller and Auditor General is right that the Act does not allow for de minimus thresholds at the moment but clearly the de minimus rule, for administrative convenience and efficiency, probably is needed and we would intend to apply that to the Act. Then we need a way of periodically reporting on what payment practice is within our society, not only by the State but in the wider society. That is where the Department is coming from with this Act. In the UK, private sector credit agencies usually provide information about average payments and look at various large purchasers. Maybe we can encourage such an outcome when we move forward. Alternatively, the Department might need to sponsor or fund periodic statements and surveys of payment practice within the various organisations both in the State sector and outside it.

One of the defects of the Act was that it allows reporting on payment practice to be done by one of two means, either through the annual reports of organisations or to be sent into the Department where we batch them and publish them through the Dáil. It is a very ill-focused and ill co-ordinated system of reporting on the practice of payments and clearly we will need a new mechanism. We have written to all the Departments to find out from them which of their agencies use 12.1 or 12.2, in other words, their annual report or other reports as the means of promulgating information. I accept it is not an adequate mechanism so we have to find new mechanisms. We hope to find these in the context of legislation that will be used to implement the EU directive.

With regard to legal interpretation, the Comptroller and Auditor General is right that there have been differences of legal opinion in a number of areas. He has suggested to us that we go to Government to confirm the relationship of transactions between State companies. We have been reluctant to do this because we are getting legal advice which says our interpretation is correct. However, from an effectiveness point of view and to be sure, as it were, we intend to go to Government and seek its approval to confirm the nature of transactions between Departments.

Deputy Bell

When the person carrying out the audit establishes that there is late payment, what is the sequence of events? What happens and who is held responsible? What is done to put the situation contained in the report right?

Mr. Haran

With regard to the mechanisms that are needed, large organisations that do a lot of purchasing need to have automated systems of invoice management and payment. Manual systems are difficult to use to ensure the application of the Act. When an invoice is sent in, it is stamped. The clock starts ticking with the date of the invoice. Take a case where there is no contract that says one can be late or the contract does not have particular provisions to enable the date to be extended. The payment systems should highlight when one goes past 45 days and automatically credit to the supplier, in the cheque or in an additional cheque, a payment for the late interest with a statement showing how the interest payment is calculated. The essence of this is that it should not be the responsibility of the supplier, usually a small business, to seek payment of the late payment and interest. It should be an automatic activity that is triggered.

The Comptroller and Auditor General's office does a special audit, a section 13 audit, to ensure compliance with this. The Department also compiles certain information in a section 12 report which should outline the extent to which late payments are being made and to identify whether late payments are becoming a problem.

The Comptroller and Auditor General has stated that he will give a note in regard to an account where certain thresholds are exceeded as a means of trying to ensure that best practice is promulgated within Departments. Best practice ultimately means that you pay on time and quickly, rather than that you conform with legislation and pay the interest. It would be desirable that we would not have to pay interest.

Deputy Bell

The Comptroller and Auditor General's report suggested, if I read that section correctly, that there was difficulty in establishing the actual sequence of events regarding the payments. In other words, in many cases the records did not show how late they were or the date of payment. Did Mr. Haran find any difficulty with that?

Mr. Haran

We, even in our own Department, had difficulties at a very early stage in the implementation of this in the absence of good automated systems and recording systems. At the heart of this is automation, ensuring when the goods and invoices arrive that one captures the date, that the trigger is started and the system is automated. In the early application of the Act, I know that there were difficulties in certain organisations about the degree to which automation was used and the proper practice in organisations to ensure that they date stamped invoices and that the invoices and the goods arrival were properly captured.

Deputy Bell

In the report it would appear that there was some difficulty with the interpretation of section 13 of the Act. Will Mr. Haran comment on that? Does he think that it could, for example, require amendment?

Mr. Haran

On section 13, the issue is really about the role of the auditors. There is an issue about grouping the section 13 and 12 reports and there is an issue about the views of external accounts regarding their onus of responsibility in determining the efficacy of the practice within the organisation which they are auditing. We are now looking to rectify this through the response to the auditing review group so that we would look towards having the section 13 aspect of it captured within a positive statement by the auditor about the compliance and the directors are happy that they have mechanisms in place to ensure compliance with a variety of statutes, one of which would be that regarding prompt payments.

Deputy Bell

I know it is not Mr. Haran's responsibility to write legislation, but will he recommend to the committee that that section or sections be amended?

Mr. Haran

Yes. We feel that this should be done. We accept the Comptroller and Auditor General's comments also and we accept the committee's recommendation that we need to address this area.

Deputy Bell

Chairman, we could consider making that recommendation to the relevant Ministers.

Deputy C. Lenihan

On the Vote, section 13, commissions and inquiries, over the past year or two the Department has been vigorous in relation to certain inquiries, particularly into the 120 alleged Ansbacher account holders, who in the main are prominent businessmen. The cost of these inquiries does not appear to be reflected in that. I would have thought there would have been a much higher cost. In 1996, £36,000 was spent on company law inquiries in general and the Faxhill Homes ones, which I presume relate to the Ben Dunne issue and Deputy Lowry etc., is costed at £135,000. Where is the cost shown for the other substantive inquiries which have arisen out of the public tribunals?

Chairman

It is on page 268, commissions and inquiries.

Deputy C. Lenihan

I was wondering why it is separated. I am sure the Secretary General would have a view on this and perhaps he would give us a progress report on them because that seems to be a rather low cost for the amount of activity which is involved in these inquiries.

Mr. Haran

The Deputy is right. There are differences in the costings of the different types of report and the essential driver of the ultimate cost is whether these reports are, first, under the aegis of the Department or the court.

The section 8 reports under way are those of High Court inspectors. High Court inspectors are external individuals appointed by the court at the application of the Minister but not determined by the Minister. They are court costs and they will ultimately be borne by the Vote of the Department of Justice, Equality and Law Reform. My Department is very active in the negotiation and the committee previously commented upon the application of the costs in these areas.

The current section 8 inquires would be, first, the National Irish Bank financial services and, second, the Ansbacher report. As the Deputy will be aware, there are judges involved in both of these, augmented by other inspectors of a professional nature.

The section 19 reports are ones which are normally done within the Department, although sometimes these also are contracted out because of resource issues. We have five section 19 reports currently under way and they are being carried out by the authorised officer, Mr. Gerry Ryan, who is a departmental accountant.

Chairman

On what are those five reports?

Mr. Haran

The section 19 reports are: the Celtic Helicopters report which is ongoing, the Guinness & Mahon report which is ongoing——

Deputy C. Lenihan

About what is that one?

Chairman

Let us get the list first.

Mr. Haran

There is the Hamilton Ross report which is ongoing, the Kenford Securities report and the College Trusts Limited report.

Deputy C. Lenihan

Will Mr. Haran jog our memory regarding those reports?

Mr. Haran

The Celtic Helicopters report is separate. The other reports are of financial structures where information came to light arising from the earlier reports such as the Ansbacher report. They are follow-on reports.

Deputy C. Lenihan

Are they tail-off reports?

Mr. Haran

Yes. They are reports where information emerged which required investigation.

Deputy C. Lenihan

I hope Mr. Haran does not mind me ticking them off as we go through them. The Celtic Helicopters report is self-explanatory. What is the substantive issue in the Guinness & Mahon report——

Mr. Haran

It would be improper for me to state anything other than that they are reports where information came to mind about activities——

Deputy C. Lenihan

——and structures and an organisation within the bank or whatever. What about these names such as Hamilton Ross?

Chairman

What is the background to each of these reports?

Deputy C. Lenihan

That is what I am trying to establish, Chairman. What about Hamilton Ross?

Chairman

The Deputy asked the question and interrupted the reply.

Deputy C. Lenihan

I apologise.

Mr. Haran

As the committee will be aware, the Tánaiste initiated certain studies, shortly after coming to office, in the areas of Celtic Helicopters, Garuda, Ansbacher Cayman and Guinness & Mahon. Following from these reports, certain information came to light which prompted her to seek to have section 19 investigations and authorised officers appointed to other legal entities. These investigations have been prompted by the Tánaiste and they are under way at present. It would be prejudicial of me to identify particular aspects of activities in any of these entities.

Deputy C. Lenihan

Mr. Haran can speak generally.

Mr. Haran

The Tánaiste felt that there were matters which came to attention which raised issues of concern and required further investigation, which is what a section 19 investigation is. A section 19 investigation is a fact-finding activity.

Chairman

In which Act is section 19 contained?

Mr. Haran

It is section 19 of the Companies Acts, as amended in 1991.

Chairman

Mr. Haran, you have listed seven inquiries. Will you state the commencement date of each of those seven inquiries, starting with the NIB inquiry?

Mr. Haran

Yes. The date of the Celtic Helicopters inquiry was 9 September 1997. Garuda, which has concluded, was also on the same date. That has been concluded and referred to——

Deputy C. Lenihan

It is not ongoing.

Mr. Haran

No. Does the Chairman want the ongoing ones?

Chairman

Yes.

Mr. Haran

The Guinness & Mahon report commenced on 8 January 1998. The Hamilton Ross Company Limited report commenced on 23 January 1998. If the Chairman wishes to have the section 8 ones included, the National Irish Bank Limited report was commenced on 30 March 1998. As the Chairman knows, that is under the High Court.

Chairman

On 13 March?

Mr. Haran

No, 30 March 1998. The reasons for that would have been announced in the court in the affidavit that was presented to it. The Kenford Securities Limited report commenced on 9 June 1998.

Chairman

That is a section 8 one as well?

Mr. Haran

That is a section 19. National Irish Bank Financial Services was a linked one with National Irish Bank and that commenced on 15 June 1998. That was a section 8 report. That was in the courts. There are two section 19 reports relating to Dunnes Stores which are delayed by court actions. We have been to the High Court twice and the Supreme Court once on them.

Chairman

I want the commencement dates of all the inquiries and then a progress report. There are two Dunnes Stores inquiries?

Mr. Haran

The two Dunnes Stores reports commenced on 22 July 1998. The section 19 report regarding the College of Trustees commenced on 10 March 1999. Its status is that it is still ongoing. The Ansbacher Cayman Limited section 8 report started on 22 September 1999 and that is ongoing.

Chairman

Are there any others?

Mr. Haran

No.

Chairman

The section 8 NIB report started in March 1999. The section 8 Ansbacher report started in September 1999 while the Celtic Helicopters report started on 9 September 1997. Is that a section 19 inquiry?

Mr. Haran

Celtic Helicopters?

Chairman

Yes.

Mr. Haran

That is a section 19 report.

Chairman

Under which section is the Guinness & Mahon report which started on 8 January 1998?

Mr. Haran

The Guinness & Mahon section 19 report started on 8 January 1998.

Chairman

Under which section is the Hamilton Ross report which started on 23 January 1998?

Mr. Haran

That is under section 19.

Chairman

The Kenford Securities report under section 19 started on 9 June 1998 while the College Trustees report is under section 19. The Garuda inquiry is completed. What is the position regarding the Ansbacher inquiry?

Mr. Haran

The section 8 report into Ansbacher Cayman Limited started on 22 September 1999. The High Court orders took place——

Chairman

Is that inquiry under section 19?

Mr. Haran

That is a section 8 report.

Chairman

The section 8 report into National Irish Bank Financial Services started on 15 June 1998.

Mr. Haran

That is correct.

Chairman

The two Dunnes Stores inquiries started on 22 July 1998.

Mr. Haran

That is correct.

Chairman

They have been delayed by court action.

Deputy C. Lenihan

For the convenience of some members who are curious about these companies, I wish to concentrate on the section 19 inquiries because they are germane to this committee. They are ongoing investigations and taxpayers' money was clearly involved. While the Ansbacher Cayman Limited inquiry might be more interesting, it is in the theatre of the courts. Will Mr. Haran remind the committee to what Hamilton Ross, Kenford Securities and College Trustees relate? I appreciate he cannot prejudice the outcome of the inquiries, but will he remind us of their origin?

Mr. Haran

The origin of these reports is information that came to light following other investigations that were under way that required investigation. The Tánaiste decided they required investigation.

Deputy C. Lenihan

Was that as a result of information that came into the public domain via the tribunals?

Mr. Haran

Not into the public domain. This was as a result of information that came into the Tánaiste's province from other inquiries that were initiated originally from information that might have come out of tribunals. It originally stemmed from that, but some of these investigations were spawned or initiated following from information that came from the other section 19 inquiries that I mentioned, some of which have now concluded.

Deputy C. Lenihan

The provenance of the Celtic Helicopter and Guinness & Mahon inquiries is clear. What is the position regarding the Hamilton Ross inquiry? Our memories of the names on this side of the House are not too good generally so perhaps Mr. Haran could remind us.

Mr. Haran

The names generally would not be in the public domain. They are not household names.

Deputy C. Lenihan

We have heard of College Trustees in some context in the tribunals. Perhaps my memory is serving me badly, but with what was College Trustees associated? Can Mr. Haran identify parent companies?

Mr. Haran

I find it particularly difficult to answer what companies are associated with because——

Deputy C. Lenihan

These are matters of public record.

Chairman

The Deputy should allow the Secretary General reply to the questions.

Mr. Haran

In so far as the question might mean why we are investigating one particular aspect of it, I would find difficulty. College Trustees is a corporate structure, I believe, involved in banking activity. I do not have details of all these companies with me at the meeting. The Tánaiste has answered many parliamentary questions about these in the House.

Deputy C. Lenihan

The corporate structure is publicly known.

Mr. Haran

That is right.

Deputy C. Lenihan

We can all go down to the Companies Office and find out those.

Mr. Haran

That is right.

Deputy C. Lenihan

Guinness & Mahon is banking while Celtic Helicopters is aviation.

Mr. Haran

All these——

Deputy C. Lenihan

Is College Trustees also involved in banking?

Mr. Haran

As I understand it, all these are corporate structures used for banking activity.

Deputy C. Lenihan

All of them?

Mr. Haran

All of them, apart from Celtic Helicopters which we know is different.

Deputy C. Lenihan

The genesis of these is information supplied or arriving on the desk of the Tánaiste and the Department.

Mr. Haran

Usually the authorised officer. That is where the information usually comes to us from.

Deputy C. Lenihan

Yes. The section 19 device is, of its nature, fact finding.

Mr. Haran

It is fact finding. It is trying to establish whether there is a basis to do other activities. The authorised officer has a lot of power and there are a lot of protections in place as well to prevent the section 19 reports ever being published. There is a balance of rights and responsibilities for the Tánaiste and the Tánaiste's officers. Much information can be gleaned from a section 19 and frequently we will use the section 19 to seek a section 8, which would be a High Court inspectorate and more public domain——

Deputy C. Lenihan

They are initiated by the Minister in his or her own right.

Mr. Haran

A section 19 would be initiated by the Minister.

Deputy C. Lenihan

This matter will recur for this committee. How do we evaluate the cost? Is there a time duration? How do we evaluate whether the taxpayer is getting value for money in what is essentially an information trawling exercise as the Secretary General described it?

Mr. Haran

Fact and information gathering.

Deputy C. Lenihan

Fact finding.

Mr. Haran

The type of thing one might consider is, for example, the section 19 report on Faxhill Homes.

Deputy C. Lenihan

That is completed.

Mr. Haran

Yes. That was done by the private sector and that is why the cost for that one is there.

Deputy C. Lenihan

There was an authorised officer and the cost was £135,000.

Mr. Haran

Yes. An external officer was appointed to do that and deal with people.

Deputy C. Lenihan

Is that the famous case of Ben Dunne and the conversion to the home in Tipperary?

Mr. Haran

I understand legal activities are taking place at present on some of these issues.

Deputy C. Lenihan

Yes. What was the duration of that outsourcing? It cost £135,000 over how long a period?

Mr. Haran

It was created on 22 July and it reported to the Tánaiste on 21 December 1998.

Deputy C. Lenihan

How many people were involved in the staff of the inquiry?

Mr. Haran

I do not have the taxed costs of it. I do not have the breakdown or the working papers of the costings that came in. The cost was £143,000 of which £89,000 was paid in 1999. However, other authorised officers of the company would also have been involved in doing the work. Frequently, there is recourse to legal advice which can be quite expensive.

Deputy C. Lenihan

That is all included in that?

Mr. Haran

That was all included. In our ones, where we get the Attorney General's advice, it is not included as a direct cost.

Deputy C. Lenihan

That is a section 19?

Mr. Haran

Yes. In our own section 19 reports, it is the officer's own time.

Deputy C. Lenihan

Could one expect a cost of £135,000 each for the reports into Kenford Securities Limited, College Trustees, Hamilton Ross, Guinness & Mahon and Celtic Helicopters?

Mr. Haran

No.

Deputy C. Lenihan

In other words, does one multiply the cost by five?

Mr. Haran

We are doing these internally so we are achieving a great cost saving by having an authorised officer, an accountant in the Department, augmented by two other accountants. We use the Attorney General's advice and external advice when necessary. Doing section 19 inquiries within the Department is an extremely cost effective mechanism of achieving a section 19 report. The original Ansbacher one that created the section 8 inquiry was done by the same team as was the Geruda investigation.

Deputy C. Lenihan

Was Mr. Haran's expectation that the cost would be halved per individual and it would cost £50,000 or £60,000 each?

Mr. Haran

It is very difficult to compare individual supports.

Deputy C. Lenihan

It is complex.

Mr. Haran

Sometimes one has to do a section 19 report on a very small financial structure that is used to carry out a number of transactions. The company structure could be very small and one might only be doing a study to look at a small number of transactions going through it. A study into such a company might be a small activity and relatively inexpensive.

If one had to do one on another corporate structure, say, on Dunnes Stores, that could be an enormously expensive activity from a time point of view. We feel strongly that by doing it within the Department we save a lot of money. Some of these are related companies so by having the one officer do them we are getting very good value for money.

Chairman

When are we likely to get results? Some of these have been going for three and a half years.

Deputy C. Lenihan

I am concerned about the time element in all five investigations. Is there a timeframe?

Mr. Haran

The Tánaiste in Dáil PQs on Tuesday said that she expected to get some of these reports quite soon. I believe she was expecting those on Kenford Securities and Hamilton and Ross soon. I hope later in the year we will get the other three, Celtic Helicopters, College Trustees and Guinness & Mahon. We cannot determine when the sections 8 inquiries which are in the courts will arrive. As the Tánaiste said, in the first half of this year she hopes to get the National Irish Bank ones. As the committee will be aware, we have had a change in one of the inspectors into the Ansbacher Cayman section 8 inquiry and two inspectors added.

Deputy C. Lenihan

Will Mr. Haran itemise, when he has time, the internal savings he claims can be achieved through an internal rather than external investigative process? It would be helpful for comparative purposes.

Mr. Haran

It would be very difficult to come down with a hard number on it. It is the cost of an accountant in the public sector. I can give the Deputy costs like that. An external accountant is a multiple of an internal accountant. Similarly, an external barrister is a multiple of AG advice. The Comptroller and Auditor General's accountants are also much cheaper than those of an auditor but it would be a multiple.

Second, the other benefit I am getting is that when we use our accountant like Gerry Ryan and his team we are talking about people who have developed a level of expertise and a familiarity with individual cases which give a lot of savings. However, it creates a huge strain on individuals and it is a long time for people to work on single projects. They have delivered some of the outputs and have concluded some of the cases they have undertaken.

Chairman

Can the Secretary General assure the committee there is no avoidable delay in these cases? For example, why has the Celtic Helicopters investigation taken three and a half years?

Mr. Haran

I cannot go into the detail of the individual cases but I can tell you the types of events that can lead to a delay. I do not know what the current delay is in Celtic Helicopters. In an investigation under section 19, one hits a road block when one finds a new corporate structure being used to carry out a certain transaction. I am only giving a generic example. One finds a corporate structure that was used to carry out a number of transactions. The authorised officer has no right to inquire into that structure and look behind those transactions. What then happens is that one might seek to go to the Minister in charge and say "I have got information that points to certain activities that need to be investigated" and one then creates a new section 19 into that corporate structure. Only when that is completed can one then go on and complete the original one that led to it being opened. One closes that case before one closes the original case that led to it being opened. That can happen.

Chairman

Are you saying that in some cases those who are the subject of an inquiry can frustrate the law and the inquiry?

Mr. Haran

We are usually looking back at an event. People can, to protect themselves against the prying eyes of our officers, create structures that are labyrinthine and require us to go after each one in a serial fashion. As you know, amendments to company law have been promulgated and are being discussed on Committee Stage at the moment creating the Office of Director of Corporate Enforcement where enhanced powers will be in existence maybe to give us a speedier and more streamlined way of dealing with these types of activities.

I would not like to detract from the strong work and the extraordinary amount of fact-finding that has been achieved by the authorised officer who clearly convinced the courts when they appointed the section 8 inspectors into the Ansbacher accounts.

Chairman

Can you assure the committee that there is no avoidable delay in any of these cases?

Mr. Haran

Yes, I can assure the committee.

Deputy C. Lenihan

Mr. Haran cannot expand on the individual cases but he referred to labyrinthine company structures. The purpose of a section 19 investigation is to establish facts——

Mr. Haran

That is right

Deputy C. Lenihan

——not breaches of the law in relation to corporate structures that may be labyrinthine and complicated and also structured in such a way as to cumulatively amount to an abuse.

Mr. Haran

As well as facts in relation to circumstances suggesting there have been abuses. One might find out that certain things were done in a certain fashion and were clearly wrong. Section 19 gives limited powers to come along with a determination but one may come along with a determination that there is a lot more investigation required because certain transactions or processes occurred which lead one to this conclusion. One convinces a court to appoint a section 8 inspector.

Deputy C. Lenihan

One can conclude that the common pattern in all investigations - Celtic Helicopters, Guinness & Mahon, Hamilton Ross, Kenford Securities and College Trustees - is not an illegality but a company structure or a cumulative series of overlapping structures that is connected to an abuse.

Mr. Haran

I would like to emphasise that the structure can be something that inhibits and elongates the time required to do a section 19 investigation. Section 19 usually looks into whether there is a reason to look towards appointing a section 8. One is not only looking at structures, one is looking at activities undertaken within individual companies. The structures can lead to the need to create further section 19 investigations.

Deputy C. Lenihan

Facts are established to ascertain bona fides or mala fides in the structures and activities of companies.

Mr. Haran

If something requires deeper investigation where powers of subpoena are required, cross-examination and, therefore, a High Court inspector is needed to do it.

Deputy C. Lenihan

How many legal challenges have there been in these five investigations by directors and executives of these companies?

Mr. Haran

To the best of my recollection none of these five has been challenged.

Deputy C. Lenihan

The delay cannot be attributed to legal challenges?

Mr. Haran

At times one might get a shake of a bush but that does not amount to a challenge. Sometime one has difficulties when one asks people individual questions. One might not get the response that one requires. We had legal activity in the Cayman Islands in relation to one of them, as the Deputy knows, but that was an isolated set of events where we were in the Caymans.

Deputy C. Lenihan

In general the delay cannot be attributable to legal challenge, in other words, people seeking to legally defend themselves in a robust manner against the Department's prying eyes.

Mr. Haran

The delay in the Dunnes one is the only one where we have been stopped by legal challenge.

Deputy C. Lenihan

Are the executives of the other five companies fully co-operating with the letter and spirit of the law and not using the law to obstruct?

Mr. Haran

I do not know the detail of each of these reports and what goes on. We actually gave the authorised officer the responsibility and the authorised officer is given a huge amount of discretion. There is not a huge difference between my supervision of the authorised officer and how we would have supervised the external authorised officer. They have safes and locked rooms and we have a lot of security and protection for them. Their reports are numbered and only go to one or two people. We regard this as a highly sensitive and confidential activity. I do not know the detail of what the authorised officer is doing. To the extent I gave the Chairman assurances about delays, I hope it is understood that I am not supervising the day to day work. I could not and I would not do so.

Deputy C. Lenihan

Given the sensitivity of what is being investigated, the references to safes and locked rooms and the need to know basis of these inquiries, I trust Mr. Haran understands our concern——

Mr. Haran

Of course I do.

Deputy C. Lenihan

——that, while we know they work pro bono and for the public good, we, and Mr. Haran as Accounting Officer, need to be able to ensure that these authorised officers do not indulge in some type of detective fantasy at the taxpayers’ expense.

Mr. Haran

I accept that. As a justification, the Ansbacher Cayman work he did created an extraordinary response. It was a tremendous piece of work and the quality of it convinced the courts that it was proper to proceed and to appoint a section 8. There is a high onus of responsibility to prove to the court that this is reasonable. As the Deputy will know, the court is one of the few bodies to see the report. I do not remember who else will have seen it.

Deputy C. Lenihan

I know Mr. Haran does not supervise the authorised officer's day to day investigations and inquiries which are highly sensitive and confidential, but does he demand a periodic assessment of what the officer does and whether it is worthwhile to continue with it? In a normal office, if a person is appointed to inquire into a problem in the company, he or she is normally given a time limit or a date by which he or she is asked, for example, if the company should go to court.

Mr. Haran

We do on the section 19 inquiries. I have had review meetings with the Tánaiste and the authorised officer on a number of occasions and have asked about progress, what can be done to speed them up, whether there was a resource issue and if we could augment resources in certain circumstances.

Deputy C. Lenihan

Some of these investigations can last for three years. How often would Mr. Haran, the Tánaiste and the authorised officer meet to try to speed up matters or allocate additional resources?

Mr. Haran

It is not only about speeding up or resources, it is about a number of elements. It would not always be myself and the Tánaiste. Frequently the authorised officer would be reporting privately to the Tánaiste. That is a very useful device. I would meet the authorised officer, who is in my own building, a few times every month.

Deputy C. Lenihan

Would it be specifically about these investigations?

Mr. Haran

Yes, and how work is going, what needs to be done, on specific policy issues being investigated which are related to me and whether we would seek a section 8 on a particular case or otherwise. A lot of work and meetings could take place on high policy questions that emerge, such as a section 8 appointment, an application to the court.

Deputy C. Lenihan

Mr. Haran meets the authorised officer three or four times a month. Would the Tánaiste meet him a similar number of times or would it be once or twice?

Mr. Haran

I do not monitor their meetings. I know over the past few years the Tánaiste would have met the authorised officer a number of times.

Deputy C. Lenihan

Would it have been about these investigations?

Mr. Haran

Yes, and on work in progress.

Deputy C. Lenihan

What does "a number" mean? Would it be once a month?

Mr. Haran

At times it might be more than once a month and sometimes it might be once every few months. It depends on the progress. Frequently it might be at the request of the authorised officer or of the Tánaiste.

Deputy C. Lenihan

Would there be an intention in the long-term to have some form of structured reporting system to evaluate the work of an authorised officer?

Mr. Haran

In the longer term we are moving towards the Office of the Director of Corporate Enforcement, which we feel would probably be a better way overall to manage and promote this activity. The Director of Corporate Enforcement will have gardaí attached to the office and we feel it would be a more efficient and effective way in the longer term.

Deputy C. Lenihan

Would it be more appropriate than using an authorised officer?

Mr. Haran

Yes. That authorised officer is out of our corporate services area where his job was previously working on tax policy and competitiveness policy. We have not augmented our resources. We have taken someone from the Registry of Friendly Societies as well and someone from the old prices area. We used to do some of the prices investigations. We have tried to augment his resources from there. Sometimes we look for the Attorney General's advice and sometimes we seek external counsel to advise them. It is a very effective and efficient means of carrying out or conducting this type of work.

Chairman

I disagree with you there. I imagine the public shares our frustration that these investigations take so long and are behind closed doors. Why should they be behind closed doors? There is no accountability under this cloud of confidentiality. That is what Mr. Haran tells us. Why does it take so long? I imagine the public is very frustrated by the lack of progress.

Mr. Haran

I accept the frustration people have about the time it takes to do some of these activities. In parallel I accept that many people would like to know what is being found out. The Oireachtas, as far as I understand it, decided that the nature of the powers the officer has - the powers relate very much to the constitutional advice - are such that the investigation has to be done in a fashion that protects the information found and that it cannot be promulgated. It is a decision of the Oireachtas but, as best I understand it, because of the nature of the rights and responsibilities of the officer and responsibilities of the person whom the officer goes to, such information has to be protected.

Similarly, at a certain stage, the Garda files would also be protected and they are fact-finding. To a certain extent most Garda files are protected. We do not necessarily see what the outputs from Garda investigations are. That is to protect the innocent and the privacy of people being investigated. We have not established that any of these entities that we are investigating are carrying out criminal activity. It is only when one goes to a section 8 and the proper protections under section 8 structures are in place that reports with the facts that we find can be published. The reports are published under the jurisdiction and competence of the courts which is a safeguard for us all.

Deputy C. Lenihan

I am not clear on this. Does this fact-finding section 19 device allow the Department's authorised officer have access to Garda investigation reports?

Mr. Haran

No, I am drawing the parallel with Garda investigation reports.

Deputy C. Lenihan

Does the investigation specifically preclude access?

Mr. Haran

No. The area of criminal law, I am sure, protects Garda information from other sources. It is not in our provenance. However, the Director of Corporate Enforcement will have greater powers and need not necessarily instigate section 19 investigations and will have Garda——

Deputy C. Lenihan

Assistance.

Mr. Haran

——members as part of staff.

Deputy C. Lenihan

Yes, but at present an authorised officer cannot draw upon Garda information where his fact-finding mission is concerned.

Mr. Haran

No, absolutely not. It is very limited as to sources of information.

Chairman

We have given this a great deal of time. This is very unsatisfactory. What is the purpose of this if it will take years with nothing achieved? There is a general perception that, in this State, white collar wrongdoing is not pursued with the diligence shown in other jurisdictions, including Northern Ireland. There are never prosecutions for wrongdoing. I thought it was a good thing when the initiative was taken but I have lost faith because it is taking so long. There is no tangible progress and that is how I see it. Is this good use of public money?

Deputy Dennehy

I must almost apologise that I will deal with more mundane matters. I concur with the Chairman's final remarks except where he stated that there have not been any prosecutions. Until now, there have not been any investigations and we are at least going the correct route. It is to be hoped that, when due process is complete, prosecutions will ensue should any wrongdoing be found to have happened. Until the past few years, no investigations took place.

The Comptroller and Auditor General mentioned in his opening remarks that the buoyant economy has affected many of the original Estimates. For example, expenditure on the INTERREG II programme and Union initiatives was at least a third lower than the Estimate. What was the reason for that? I have a few questions related to that material.

Mr. Haran

Yes. On the other issue, in the Faxhill Homes case, 29 summonses have been issued and a case is being heard in the Naas District Court, so there are prosecutions.

Deputy Dennehy

It is certainly progress.

Mr. Haran

It is hard and I accept the rightful impatience of people to see progress in these areas. We need to be impatient. This is I2, is that right?

Deputy Dennehy

That is right.

Mr. Haran

As Members know, INTERREG II involves a number of measures - economic development, tourism and technical assistance - and it is a North-South programme. We have had underspends in this because it was a very slow programme to get up and going. We had long delays in draw-downs and I remember discussing this last year as well when there was a much lower level of expenditure. We found that it is taking a while for projects to come in and those are only the projects for approval. Projects have to have certified delivery also. I am told it is moving forward very well at this stage. The guidelines and requirements are very strict. They are EU guidelines, as Members will know, and there can be delays for tax clearance and planning. My note says there was only £0.99 million last year, in 1998, and expenditure went up to £1.8 million in the year in question, 1999. Recent approvals are drawing down a lot quicker at this stage. Our experience is that a lot is happening and we are quite sure - the section has advised me that by the end of 2001 the full amount will be drawn down. This series of measures seemed to have a very long start period.

Deputy Dennehy

I can fully understand. We would be the people insisting on the tax clearance and so on with community groups but I felt that an extra initiative might be taken on this because of the North-South dimension and that it was more or less established in a blaze of glory, with the need for co-operation being stressed. Did we give any attention to assisting people with this other than what we would offer with normal schemes?

Mr. Haran

The county enterprise boards would be very aware of it and they would have tried to promote it as best they could. In addition, 54% of it has been paid down so far and we are told that the full INTERREG amount will be paid by the end of 2001.

Deputy Dennehy

On the community employment schemes generally, we have had a lot of controversy, some of us believe they should not be phased out pro rata to the unemployment figures. I felt we got a bit of a sop in the social employment programme but there was no expenditure on that. We were assured of approximately 700 special positions being created nationally for those who might not be able to cope or engage in normal full-time employment. However, there was no expenditure on that social employment programme. Why was that?

Mr. Haran

The social employment programme was not launched, effectively, until September 2000, so there were delays in launching the activities. The programme did not start until September 2000 and we hoped that up to 2,500 jobs would be created by end 2003 in the social economy but it is an area we have to learn a lot about. There are complex definition issues and the term has been used widely with limited precision at an early stage. The reason we did not spend is that basically the Tánaiste did not launch the programme until last year. That is why there was no spend in 1999. We are hopeful and expenditure is growing. The new chief executive of FÁS says there is a strong and vibrant demand for this. There is now a system in place which should lead to growth.

As unemployment falls dramatically, that does not mean we can close down all our schemes to support those who find it difficult to get into full-time employment, those whose local economies are so poor or those whose resource skills are low. We have to have measures to help people when they leave the jobs initiative or community employment. We need strong systems to support them in their move from unemployment and supported training to employment. It seems there would be some continuing future need for certain forms of sheltered employment. I do not like to categorise social economy as such but there is a panoply of schemes needed and some of those will be sheltered employment or systems of support while in employment, such as some of our schemes with the disabled.

Deputy Dennehy

This programme was created because there were complaints from those of us involved with people in the communities and there was an obvious need there. The Hamilton Ross report adopted a simple formula of cutting by 40% if there was 40% more unemployed. That was not the answer. This was given as a kind of half way house but continuity was the key word we tried to build into it - when the other programmes finished someone would be capable and ready to implement the scheme. If people are to be out of the activity for two years or more, however, we are going right back to where we were ten or 15 years ago.

Mr. Haran

I accept that. There were some changes with the jobs initiative and there was relaxation of the exit demands trying to achieve what the Deputy is suggesting. The Deputy is right and there is no point in pouring money into a person and leaving them at home for a couple of years because there is a waste of the investment in them. We must also be realistic about the ultimate impact we expect to have on some people. The ESRI did a report on some of the training and employment schemes recently and it was very strong on the CE schemes having a limited training impact, with limited numbers getting into full-time employment. There are problems there but sometimes the social outcome of some of the schemes is to support the community or an individual and not always to get an outcome where they are regarded as totally independent. That does not always occur and does not invalidate the need to give some support——

Deputy Dennehy

I ask the Secretary General to delegate someone to keep an eye on this because I am aware that FÁS would want to - I would not say wash its hands of - concentrate on what it sees as its original job of training apprentices and so on, but it cannot do so because it is understaffed and does not have resources to do so. There is a danger it will walk away from the needy in society.

Regarding health and safety, I know Mr. Haran will not know the everyday workings of the Health and Safety Authority, which has a new role in certain areas. One is the policing of the Seveso 2 EU safety directive. That was previously a general matter for the Department up to perhaps two years ago. Implementation of that directive concerns me and the public. I have been trying to ascertain the areas, sites, processes and plants affected by this. I have been looking for an area map of the places affected and it appears that until such time as someone seeks planning permission for an area, nobody can be told what establishments or areas are affected by the directive. The Secretary General may know it is causing havoc in Passage West in Cork, a town designated for renewal three years ago but which has now been told it can do almost nothing because of this directive, which is being implemented by the HSA. Is there a map available to me, other public representatives or industrialists of the affected zones?

Mr. Haran

On the specific question I do not know if there is a map available. I will have to come back to the Deputy on that. On the general issue, there is a serious problem in Passage West with the IFI plant. As I understand it, the HSA is asked as part of the planning process for a view under the Seveso 2 directive. The HSA would say it is ultimately up to the planners to say yea or nay. They feel they have to give technical advice as to the extent of risk involved. I am not technically competent to question their technical advice. The relevant plant has been very good and I do not think it has ever had a problem. However, their advice to the planners is inhibiting development of the Haulbowline site.

Deputy Dennehy

I have tabled parliamentary questions on this issue but everyone seems evasive. Initially I felt that people did not know what was happening, particularly as regards section 12 which was changed under the second directive. People have assured me that the Health and Safety Authority had only an advisory role.

Mr. Haran

That is my understanding.

Deputy Dennehy

However, no planner will go against the Health and Safety Authority's advice and take a chance of being before a tribunal in ten years' time. The HSA has a much more important role than an advisory role. It is defining what and where developments can take place. I am concerned about this because Cork in particular has a difficulty if this is implemented as it seems to be in that we have chemical and related developments. There would be a significant detrimental effect if there is no public discussion on the implementation of this directive. There has been no such discussion other than questions we tried to put to the Minister.

I do not know if it is possible to issue anything on this matter. Can the committee receive a note? I would like to start a process of public dialogue on this issue rather than being pushed from planners to the Health and Safety Authority to Ministers and so on, and everyone stating that it concerns an EU directive. We need to know what we are implementing and why we are implementing it. For example, was the decision regarding the distance in kilometres an arbitrary decision, was it taken by the HSA, does the same apply in the UK and so on? I would like to receive a note on these issues. It is important that we know what we are at.

Chairman

That is a formal request from the committee.

Mr. Haran

I understand that, Chairman.

Deputy Dennehy

As regards the prompt payment report and interest levied, those at fault seem to be bodies down the line such as health and education bodies and so on, rather than central agencies. Is it a charge on their budgets or is it a central Government charge?

Mr. Haran

It is a charge on their budgets.

Deputy Dennehy

So they should be taking the initiative themselves to——

Mr. Haran

The incentive is there.

Deputy Dennehy

They are being negligent as it were. They are wasting taxpayers' money if they do not implement the 45-day stipulation.

Mr. Haran

That is correct. It is a penalty and the intention is that it should be fiscally stimulated. In other words, to pay on time. The direction from which we come at this is to protect small suppliers. That was our goal. When dealing with a very large company, such as the State, small companies would not want to say that if they were not paid on time they would not come back. It is best to place the onus and responsibility on the State or the large purchaser so they pay these companies automatically.

The penalty interest is an incentive to us all. We have also made mistakes. It would be wrong for me at central level to say it is all to do with health bodies.

Deputy Dennehy

I do not know if we have dealt with the issue of the intention of going to the private sector. Is that an EU objective or directive?

Mr. Haran

It is an EU directive which we support. It is a very good idea. It will come into operation in the autumn of 2002 and will stipulate a period of 30 days rather than 45 days. It will be a fairly onerous responsibility of which we are very supportive. We were also one of the initiators of the minimal level which is to avoid the situation where people have to write cheques for 10p or £1.

Deputy Dennehy

When this was first mooted a couple of years ago, the point put to the Secretary General of the Department of Finance by county and city managers and their agency was whether it would also apply to the Department of Finance. Does the Department have to pay health boards, local authorities and so on under the regulation?

Mr. Haran

The regulation is for purchasers not for——

Deputy Dennehy

Not the other way round. That was the obvious question at the time.

Deputy Rabbitte

What was or is the Bula inquiry about?

Mr. Haran

The Bula inquiry concerned section 14 which was ultimately about the ownership of certain companies. Transactions took place and it was a question of who was involved in those transactions. I am sure we published the——

Deputy Rabbitte

Is it over?

Mr. Haran

It is well over.

Deputy Rabbitte

A minimal cost was accruing in 1999.

Mr. Haran

That is correct. It was referred to the DPP. It was published on 22 July 1998 with section 14.

Deputy Rabbitte

Does the Ryanair inquiry concern the industrial relations intervention?

Mr. Haran

Yes. Two people came in during the serious dispute which closed the airport.

Deputy Rabbitte

What has the State gained as a result of that expenditure? The Labour Relations Commission could arguably have——

Mr. Haran

The nature of some disputes - the protagonists and what is happening - means one has to look to other solutions. At the time it was not felt the machinery of the court would have been effective in resolving the dispute and opening the airport. Two people were brought in and a dispute gave rise to court cases which added to the costs.

Deputy Rabbitte

A major part of the cumulative cost of the personal injuries tribunal arose in 1999. How was that incurred? Is there any sign of that tribunal being established?

Mr. Haran

There is. The personal injuries tribunal has produced a report. The report was largely finished last year but there were delays with finalising one particular aspect. We expect it to go to Government within the next two to three weeks. We are late in publishing the report and reaching a conclusion but we are very bullish about the conclusion we might get from it. Some very good people were working on it. We are looking at alternative means of addressing the determination of injuries so we might try to de-litigate this area to a large extent. The costs in Ireland are much higher than in other jurisdictions. We are bringing a fairly robust proposal to Government.

Deputy Rabbitte

If the Government was to approve it, how soon could the personal injuries tribunal be up and running?

Mr. Haran

It will not be this year anyway as it would be impossible to get the legislation through the Dáil. We would probably set up a pilot activity in a tight area and try to move from that towards 2002.

Deputy Rabbitte

Did Deputy Dennehy ask about the job initiative scheme?

Mr. Haran

Yes, but the issue was the relationship between the schemes and a social economy programme. The social economy programme had not started in 1999 and we were letting people go from the range of CE and jobs initiative schemes, who were going to nothing. One of my responses was that people on jobs initiative schemes were allowed to continue until we had an array of supports available. So there were——

Deputy Rabbitte

That is a humane facility but it lacks clarity. It is difficult to give answers to people who say their programme was extended for four or five months - they do not know for how long. They seem to have an undertaking from the Minister that in no event will they regress to the unemployment queue, yet they do not know.

I was speaking to people in a child care facility before Christmas. One has to be able to plan such a business, yet the manager did not know whether she would have job initiative people who are allowing her to provide the service. It is a little unsatisfactory although I understand the humanity behind it.

Mr. Haran

A new range of additional supports are being developed and a social partnership process is under way. However, that is tangential. It is important but it is not the driver. It is not satisfactory that people are concerned about their future. We have not devised a full range of supports in this area and I do not defend the fact that some people are unsure what their future will hold. We have managed to keep people on the jobs initiative and, ultimately, we are trying to secure their migration into the open labour market. However, we have not sufficiently developed high level supports to assist them in their transition from the jobs initiative to the open labour market. The open labour market may not, however, be the end goal for certain groups of people. I remain loathe to write people off or categorise them as being unable to achieve that goal. It would be dangerous to do that.

The new supports may be in the form of mechanisms which would support people in continuing employment. It is accepted that such mechanisms should be available to people with a physical disability whom we assist in obtaining and retaining employment in the open economy but the same thought processes do not seem to operate in regard to people with other forms of disability or inability.

Deputy Rabbitte

It is unsatisfactory that the people concerned feel that the Minister, the Government, the Department or FÁS are trying to reduce numbers by issuing letters outlining their remaining time in the perceived hope that they will exit into other employment. Perhaps the social economy programme could take on some of these people. What is preventing a successful outcome to the discussions between the Department of Enterprise, Trade and Employment and the Department of Education and Science in regard to the latter Department taking responsibility for the myriad of CE participants who work as caretakers, classroom assistants, part-time secretaries etc.? I thought the idea was that the Department of Education and Science would take on that responsibility.

Mr. Haran

That is the proposal, yes.

Deputy Rabbitte

When will it come to fruition?

Mr. Haran

Discussions have been held on this issue over a period of time. If I might respond to an earlier point, it is still necessary to push some of the jobs initiative and community employment scheme participants into the open economy. I would be dishonest if I said people can stay on as long as they wish. People are individually assessed and encouraged into the open economy.

The delays in agreeing a mechanism in regard to the CE participants with the Department of Education and Science are occurring at an administrative rather than a political level. The Department of Enterprise, Trade and Employment has some concerns that in moving a group of people from one categorisation to another, their needs will not be sufficiently protected. We are anxious to find a transition which will adequately address the needs of CE participants who currently hold jobs in schools into an environment in which education is properly driven by the school's needs and educational requirements. We want to devise a transition which will not offend the Department of Finance. My Department, the Department of Education and Science and FÁS are working hard to devise a set of proposals to deal with that migration. Ultimately, it is not desirable for the education system to be augmented in this back-door fashion through community employment. We must regularise support structures in this area.

Deputy Rabbitte

Am I tempting you into a policy area by asking whether we will have clarity on this matter by the start of the next academic year in autumn?

Mr. Haran

I hope to have clarity by then. Any solution must take account of educational needs and the individual requirements of employees in this area so that the transition would be a clean one.

Deputy Rabbitte

Can prospective sponsors obtain details from the Department in regard to the social economy programme? If I believe my enterprise has a social economy potential - I could be peeling potatoes for the local hotel - can I contact the Department to obtain clarity on that?

Mr. Haran

My understanding is that FÁS has put in place a good structure to support social economy work for which there is a high degree of demand. The social economy could form part of people's transition from community employment into the open economy. This could happen in regard to schools. We must be open to different ideas as we plan the migration.

Deputy Rabbitte

The uptake for the North-South trade and business development body was negligible in 1999. What is the current situation?

Mr. Haran

Inter-trade Ireland is up and running and has appointed its chief executive, Mr. Liam Nelis, who is recruiting additional staff. Due to a hiccup which occurred, many of the staff members were on secondment and that was not a very good way for the new entity to do its work. I attended a seminar about a week and a half ago with all the agencies North and South to agree co-ordination mechanisms.

The board of Inter-trade Ireland, chaired by Mr. Martin Naughten, is very able and hungry in driving this project forward. The political system strongly supports its efforts. Inter-trade Ireland is currently recruiting full-time executives.

Deputy Rabbitte

Where is this body located?

Mr. Haran

It is based in Newry as per the agreement. As far as I understand it, the board has obtained a permanent premises there. The challenge for Inter-trade Ireland will be to find areas in which it can add true additional value and that it why it arranged a seminar to bring together agencies from the North and South and the two Departments. It wanted to identify areas in which it could have a meaningful impact without stepping on the toes of the plethora of other entities in this field. I can elaborate on the body's activities if the Chairman so wishes.

Chairman

Not today, thank you.

Deputy Rabbitte

I have never quite understood what the Díon committee does. Will Mr. Haran clarify that?

Mr. Haran

We support, via a committee operating out of London, a range of bodies in the UK which supports the Irish diaspora. A member of the Department's staff, who is the labour attaché in London, acts as the chairperson of the Díon committee which provides grants to a number of organisations. I have a list of the organisations involved and will be happy to forward it to the committee.

Deputy Rabbitte

My point is that we are currently scouring the world for labour. A huge number of Irish people living in London remitted money to their families here when it was badly needed but are now living in appalling conditions, sometimes in poor health as a result of the heavy physical work in which they were engaged. It seems we are not doing a great deal to address the situation in which they find themselves. We are trying to attract workers from Newfoundland, Beijing and Johannesburg but we do not seem to be particularly interested in people to whom we have a moral responsibility. Does the Programme for Prosperity and Fairness contain a commitment to establish a commission to examine this matter?

Mr. Haran

A commission operates under the auspices of the Department of Foreign Affairs. I agree that when many Irish people went to the UK in the past they were not a burden on the social welfare system. We are trying to support these people through many NGOs in the UK. These organisations deal with other immigrant bodies as well as the Irish.

Deputy Rabbitte

My impression is that we are contributing a pittance - it is just scratching the surface.

Mr. Haran

This year we contributed £2 million. Three years ago, we contributed approximately £600,000. That is the political response from the Minister and from Ireland by way of saying that we must accept our responsibility to these people and increase the support.

Chairman

Many of these people went to the UK in the 1950s and are now retired. When they return to Ireland to visit their relatives or friends - many of them have few relatives or friends left - they do not have free travel, to which they would otherwise be entitled. Can something be done in relation to giving them free travel as if they lived in the country?

Mr. Haran

I hope the committee will examine these important issues relating to rights and responsibilities.

Deputy Rabbitte

On appropriations-in-aid, 40% of credit unions paid their fees when submitting their annual returns, despite a campaign by the Irish League of Credit Unions against payment of fees. What is this about?

Mr. Haran

There was a change in the registration charge of credit unions. The Irish League of Credit Unions tried to encourage its members not to pay, but 40% of them paid. It has since agreed with the registrar that they should pay, and everyone is now paying fees.

Deputy Rabbitte

Did this relate to a point of principle?

Mr. Haran

It was rather on a point of principle.

Deputy Rabbitte

On the returns to the Office of the Director of Consumer Affairs under the Consumer Credit Act - I have an interest in this matter since I introduced the Act - the garage owners at the time claimed it would be the end of civilisation as we know it if they had to pay a very modest fee. It seems garage owners have not gone out of business. Are they paying their fees to the director as required under the Act?

Mr. Haran

The garage owners.

Deputy Rabbitte

Yes, those who operate the hire purchase system.

Mr. Haran

I will find out the answer.

Deputy Rabbitte

It is a point of detail. I would like to know the answer because the Society for the Motor Industry at the time made stout representations that it would put——

Mr. Haran

I am sure after the past couple of good years, stouter representations will be made.

Deputy Rabbitte

I would like to know if the director is getting her money. On the income from IDA Ireland property, are we still disposing of property?

Mr. Haran

Two things are occurring. We are disposing of buildings and selling them to clients and others. At the same time, we are acquiring landbanks to develop the brown side of the business. We are building up landbanks in strategic areas and depending on the private sector to build the buildings. I recall that £35 million worth of property was put into IDA Ireland driven landbanks by the private sector in the past year. The view is that the landbank is the way to go and that we should encourage the private sector to get involved.

Deputy Rabbitte

I know there is an answer to this question, but I am a little confused as to how the allocations to IDA Ireland always have an outturn that is so precisely in line with the allocation. Where do we catch up with the actual accrual accounting?

Mr. Haran

We do not have accrual accounting in relation to these areas because it is a grant system. IDA Ireland may have it within its books. While the outturn is accurate, the Deputy will notice that the Estimate was wrong. This led to a supplementary for IDA Ireland in the year in question. Collectively, we got the figures wrong when the Estimate was being drawn up.

Deputy Rabbitte

So it is almost on an invoice basis?

Mr. Haran

It is on an invoice basis - it must have delivered on certain projects. We know what its potential liability is but whether it is real depends on its delivery on the approval. If it does not start up activity or employ people, it does not draw down. We cannot govern whether it will draw down but we usually have a fairly good estimate of the quantum. However, there were delays in the year in question so a Supplementary Estimate had to be introduced to reduce its overall allocation.

Deputy Gildea

To get back to the more mundane question of FÁS, while it may be regarded as mundane here, it is not mundane to those people in rural constituencies like mine who derive an income from it. On the question of the open labour market versus community employment, I am very unhappy with the way in which community employment schemes are currently structured. It seems they are being phased out, particularly when one considers the three year rule whereby someone over the age of 35 who works three years on a FÁS scheme is no longer eligible. What material grants are being provided to community employment schemes? Again I emphasise the importance of the overall FÁS community employment schemes both to local communities and participants.

Mr. Haran

I do not have the data on what the quantum currently is of the additional money provided for materials, which makes a difference to sponsors. This relates to paint and so on for clubs, schools, playing pitches, providing posters and so on. On the wider policy issue, CE was introduced originally because of the dreadful unemployment figures and so on. This was an unemployment project, dealt with through sponsors. Over time and because of its use, it went from being an unemployment scheme to a service provider scheme and an important part of the infrastructure, particularly for communities with endemic unemployment rates which were impoverished by years of underdevelopment. It was an important part of the resources of the local community.

The social economy should play a role in addressing some of these issues but other areas of expenditure will also have to play a role in ensuring our overall level of provision in communities reflects the needs of these communities. We are providing training in this area to ensure community employment remains a labour market intervention and that other interventions such as the social economy and a change in the education support structures also take place in parallel. I accept there are discontinuities that affect communities where one is ending and the other has not begun adequately, which can cause a strain on communities. I could not come before this committee and say we are maintaining a whole lot of these schemes for labour market reasons. Given that the ambit of some of these schemes goes beyond the labour market, we must be specific in this regard and support them.

Deputy Gildea

If one takes areas such as the west and north-west, they do not have the same employment levels which prevail in Dublin and other parts of the country. The structure is failing to provide the support it should be giving to rural communities because most of the programme is focused on areas of high employment such as Dublin and the criteria applied to areas of high employment are also being applied to areas where unemployment is four or five times the national average and where the FÁS community employment schemes and other schemes have been beneficial to the local community and participants.

Mr. Haran

I accept that. In an attempt to ensure that it was not Dublin or urban centred, in the adjustments which were made particular consideration was given to island communities because they do not meet some of the criteria and have special challenges. They were excluded from the restructuring. However, other rural communities were not. It is a matter of striking the right balance between schemes which are designed to help individuals return to mainstream employment and schemes which are useful in helping communities to grow and which improve their welfare. Leader and county enterprise boards also have a role to play in this regard, as do EI and IDA Ireland. I recognise that the closure of community employment schemes causes problems because communities become dependent on them and are used to them. We have to find a way of working through that and putting in place other support structures to help rural communities, especially where the population density is such that it is difficult to secure support structures.

Deputy Gildea

There is a section of the population in rural areas who, because of a number of factors, including socio-economic factors, cannot migrate to Dublin. The community employment schemes were extremely important for these people and their communities.

Mr. Haran

I accept that there are places where they are important, but we have to find measures which will help those communities out of full dependency and also help them to grow. There are wonderful communities where the community enterprise centres helped to develop sustainable economic activity. Industrial policy should not have to depend on these people coming to Dublin for a job. The emphasis of industrial policy has to be the opposite, it must encourage people to go out and bring economic activity to other areas.

Deputy Dennehy

I want to follow up on the point made by Deputy Gildea and the Secretary General's comment. He said that communities have got used to community employment schemes as they provide job opportunities etc. During the past year I have argued that while an audit was carried out on the numbers employed, etc., no audit was done on the work carried out under the schemes. I am not referring only to the school-related work, to which Deputy Rabbitte referred, but to the maintenance of sports pitches and a range of community-related activities which the local authorities will not touch. We are all involved in local authorities and we know they will not go anywhere near this work. No audit has been done of the great benefits of these schemes and I am concerned at the official line, "We have tried to rehabilitate people and have provided outlets for them." Villages and urban areas which were semi-derelict have been turned around by these workers. These schemes are critical not just in providing posts or generating cash but also in doing beneficial work. I do not think you attempted to measure this aspect when this argument was going on.

Mr. Haran

They provide a very valuable service and communities have become dependent on them because they have re-energised them. They provided sports facilities and gave a new vibrancy to communities by encouraging community spirit and the development of entrepreneurship and a different attitude. This is why measures such as social economy and others are so important. The emphasis is not necessarily on the recruitment of an individual as a labour market measure, rather it is on providing society with a new form of economy, which can be sports, providing care for the elderly or needy and providing meals for disabled people. These are very valuable measures and I accept that we have not done an audit on them. Community employment was measured as a labour market intervention. However, it clearly has value as a wider service in providing intervention.

Deputy Dennehy

Do you have any intention of doing this audit which should be done? The mechanism used seemed to be very crude. You took on a firm of consultants and economists who did number crunching and came up with a simple solution - while there were 200,000 a few years ago there are now 40,000 and the figures should be reduced pro rata. Do you have plans to carry out a social audit, which is critically important?

Mr. Haran

We plan to do the mainstreaming of the provision. This is the way we have to go so that communities are not dependent on an employment scheme. Communities are rightfully dependent on sports support structures, educational support structures and health care support structures, and CE was one of the ways of providing these in the past. It has a role to play in the future but because of its size and the rate at which it escalated it started doing many things which should now be delivered by new systems. I accept the value of what it has done in communities and would not try to underestimate it.

Chairman

I want to ask about your internal audit arrangements. To follow up on the point being discussed, there are labour shortages at every level of the economy and in most regions for high, medium and lower level jobs. Yet last month 135,000 people were paid unemployment benefit. This point has been troubling the committee for some time. Why is this mismatch continuing? There are labour shortages everywhere, yet 135,000 people are still being paid unemployment benefit. Do you have anything new to say to the committee on this point?

Mr. Haran

I am afraid I do not have anything new to add. The labour shortages are growing and unemployment rates are collapsing. The ILO labour force unemployment rate and live register figures are falling rapidly. There is still a huge gap between them but it has narrowed slightly - I think it is 84,000, down from 100,000 a fewyears ago. There is still a big gap between the entitlement to a social welfare payment andthe labour force estimate of unemployment. The labour force estimate of unemployment reflects very much our understanding of the labour market. It has a long-term unemployment rate of 1.4%——

Chairman

It certainly reflects my experience. Is this not a colossal rip-off? Are many of the people receiving unemployment benefit also working? Is there any other explanation?

Mr. Haran

I imagine a big reduction must be occurring in the black economy element because it is becoming easier and more beneficial to be in paid employment as it gives more money. There are new tax structures in place to encourage paid employment. The tax burden on paid employment is also coming down for both the employer and the employee. I do not have data - I am not auditing the social welfare aspect. The Department of Social, Community and Family Affairs is pursuing the investigation you initiated in Galway——

Chairman

And Waterford.

Mr. Haran

——and this should throw some light on the matter.

Chairman

I cannot see any other explanation but that people are working and drawing unemployment benefit and they are getting away with it. Of the figure of 135,000, maybe 30,000 are part-time employed and receiving partial payments. I ask you and the Department to be vigorous in protecting the public finances. We do not wish to have another public inquiry showing that your Department or others did not do their job. Mr. Jack Lynch, when Taoiseach, said that if the unemployment figure went above 100,000 a Government should resign. We are now talking about full employment, yet we are still paying 135,000 people. The DIRT issue, in terms of money foregone to the Exchequer, is minimal compared to the potential loss of revenue here.

Mr. Haran

Our employment action plan plays a role in helping to reduce that figure. The thresholds have been reduced to get at people crossing it at nine months rather than the year to date.

Chairman

We will have a more detailed debate on that soon. Will you tell me about the internal audit arrangements within your Department?

Mr. Haran

There are six people employed in our internal audit unit. We have two sets of responsibilities, standard internal audit of the departmental Vote and internal audit activities relating to EU funding and the cascade arrangements which exist there. We also have an internal audit committee. I was a member of that committee up to the end of last year. Best practice has suggested that the Secretary General should not be a member of such a committee because it reports to him. It is now chaired by my colleague, the head of corporate services. An external accountant from the Department of Agriculture, Food and Rural Development is a member of the internal audit committee which meets on a regular basis.

Chairman

Does such a post as internal auditor exist?

Mr. Haran

There is a head of internal audits post. We also have an internal auditor.

Chairman

Is this post independent of the finance function of your Department?

Mr. Haran

It is.

Chairman

To whom does the internal auditor report?

Mr. Haran

Ultimately, he reports to the head of internal audits, the internal audit group then reports to me and the management board on a regular basis. For example an audit needs assessment is currently under way. The internal auditor came to the management board and presented proposals regarding this assessment. The management board will adjudicate on that. I also make adjudications with the management board.

Chairman

Does the internal auditor have uninhibited access——

Mr. Haran

Yes.

Chairman

At any time and without notice?

Mr. Haran

A circular has been issued to that effect.

Chairman

At any time?

Mr. Haran

Yes. I do not know of any place he cannot go - perhaps he cannot go to the inspector's office because he reports to him.

Chairman

Can the internal auditor go straight to you if he has a particular concern?

Mr. Haran

Yes.

Chairman

What rank is the internal auditor?

Mr. Haran

He is an assistant principal. The head of internal audits is a PO higher scale. I make a distinction because the EU internal audit officer also reports to the PO higher scale. He is a consultant accountant, it is a technical grade.

Chairman

Tell me about health and safety. What are the statistics regarding health and safety injuries?

Mr. Haran

I will get the figures. I think the death statistics have risen, everything is relative. Related to the overall population of employment the figure is decreasing but the absolute figures have increased in the past year. The fatalities investigated were 78 in 1995 and 48 in 1997 and they were up to 69 in 1999.

Chairman

There were 48 fatalities in what year?

Mr. Haran

In 1997. There were 78 fatalities in 1995.

Chairman

Apart from the fact that more people are working, is there a slackening off in safety standards?

Mr. Haran

It is very difficult to identify why it is happening. There is a great deal going on in the construction industry. There is a partnership arrangement to try to encourage employers, unions and the health and safety people to work together to effect a significant improvement in that area. The number of farm accidents remains very high. Beyond that there are isolated incidents. This year's budget has provided a significant allocation for increased staffing.

Chairman

How many accidents have taken place each year for the past five years in the construction industry?

Mr. Haran

The figure for last year is 18 fatalities. I do not have with me figures for previous years. There were over 1,000 reported injuries. The statistics in the agriculture industry are the highest, with 23 fatalities last year. It is a serious problem.

Chairman

Does a programme exist between your Department and the Department of Agriculture, Food and Rural Development focused on farm safety?

Mr. Haran

A task force has worked on this area and has produced guidelines for it. The HSA has attended the ploughing championships and has worked with the representative bodies, Teagasc, the ESB etc. to raise awareness in this area. There has been a great deal of activity in the area. It is a very difficult area and it has been a persistent problem.

Chairman

The committee, regrettably, is only interested in the costs ultimately to the Exchequer. That is our function. We must draw this to the attention of our colleagues on the agriculture committee.

Is there any new approach to the problem as expressed by Deputy Gildea about high unemployment in some rural constituencies remote from Dublin? I see that the Estimate for IDA Ireland was reduced in the Supplementary Estimates. Am I reading that correctly?

Mr. Haran

It was.

Chairman

By £22.5 million.

Mr. Haran

That is a lag type of Estimate. Commitments were made two years previous to that. It is a poor reflection of activity.

Chairman

Is there any attempt to use that money in places such as west Donegal and west Mayo?

Mr. Haran

Yes, there is. IDA Ireland and Enterprise Ireland have new regional strategies. We use differential financial packages depending upon where the project is located. The BMW region will attract much higher grant aid than a non-BMW region. The aim of IDA Ireland is to have 50% of all announcements for new greenfield investment in a BMW area by 2002. It achieved that last year. Enterprise Ireland is giving differential grants - I did not bring the figures with me. It wants to move 150 companies from Dublin to the regions. A lot of effort is being made in this area. Improved infrastructure plays an important role in this area. We do not deliver the infrastructure but we are drivers of it.

Chairman

I know that, but on that point, I was appalled when I read that the national development plan would include a map of the island of Ireland, and the road structures proposed were one to Belfast, one to Galway, one to Limerick, one to Cork, one to Waterford and the south-east and nothing to the north-west. There is nothing for Sligo, Donegal or Monaghan. How can those regions develop if good infrastructural connections do not exist?

Mr. Haran

I agree.

Chairman

Is it a big deficiency in the national development plan?

Mr. Haran

I cannot speak in detail about the national development plan but I can say that the inhibitors to development in the north-west include the road structure and the transmission and distribution infrastructure. Such factors inhibit the types of company located in the north-west. These new economy projects are very dependent upon robust energy infrastructure. The educational infrastructure must also be robust. They will be the key drivers. We will do things with our differential grants to promote the areas but ultimately the areas must promote themselves by having high quality infrastructure.

Chairman

One look at that map of Ireland in the national development plan shows the north-west is completely ignored. There is no proposed road except the one to Belfast. There is a huge gap. I have, for years, identified the north-west as an area which should receive major structural development, yet it is omitted from the national development plan. Deputy Gildea has rightly raised the question of high unemployment in the north-west.

Mr. Haran

I accept that good infrastructure is required. IDA Ireland has scored recently in this area following the task force problems in Donegal. Letterkenny has a great resource of software people. That is a palpable resource and we are trying to tap it. Inishowen has very serious problems.

Chairman

If industry needs to communicate through airports and to markets it needs roads, rail and infrastructure. The north-west does not have these facilities. This is the case from Mayo to Donegal.

Mr. Haran

That is right.

Chairman

There is unemployment and labour shortages but there are no infrastructural proposals whatsoever.

Mr. Haran

I am not sure there are no infrastructural proposals but I know there are real challenges there.

Chairman

The National Roads Authority has come in here and there is a major gap. Perhaps Mr. Haran would take this up with the Department of the Environment and Local Government and let us have a note on his reflections within two months. Is that agreed? Are there any other questions?

Deputy Dennehy

I wish to revert to the health and safety issue. Did I hear Mr. Haran say there has been a 33% increase in inspectors?

Mr. Haran

In the budget.

Deputy Dennehy

Will that lead to many extra inspectors?

Mr. Haran

I will get the figure. I was involved in the negotiations about it but I do not remember the extra number.

Deputy Dennehy

Will the extra staff be targeted at the building industry?

Mr. Haran

It will be up to the health and safety board which is a tripartite board to direct, with the executive, the deployment of the resource.

Deputy Dennehy

Part of my previous experience was as a safety officer in Irish Steel, which was what turned my hair white. Normally a bad employer is at fault but the farm fatalities appear to suggest that is not the case because obviously they would have their own interest in this matter. What I am trying to get at is whether the finance is being targeted in the right way. The National Industrial Safety Organisation is doing fantastic work but it is a voluntary body. It is that body that has made the real impact rather than the statutory body. The funding is being targeted at inspectors, but should it be targeted at education? I appreciate there is a need for both, but is the mix right?

Mr. Haran

I hope the mix is right. A lot more energy is being put into awareness raising campaigns such as the partnership campaigns, FÁS training and health and safety modules to assist the educational side. Clearly we learn a great deal from the farming community but these people are under great stress and strain. It is dangerous to categorise any one grouping. Safety has to be a total partnership activity. We know from some of the multinationals which have set up some huge projects here that one gets health and safety down to an extraordinarily robust fashion. The Intel construction plant was the best in the globe from a health and safety point of view because it put systems in place, with workers and employers working together to ensure people do not get hurt.

Deputy Dennehy

I accept that point. Are we heading in the right direction? The Irish refining plant is a classic example as there has not been an accident there in 14 years. If one occurred there it would obviously be damaging but it has taken the precautions to avoid that and it has done so through education.

Mr. Haran

That is right.

Deputy Dennehy

Is our national money going in the right direction? In my experience, 90% of the accidents on which I took reports and of which I oversaw the results arose from over-enthusiasm by workers. They were trying to do the right thing and to do it speedily. It was not due to negligence as such even though the company might be found negligent later but it would probably come down to a lack of training or education. If we are funding 33% of the budget, some of it must go towards education rather than merely towards increasing the number of inspectors. We seem to get caught up in the public debate, the number of inspectors available and so on.

Mr. Haran

That is a fair comment. There are 25 additional inspectors. I am informed that 52% of the increase is for the non-pay area. The Health and Safety Authority believes strongly in public awareness activities. Sometimes it is difficult to do a cost-benefit analysis because one does not always see the benefits of public awareness, apart from indirectly. I totally agree with the Deputy's analysis that these things can be done if the education is provided, but there is a role also for inspection to protect employees where an employer is not as active as he should be in encouraging this partnership.

Deputy Dennehy

When the parliamentary question is asked or the debate is taking place in the House the important issue seems to be the number of inspectors. That is the end of the matter for most politicians. I am anxious that Mr. Haran's Department would say what cannot be audited as well, emphasising training, results and benefits. That is important.

Chairman

This is a time of great joy in your Department given the state of the economy and the state of employment. Is there any assessment of where we may be at risk? Have we too many eggs in any one basket? Are we trying to spread that risk to ensure there is not a sudden shock to the system whereby there is a collapse in one sector?

Mr. Haran

I think the Chairman is right. There are a number of risks about which one has to be careful. The type of risks that can be avoided are in indigenous and overseas companies, and there may be an imbalance in terms of particular markets. Enterprise Ireland has done a lot of good work in trying to develop indigenous industry. That will give us much protection against certain downturns. It has to try to find different marketplaces, particularly the euro marketplace. We have had much success but we are still very exposed to the UK market and with the movement into the euro we are quite exposed to asymmetric shocks from a currency point of view. On the portfolio balance, we have to concentrate on the sectors. We are strong in health care and in ICT. It is good to be strong in an industry that is so pervasive and growing so well. A counteraction to that is that we are strong in health care and pharmaceuticals and in the financial services industry which give a certain amount of protection against the ICT collapse and any problems that might occur in that area.

It will be a while before we will be able to measure our success, but it is constantly growing on the value chain. It is easy to say our success is moving up the value chain but we have to try to concentrate on as many of our businesses, those in existence and those which will come into existence, to ensure the value they add is high so that they are less exposed to the average wage cost. In the long-term Ireland cannot compete against low wages so we have to constantly grow to ensure it is the brainpower of our society that is being exploited and used for added value. That is what the whole Science Foundation Ireland investment is about, trying to grow the quality and quantum of research occurring in our society. That is a ten year horizon. That is when we will start to get the real benefits. It is an early investment today for a deferred and delayed response but it is critically important that in every product line we are in we go up the value chain so that we are more robust. If there are hiccups of a global nature of course we have to suffer but we have to try to organise it as best we can. It is a free market so we cannot determine all the outcomes. We seek to secure as great a balance in it so that individual shocks will not hurt us more than other people.

The euro is an important element and I hope our euro market exposure will be a critical part of that. An example of this is that 40% of the new jobs in IDA Ireland assisted companies were in wage levels above £25,000, which is one of the indicators of how far we are going up the value chain. We would not pay that money if we were not going up the value chain. There are also more high productivity companies. We have to keep on working on this and trying to secure those outcomes. The rhetoric is easy.

Chairman

What do you think about wages and the criticism from the European Commission? An editorial in the Financial Times on that issue stated that we would have to face the inevitability of an increase in wages.

Mr. Haran

I juxtapose the Financial Times with the European Commission. They almost say the opposite. The Financial Times states that Ireland is bad because wages are not increasing and the Commission states that inflation and potentially wage inflation is too high so we should not have an inflationary budget. They are contradictory arguments. Basically, the Financial Times is saying that we should go away from social partnership processes, let wage increases rip through the economy and have what it would call a self-correcting inflation response. That is what its analysis would suggest.

The Union is applying certain analyses to us which may not be appropriate for an economy like ours. We have a very open economy. In the 1980s we tried to expand fiscally. We pumped money into the economy to make it grow, we discovered that pumping money into it does not make it grow because it is dissipated. It goes out of the economy immediately through imports and exports so it does not affect domestic inflation the same way as a fiscal stimulus would affect a very closed large economy. In a certain sense, we feel that maybe it is misapplying analyses for large countries with lower dependence on trading to an open economy like ours that is fiscally healthy.

Chairman

Our job is to protect the public finances and to ensure that we are taking steps now to protect it down the road. I would like to hear about training and retraining. You spoke about embarking on programmes that will have benefits in ten years. Is FÁS looking ahead to training needs in three, four and five years and is it adjusting accordingly now?

Mr. Haran

There are a number of activities. The national training fund legislation was passed by the House at the end of last year. In the fund we are moving away from the old sectoral committees and establishing new structures to try to address this issue. We have a skills awareness group that is chaired by Danny O'Hare which tries to anticipate the skills requirements in our industry. It concentrated in the original report on the higher end of the business. It is also doing a report on the construction industry. It hopes to use that type of device, which brings together the two Departments with Forfás and FÁS as our two agencies and the HEA, to try to identify what will be the skills requirements of the future and what systems we have to support them.

Second, there is something on which we still have not adequately developed a policy but which we are thinking about, the lifelong learning aspect of training. I hope we will get it right with regard to the mix of degrees and skills we are developing. One thing we feel confident about is that we will need new systems to help grow skills on an ongoing basis. We are trying to think about it but we have not settled on anything in particular. We have the skills nets process as well, involving trade unions and employers in the active management of training within certain areas. However, I do not feel we have yet cracked adequately the lifelong learning challenge which will be important for continuous economic development.

Chairman

We could discuss this for some time. There are no further questions so I propose that the committee note both the accounts and the special report on prompt payments and that the meeting adjourn until next Thursday at 11 a.m. Is that agreed? Agreed. At that meeting we expect to have the vocational education committees from County Wicklow, including Bray.

The witnesses withdrew.

The committee adjourned at 1.25 p.m. until 11 a.m. on Thursday, 15 February 2001.