Vol. 573 No. 2
3 Mr. F. McGrath asked the Tánaiste and Minister for Enterprise, Trade and Employment the plans and strategies she has to deal with the exodus of companies to low wage economies; and her plans regarding the urgent need to support and develop Irish industry. [24659/03]
Maintaining Ireland's attractiveness as a profitable location from which to do business is a constant priority for both the Government and my Department. My Department and its enterprise support agencies are acutely aware of the changes taking place in the structure of the country's manufacturing base and how this is evolving in response to international market forces.
Largely as a result of our recent economic success, Ireland is becoming increasingly uncompetitive for a lot of basic manufacturing. The challenge is to assist companies to move into the type of higher value-added activities that will provide well paid jobs for our increasingly educated workforce. My Department and its agencies have put in place a range of measures to facilitate this transition including the establishment of Science Foundation Ireland with a €646 million fund to support world class research in Ireland that will provide the essential basis for the development of innovative products and services in the future; support through Enterprise Ireland for Irish-owned companies to develop new products and processes; and the establishment of a competitiveness fund in Enterprise Ireland to support Irish small and medium-sized enterprises in addressing specific competitiveness issues.
In addition to current measures, I recently set up the enterprise strategy group under the chairmanship of Eoin O'Driscoll. I have asked the group to recommend new strategies and policies that the Government and I will need to take into account in charting a course for enterprise in Ireland to the end of the decade. Among other issues, I have asked the group specifically to examine what Ireland needs to do to address the strengthening competition from Asian and EU accession states.
Does the Tánaiste agree that many of the multinationals, because of their size and capacity for employment, are setting the economic agenda and gradually the Government is losing influence? If they decide to move to another low wage country, there is nothing the Tánaiste can do about it. Does the Tánaiste support my proposal to develop indigenous industry and what role does she see for the semi-State sector in developing the economy and creating jobs? Does she have a hostile view of the semi-State sector? If this is the case, it is bad for the economy.
Does the Tánaiste agree with me that we do not live in a low tax economy when PAYE workers are paying out over 40% of their wages when PRSI, the 2% health levy, VHI and BUPA private insurance schemes, the extra 15% Government levy in chemists, the 29% increase in the bin tax in the Dublin City Council area, the new ATM tax and an increase of 100% on parking permits are taken into account? Does the Tánaiste accept that, despite the image of being a low tax economy, the average taxpayer is being hammered and this is not good for the broader economy?
I do not accept that the multinational sector dictates the agenda. We live in a globalised economy – a recent survey indicated that Ireland has the most globalised economy in the world. We trade by way of imports and exports and we must compete in that space. Employment will only grow if sales increase and sales will only increase if productivity increases through innovation. We will not achieve productivity through low wages because there are many countries that can produce goods for much less than us.
The Irish Congress of Trade Unions stated yesterday that we are a low tax economy and should examine ways of increasing the tax burden. A recent EUROSTAT study of all EU member states showed that those on low wages in Ireland pay less tax than any other European country. The average in Ireland is 17%, while it was 49% in Belgium and 45% in Germany. A person on the average industrial wage with a family has a negative tax rate when child benefit is taken into account. Such pro-work tax policies have helped to generate much of the employment created in recent years. We are conscious that we cannot stand still and that is why there are many strategies to develop the potential of our companies, particularly through innovation or out-sourcing.
The semi-State sector has an important role to play. Competition is more important than ownership, as Deputy Rabbitte recently acknowledged. I am not obsessed with who owns what; if there is a better way to run companies we must look at that. Companies in the State sector, particularly the commercial State sector, compete very successfully but if they can be more successful in a different environment we must not close our minds to the idea.
I am glad to hear the Tánaiste accepts the urgent need for the Government to play a positive role in job creation but we did not hear anything about the semi-State and State sector where the potential exists for massive job and wealth creation.
Does the Tánaiste share my concern about the new EU rules controlling State aid for investment projects coming into force in January 2004? These new rules will significantly lower the permitted grant rate maximum levels and tighten the criteria needed, leading to a requirement for EU Commission approval of grants, which will damage Irish industry.
The Tánaiste mentioned Science Foundation Ireland. Does she see this as an important part of the economic development of the State and agree that we cannot trust our economic future to yesterday's ideas? How much money was put into indigenous industry in the past 12 months?
The whole purpose of the EU state aid regime is to create an even playing field within the Union. More State aid can be given to small and medium size companies and greater levels can be granted to Objective One regions. We should not over-emphasise the grants available to industry. Upskilling, human capital development, developing the potential of the workforce and innovation are more important to Irish industry than grant aid. We must continue to move rapidly in that regard.
Across all Departments, Irish industry has received at least €200 million in a one year period between the food sector, the sector supported by my Department and the tourism industry. I do not have the precise figures but a considerable sum is devoted by taxpayers to supporting the growth of the indigenous sector. One of the Government's most important functions is to open doors overseas for the indigenous sector in order that sales and, therefore, jobs increase.
Question No. 4 answered with Question No. 2.
