I move: "That the Bill be now read a Second Time."
The purposes of this Bill are: to amend the Industrial Development Act, 1993, to remove unnecessary restrictions on the operations of Forbairt and IDA Ireland; to enable Forfás, Forbairt and IDA Ireland to establish subsidiaries; to allow Forbairt and IDA Ireland to invest moneys in funds aimed at the development of industry, as opposed simply to investment in specific companies; to increase the aggregate limit of grants that may be made to SFADCo to enable it to discharge its industrial development functions and make a number of other minor amendments to the SFADCo Acts, 1959 to 1991; and to provide statutory authority for the payment to county enterprise boards, out of moneys provided by the Oireachtas, of grants to meet their administration and general expenses and to discharge the obligations and liabilities arising out of the performance of their enterprise support functions.
While a number of the provisions of this Bill are "housekeeping" in nature, overall it will allow the operating agencies to respond to the needs of industry more effectively, thereby adding to the policies aimed at increasing employment and reducing unemployment. I expect a further significant rise in employment in 1995 following from employment growth of 2.6 per cent in 1994.
The Central Bank forecasts that nonagricultural employment could grow by 37,000 jobs in 1995. Undoubtedly, employment is growing strongly. The ESRI, in its recent quarterly report, states that despite some well-publicised job losses, the underlying trend in employment remains firmly upwards. Notified redundancies for the first six months of this year show a significant fall of over 21 per cent compared with the same period last year. Against this positive background, the trend in unemployment figures is disappointing. The ESRI has recently pointed to lower net emigration or a rise in the participation rate as being among contributory factors for the poorer trend in the live register. There is also evidence that those leaving full time education are getting jobs ahead of people who are already unemployed. These factors point to the difficulty not just in addressing the general unemployment problem, but also, in particular, the stubbornly high numbers of those who are long term unemployed. The most recent figures, up to the end of April, which Deputy O'Rourke has probably seen, show only a slight decline as a proportion of the total number unemployed.
I have recently taken a number of initiatives specifically geared towards dealing with this issue. I have increased the numbers who will benefit under the community employment programme this year, giving an average of 40,000 for 1995. In addition, I have proceeded with the recommendations of the task force on long term unemployment to establish a local employment service. The task force is continuing its work to refine community employment type programmes to make them more effective in dealing with long term unemployment. When its report comes to hand in October I will take it very seriously and act upon it.
In parallel with that process I am examining employment strategy to ensure we are doing the best we can to increase employment and reduce unemployment. To this end I have embarked on a policy review in the areas of foreign direct investment, indigenous industry and the broader actions that can improve our ability to turn the good growth we are enjoying into reductions in unemployment. We must raise our sights higher to ensure that people who are unemployed can be reintegrated into the active labour market. This is not a simple task, but a highly complex one that is fundamental to tackling unemployment, particularly long term unemployment.
Government policy on employment has many facets. The purpose is to ensure that sensible macro-economic policies are pursued. Business confidence is high. Business recognises the Government has taken action not only in the budget but also to ensure that prudent provision is made at this stage so that the 1996 budget will comply with the spending standards set — real growth of 2 per cent in public spending. This is in stark contrast with the position adopted in the previous four years when public spending was increased by between 5 to 7 per cent. A stringent approach is being adopted so that the benefits can be shared in terms of improved public services and reform of the tax code to sustain the good employment growth we are enjoying.
The operational programme for industry for 1994-99 which I launched last January sets out a framework within which policy can be developed. An overall target of 20,000 gross new jobs per annum has been set. This target was exceeded by Forbairt and the other development agencies in 1994. I am confident they will maintain this excellent performance in 1995 and in years ahead. The figures to date indicate they are again ahead of target.
While the last operational programme for the period up to 1995 had significant successes — it achieved its 20,000 gross jobs per annum on average target and saw Ireland achieve the highest growth in output and employment in manufacturing in the European Union — it also showed up continuing weaknesses in our industrial performance. These include the static Irish share in European Union markets; the continuing high level of job losses — while 60,624 new jobs were created in the indigenous sector there were 59,043 job losses leaving only a meagre 1,600 extra at work in that sector at the end of that considerable five year programme; the wide discrepancy in performance of the hi-tech mostly foreign owned and traditional sectors and the difficulty in increasing the Irish economy purchases by overseas industry — the figures show that we are in a rut with the proportion of purchases sourced in Ireland remaining fairly rigid.
The new operational programme is setting itself explicit targets not just in gross job creation as in the past but other targets that must be achieved if we are to transform our industrial performance. These include increasing indigenous exports by 66 per cent in value, almost twice as fast as the overseas sectors at 35 per cent. That would be a dramatic turnaround increasing our share of world trade by 20 per cent, the share of raw materials used by foreign companies sourced in Ireland be 15 per cent and the share of GDP devoted to research and development by 30 per cent.
While the gross job target of 20,000 is the same as for the last operational programme much greater emphasis is being placed on strengthening the long term capability of industry to reduce job losses. The operational programme has set itself a target of doubling the net number of jobs from 2,400 over the last programme to 5,000 jobs per annum on average. I want to see these targets exceeded. The agencies have accepted a higher target. The measure of our success is the net number of jobs created rather than the gross number.
Increasing competitiveness is a vital component of our employment strategy if we are to reduce job losses. The House will be aware that I established a new Task Force for Industry Adjustment to identify areas of business at risk from competitive forces and to propose enhanced competitive strategies. It is not a fund for dealing with the rescue of companies in crisis which have let matters deteriorate, it is designed to anticipate changes and help companies to change their product line, operating process, marketing strategies and positioning to respond to increasing competition. The task force includes the social partners as well as the State agencies and is developing a strategy aimed at areas where avoidance of job losses requires major changes and adjustment. I expect it will complete its work of identifying a process for the way forward in the coming months.
In addition to that task force, the IDA and Forbairt work closely with their clients to identify at an early stage Irish or Irish based companies in danger of becoming uncompetitive. The IDA and Forbairt can help companies to improve their competitiveness in a number of ways. They can help them to achieve ISO accreditation, to introduce world class manufacturing standards, to establish research and development functions, to reduce their overheads and work closely with companies which wish to become sub-suppliers to major multinational enterprises. I am pleased that a pilot programme initiated in Galway and Mayo during the past 12 months has been successful and we hope to extend it to other areas as it has helped to develop sub-supply. Forbairt also provides support under the management development programme.
We are eager to encourage development in the small business and services sector, traditionally high providers of wealth and employment in Ireland, but that sector was confined to something of a cinderella in the past. It is important that its role is recognised as it has been in our Programme for Government.
We have put in place structures like the Oireachtas Joint Committee on Small Businesses and Services under the chairmanship of my colleague, Deputy Creed, which I hope will ensure that the House will not forget the needs of small business and services. Deputy Creed is assisted by many Members on all sides who devote a good deal of energy to that work. The committee is reviewing policies, examining the effectiveness of State assistance, considering compliance costs, bringing in front-line small business operators, examining the role of financial institutions and the North-South dimension. That is important and the committee has a heavy work schedule.
I have been keen to put in place a consultative body which will interact directly with me, as Minister for Enterprise and Employment, so that I can hear at first-hand the views of business people. I am establishing a small business forum under the chairmanship of Mr. Aidan O'Boyle, who I am sure is known to Members. He is a man of immense experience spanning Ireland and the EU. He set up a small business and is familiar with national and international markets. He will bring a good deal of energy to the forum.
I am keen that the forum will be representative of all interests interacting with the small business sector. I will contact the representative groups, including small business practitioners. The role of the forum will include, among other things, assessing new initiatives that will help to build the capacity of small businesses as they must respond to rapidly evolving changes in the marketplace in which they must survive and prosper for the future. It is important to examine new ways in which they can meet those challenges and equally important to review progress and refine the recommendations of the valuable Task Force on Small Business set up by the former Minister, Deputy Brennan. That task force set an agenda we are anxious to carry through. The forum will also consider administrative simplification. A repeated plea of the small business sector is that it faces too great a bureaucratic burden of compliance costs with various State regulations and it is important to address and minimise that burden.
I will introduce a new scheme to provide long term fixed rate finance at a subsidised rate to small business. It will be the main element of the small business operational programme that will be developed by my Department, the European Union and the banks. We will build on the success of the last scheme and improve the new scheme in a number of significant respects. We will provide a larger fund which will be open to new classes of small business, such as the service sector and start-up firms and we will reduce the minimum loan of £40,000 under the old scheme to £20,000. That will open up opportunities to many smaller businesses that may not have pursued projects because of that high threshold.
The financial institutions have demonstrated keen interest in running a new scheme and I am pleased that tenders from banks have been positive. We will soon have a consortium of banks running that scheme, an innovative approach that will draw on the experience of a number of financial institutions in their dealings with small business and secure better value for taxpayers' money. The fund for the new scheme will be at least £200 million, double the amount available under the previous scheme. I hope we can succeed in achieving a higher fund. I am confident that the interest rate will be at least equal and, I hope, lower than that available under the first scheme. The money will be available over a seven year period and I will announce details of the new loan fund in the very near future.
While those measures will create additional jobs. I am conscious of the need to ensure that all members of society, especially the young and unemployed, have access to those new opportunities. I am committed to pursuing a range of active labour market measures to improve access to jobs that will include the provision of work and the development of job-related skills. A local employment service is now established in a unit within my Department. The first 12 partnership areas are putting together plans which will be submitted by the committees in the near future. It is important that the new unit recommends policy proposals and initiatives to tackle the issue of long term unemployment. I am enthusiastic about the approach of local communities in responding to local needs.
I am also working on a White Paper on Human Resource Development and Training. One of its main objectives will be to raise the horizons of Irish companies to enable them to plan a strategic position for their companies that emphasises high value added and the use of high skills to achieve a competitive edge. We must seek to develop learning organisations that view staff development as an integral element of the fight to maintain and increase competitive capability. The White Paper will also address important policy issues such as skills gap, in-company training and ensuring maximum value from the training budget. I am engaged in extensive consultations with the social partners in preparing that paper. It is clear there will need to be a strong and sustained national effort to tackle unemployment and no one measure can solve it. The Bill has developed from many initiatives outlined in the broad framework of the operational programme for industry in so far as it represents new initiatives, but some housekeeping issues need to be dealt with.
Forfás has made a significant contribution to maintaining the broad policy focus recommended by Culliton and Moriarty, particularly in respect of the wider business environment. The issues being addressed by Forfás, including industrial costs, taxation, telecommunications, finance for industry and the State's future role in the provision of industrial property, are crucial to the competitiveness and growth of enterprise.
The policy and co-ordination functions of Forfás include an important science and technology component. That includes co-ordination of Ireland's involvement in the EU Framework Programme for Research and Development. In addition, Forfás provided extensive back-up to the recently published report of the Science, Technology and Innovation Advisory Council. In the coming year Forfás will continue its work with STIAC and Mr. John Travers, chief executive officer of Forfás, is currently chairing the task force established by the Government to respond to STIAC's recommendations.
I will now deal with the main provisions of the Bill. The Industrial Development Act, 1993, which established the three new agencies, Forfás, IDA Ireland and Forbairt in January 1994, confined to Forfás only the power of the former IDA to acquire, hold and dispose of land and property. While the original intention was to give Forfás, Forbairt and IDA Ireland the basic power to acquire, hold and dispose of land and other property, paragraph 1 (2) of the First Schedule of the 1993 Act confines that power to Forfás only. That has had two main effects, neither Forbairt nor the IDA can hold land either for administrative or industrial development purposes and neither of them can acquire, hold or dispose of shares in their respective client companies. The fact that the operating agencies did not have these powers to date did not constrain them in the performance of their industrial development tasks.
Section 3 rectifies this anomaly by allowing Forbairt and IDA Ireland to acquire, hold and dispose of land and other property, in accordance with such assignments of those powers as Forfás, under the supervision of the Minister, approves under section 9 of the 1993 Act.
Section 4 is related and provides for the transfer of shares in client companies, currently vested in Forfás, to Forbairt or IDA Ireland, as the case requires. Currently the executive agencies may only invest moneys in specific undertakings, on a project by project basis. My Department and the agencies are, however, developing certain options for the creation of development funds, some specific to particular industrial sectors — for example, software — and some more general in nature. Section 6 provides for the necessary powers in respect of seed and venture capital. The funds involved could include moneys sourced from the Structural Funds or other EU funding sources. Activity by the agencies in this area would be subject to ministerial supervision.
An equity capital survey of indigenous industry, carried out by my Department in 1993, found that 34 per cent of respondents had a current equity requirement and 58 per cent had either a current equity requirement, or would have one in the next three years. A total of 78 per cent of firms which an equity requirement considered that raising equity would be difficult. These findings, together with other work in this area, indicate that many small and medium sized manufacturing firms have difficulty raising the required equity and the growth of such companies is constrained through a lack of availability of equity capital.
Under the EU Operational Programme for Industry 1994-99, a sum of up to approximately £33 million will be available for seed and venture capital investment. The object of the fund for seed and venture capital support from Structural Funds is to provide equity and management support to growth oriented small and medium sized enterprises. This support will be expected to facilitate significant growth in the investee companies that, in turn, will be expected to generate employment opportunities in these companies. To date venture funds have not strayed into the smaller end; they have tended to want more gilt edge investments. These new funds will be important for access to equity by business.
Financial support from the EU Structural Funds would be made available to applicant organisations involved in seed and venture stage equity investment in growth oriented firms. Under the scheme, Structural Funds would be entitled to rank equally with private sector funding in terms of dividends and repayment of capital. In addition, any allocation of EU support funding would be conditional on an equivalent level of matching private sector funding.
Overall, during the lifetime of the scheme, it is expected that equity support will be provided to many small and medium sized enterprises which would otherwise find it difficult to raise the necessary equity for the particular ventures. Section 6 will enable the agencies to be involved in the disbursement of these funds and enable them to set up other funds, as required, using their own money in partnership with private sector third parties.
The Bill also proposes in section 5 an enabling power to allow Forfás, Forbairt or IDA Ireland to establish subsidiaries. While there is no proposal to set up specific subsidiaries at present, there are areas of activity, particularly in relation to Forbairt, that may in future be considered more appropriate to be carried on outside the mainstream of the agency concerned. The creation and operation of any subsidiaries would be subject to controls exercised by me, as Minister for Enterprise and Employment, and the Minister for Finance.
I am taking the opportunity provided by the introduction of this Bill to provide for the further financing of the Shannon Free Airport Development Company Limited. Specifically, the Bill provides in section 8 for an increase from £150 million to £200 million in the upper limit on the aggregate amount of grant-in-aid, voted annually, that may be made to the company. The grant-in-aid moneys are applied towards meeting the company's running expenses and enabling the company to provide financial assistance to companies at the Shannon Free Zone. The last occasion that legislation increasing the aggregate limit on grant-in-aid was enacted was in December 1991, when the limit was increased from £105 million to £150 million.
In the years 1992 to 1994 Shannon Development has assisted in the creation of 4,352 gross new jobs in the industrial areas for which it has responsibility, resulting in a net increase of 844 jobs in the Shannon Free Zone and Irish-owned companies throughout the mid-west region. At the end of 1994, employment at the Shannon Free Zone had reached an all time high of 5,600. The company also completed work on the first phase of a 250 acre extension to the National Technological Park, and by the end of 1994 employment at the park had reached approximately 3,000.
The company has continued to adopt a more commercial approach to its operations and to reduce its dependence on direct State funding to meet its operating costs. The Exchequer contribution to the company's operating budget declined from 22 per cent of the budget in 1992 to 16 per cent in 1994 as a result of increases in the company's income from other sources.
The proposed increase in the statutory limit on the aggregate amount of grant-in-aid that may be issued to the company is expected to be sufficient to cover the company's operations for the next four years. In 1994 the EU Commission approved an extension to the end of the year 2000 of the cut-off date for the availability of the special 10 per cent rate of corporation tax for new international service industries establishing in the Shannon Free Zone.
The company also has ambitious plans for the future development of the National Technological Park, including additional capital investment of £100 million by the private sector in new industrial facilities and the achievement of 5,000 jobs at the park by the end of the century. The company will, of course, also be continuing its industrial development role throughout the entire mid-west region.
Other technical provisions in the Bill are also proposed in relation to SFADCo concerning pension arrangements for employees of the company's wholly-owned subsidiaries and a proposed exemption from stamp duty in relation to land acquisition, to align the arrangements applicable to SFADCo, Forfás, Forbairt and IDA Ireland.
The provisions of section 10 will secure to the Minister for Enterprise and Employment the power to make grants to the county enterprise boards from Exchequer funds to enable them to undertake activities in support of enterprise. This power has not been required to date as the boards have been functioning under the direct technical supervision of my Department, which has managed their financial transactions. The boards will soon be moving to a new basis of operation, in which they will function as independently-controlled local enterprise development companies limited by guarantee with direct responsibility for the management of their finances, hence the need for this provision.
The county enterprise boards are now in a position to provide an expanded range of services to enterprise, including financial supports and, notably, business advice and counselling and management development support to small firms. Their central role in the formulation of the local economic agenda through their enterprise plans and the promotion of an enterprise culture at local level will also be strengthened. Much of this activity will be eligible for European Union cofinancing under the Operational Programme for Local Urban and Rural Development.
I pay tribute to the achievements of the county enterprise boards to date. Already, their enterprise plans constitute a major advance in securing local input to national enterprise planning and their existing counselling and referral services provide a valuable resource to potential entrepreneurs and existing small businesses nationwide.
The interim county enterprise fund grant scheme managed by the boards, which provides fixed capital, employment and feasibility study grants to assist small business start-ups and expansions, has evoked a major response. Since the inception of the scheme in late 1993, assistance has been approved in respect of some 3,723 projects with an aggregate grant value in excess of £32 million and the potential for 5,726 full-time and 1,429 part-time jobs. Figures supplied by the boards indicate that, from their establishment to the end of 1994, 1,776 full-time and 263 part-time jobs were created in county enterprise board projects. Almost £5 million was drawn down by the boards in grant support in 1994. They have already achieved that target in 1995 and their level of activity is increasing. This provision can only strengthen the performance of county enterprise boards in their key role in the drive for enterprise development locally and nationally.
The boards work closely with other industrial development agencies and with the Leader groups and area partnership companies. Each board is assisted by an evaluation committee, the purpose of which is to provide technical assistance to its board on the evaluation of projects with a view to ensuring the commercial viability of those projects. The evaluation committee is a unique and valuable arm of the county enterprise board structure in that it provides an independent means of examining projects at local level in the cold light of day. This will help ensure good value for taxpayers' money in the future.
I commend the Bill to the House.
