Vol. 482 No. 5
3 Mrs. Owen asked the Tánaiste and Minister for Enterprise, Trade and Employment the assurances, if any, which she received recently from the EU Commission regarding Ireland's right to continue its policy of giving IDA industrial grants throughout all parts of Ireland; and if she will make a statement on the matter. [18370/97]
The EU is not threatening to remove Ireland's right to continue its policy of giving industrial grants throughout all parts of Ireland and, therefore, the question of receiving assurances on this does not arise. While the EU Commission has exclusive competence in relation to the current review of regional aid guidelines, it is conducting this review in consultation with all member states. We will continue to ensure that Ireland's interest is fully protected in that process.
The Commission is rightly seeking to introduce a fairer, more transparent and legally balanced State aid regime. Given that the cohesion countries are reducing their share of state aid it is clear that the ability of wealthier countries to provide higher levels of aid can lead to unfair competitiveness pressures on less well-off member states.
Will the Minister confirm that discussion is not taking place with Commissioner Van Miert on the industrial grants we provide? A spokesman for Commissioner Van Miert is quoted as saying that the Commissioner wants to review all concessionary taxes and State subsidies used by member states and that there is a clear indication he is seeking to change Ireland's objective 1 status to objective 2 thereby threatening IDA grants. Will the Minister say if Commissioner van Miert has tabled proposals on standardising industrial grants? If not, when does she expect him to do so? Does the Minister accept we will not be able to give as much grant aid in future as in the past?
The Deputy asked if I had received assurances from the EU Commission regarding Ireland's right to continue its policy of giving grant aid throughout all parts of Ireland. This policy is not under threat, but what is under threat is the level of grant aid. I stand over what I said — it will not be possible in the future to give as much grant aid to all parts of the country as we gave in the past.
We are involved in delicate discussions with the Commission on a number of issues, for example, the State aids issue and corporation taxes, and I am sure the Deputy appreciates it would be wrong of me to say anything more on the matter at this stage. However, I am satisfied that we will continue to be able to give grant aid.
On inward investment, grant aid is a minor factor in so many companies deciding to set up here. We currently attract 50 per cent of US electronic companies even though we have less than 1 per cent of the EU population. These companies set up here because of the low corporation tax rates, the skills base of the population, infrastructure and quality of life. The IDA has reduced the level of grant aid given to corporations in recent years.
Will the Minister confirm that the current maximum rate of grant given by the IDA to incoming companies is approximately 50 per cent and £11,500 per individual job? If she and the Minister for Finance give into the idea of reclassifying Ireland as one region or, worse still, reclassifying parts of it, then the maximum grant the IDA will be able to give is 20 per cent or £8,500 per job. Will the Minister confirm that she will not agree to a reclassification of Ireland whereby the east coast, particularly Dublin, will fail to get grant aid from the IDA on the basis of GNP?
I assure the Deputy that no consideration is being given to reclassifying the country. The figures quoted by her are not accurate as there are exceptions to the rule. Grant aid of between 57-75 per cent is allowed, depending on the region. In Údarás na Gaeltachta regions and similar regions the rate is as high as 75 per cent. I assure the Deputy that grant aid is not the only reason companies set up here. It would be in the national interest if no grants were given throughout the EU as wealthier counties have the resources to outbid us if grant aid is the only factor in attracting industry. Notwithstanding our recent economic success, we cannot give unlimited resources and it would suit us if no grant aid was given for industrial projects. Our low corporation tax rates, the skills base of the population — the Government announced major investment in this regard this morning — and the flexibility of the workforce remain the key factors in attracting so many companies to set up here.
Will the Minister give a commitment that there will be no loss of inward investment if IDA grants are reduced to the low level of 20 per cent? We have benefited greatly from industrial grants and the Government will do no service to the country if it allows this reduction.
It would suit us if no grants were given throughout the EU. I am sure the Deputy is aware that our low corporation tax rates are an incentive to foreign investment here. Last year the Irish subsidiaries of foreign multinationals paid £700 million in corporation taxes. If they had located in other countries they would have paid three times that amount. These are highly profitable and successful companies and the corporation tax rates remain a key factor in their deciding to set up here. This is why the Government remains committed, as the previous Government was, to reducing the standard rate of corporation tax to a single low rate by 2005 so that it is not seen as a State aid in any sense.
As the time for Priority Questions is exhausted we will take Questions Nos. 4 and 5 in the time allocated for other questions.
