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Gnáthamharc

JOINT COMMITTEE ON ENTERPRISE AND SMALL BUSINESS díospóireacht -
Wednesday, 31 Mar 2004

Visit by Norwegian Delegation.

I welcome everybody to the meeting. In addition to this morning's sitting we will have a meeting at 3 p.m. which will be attended by the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Harney, in regard to the inquiry into the insurance industry.

We are pleased to welcome a visiting delegation from the standing committee on business and industry of the Norwegian Parliament. The delegation is accompanied by the ambassador, Mr. Hanevold and the first secretary, Mr. Jorgen. It was a great honour to meet with them earlier this morning. I invite the ambassador to say a few words later.

Unlike the delegation, the focus of our committee is enterprise and small business. It is one of the busier committees in Parliament. We are an all-party committee and get on very well. We seldom, if ever, divide on any issue we tackle in the interests of consumers. In the past two years we have spent a great deal of time investigating the insurance industry and, specifically, why insurance costs for consumers and business are so high.

The delegation's visit is timely. I note that Norway expects to introduce a smoking ban this summer. We began it very successfully on Monday. I hope the members of the delegation will find time to discover how well it is operating here.

I now invite the chairman to introduce the delegation, after which the ambassador will address the committee.

Mr. Olav Akselsen

I thank the committee for receiving us and giving us the possibility to meet with colleagues in Ireland. The Norwegian Parliament is divided into 12 standing committees. The various committees are composed proportionally to Parliament itself. We have six different parties in our committee. This group only represents the Labour Party because we have a private study tour——

Very democratic.

Mr. Akselsen

——to see if there is something we can learn from recent experience in this field in Ireland. We wish to look more closely at the operations of the committee which we believe has had good experiences.

We share with our Labour colleagues from time to time.

Mr. Akselsen

The Labour Party is the largest party in Norway.

We are heading that way ourselves.

Mr. Akselsen

We are the largest Opposition party, but I hope that we will not remain in Opposition for long. This group of parliamentarians is from different parts of Norway. Bendiks Arnesen is from the northern part of the country. Grethe Fossli is from the area close to our capital in the eastern part of Norway. Aud Gaundal is from the middle part of Norway. I represent the west coast where we have almost the same climate as in Ireland.

Our committee deals with a broad variety of edicts. We are responsible for everything connected to fisheries, from catching fish all the way to the market. The same is true in regard to agriculture. What happens in the World Trade Organisation talks is important to our committee. We are also responsible for industrial policy, trade related matters and information technology. In addition, we are responsible for tourism, which is a large industry in Norway, although we have not been as clever as Ireland in presenting our country as an attractive destination. It is to be hoped we can pick up some——

Is there no equivalent of Ryanair?

Mr. Akselsen

No, but Ryanair is also active in Norway. We have a new Norwegian carrier called Norwegian, which is the same idea.

I hope the committee members can tell us a little about the reasons for Ireland's development over the last few years. What have been the positive and negative aspects of this?

Mr. Truls Hanevold

As a relative newcomer to Ireland, I am pleased and honoured to be able to join members of my Parliament in visiting this Parliament this morning. More than 30 years in this profession have taught me that to bring parliamentarians together is the best way of building bridges between two countries.

I am delighted that the Norwegian parliamentarians are here and I am most grateful to the Chairman and his colleagues and everybody with whom I have been in contact at the embassy in order to prepare a programme for the committee. It is easy to work as an ambassador here because the doors are open and people are frank. We will have a good discussion which I hope will be useful to both sides.

I will shortly call on Deputy Howlin, whom the members of the delegation know well and who is probably the most experienced member of the committee, having been a member of the Cabinet for a considerable time. He will be looking after the delegation after this meeting.

I have been a Member of Parliament in the Upper House and the Dáil since 1982. In 1987 our economy was in a dreadful position. We had income tax at a lower rate of 35% and a higher rate of 65%. The world economy was also doing badly. The Government of the time consisted of the largest party, Fianna Fáil, of which I am a member. The then Taoiseach, Mr. Charles Haughey, and the trade unions brought about what was known as the national understanding, which meant that unions, employers, people in agriculture and everyone involved in the running of the country came together and accepted a three-year agreement on wage increases. This eliminated strikes completely and we have had practically no strikes since 1987, which is a credit to Governments of all parties since then and to the trade union movement.

Ireland went from being the weakest economy to being one of the top two economies in Europe in 15 years. If there is one thing the delegation should convey to their parliamentary colleagues about how they can enhance their country, it is our experience of eliminating strikes. We have a reasonably satisfied workforce and employers have the opportunity of knowing their commitments and the goals they can set for their companies.

As someone who has been self-employed since 1963 - being a Member of the Upper House was not a full-time position and I became a Member of the Dáil two years ago - I can assure the delegation that the national understanding gave certainty to people who were creating wealth. I knew what my overheads would be. Anyone in business will tell one that business, and Governments, are not about turnover but about overheads. Knowing what one's overheads will be in advance results in greater efficiency and therefore greater productivity. These words are the result of my hard experience. I am probably the oldest member of the committee here today.

I welcome my Labour Party colleagues from Norway. I hope this will be a two-way dialogue because we are anxious to learn from the delegation. We have not yet found reserves of oil, as Norway has, to buoy up our economy so we have been obliged to cope with less auspicious circumstances and try to find our way. We look forward to Norway joining the EU some day. The country takes periodic runs at the EU. Information about the political climate and the attitude of our colleagues towards this would be of interest to the committee. I will have the opportunity to talk to the members of the delegation later so I will not say much at this stage.

The Chairman correctly explained the terms of Ireland's economic development. There is a phrase, "Hanging focuses the mind." When one is facing the gallows one must face reality. In the 1980s, as one economist expertly put it, Ireland's economy was a basket case. We needed to take radical action. We built a consensus around what needed to be done through social partnership. Employers, trade unions, the Government, Parliament, farmers and members of other social pillars worked together, sharing pain to achieve an agreed set of objectives.

This presented difficulties for us, and continues to do so. We have continued to make use of social partnership but it has diminished the role of Parliament and the role of parliamentarians in shaping policy. All Parliament does now is to rubber-stamp taxation policy which is agreed within an external structure. This diminishes the democratic component of policy-making, which is a cause of concern for many.

However, the economic benefit has been clear. For example, over the last ten years more than a quarter of all American investment in Europe has come to Ireland. There are a number of reasons for this apart from the stability issue - the fact that we speak English, after a fashion, is important. There was also certainty in the tax regime. Up to the last election we had the habit of changing Governments at each election, which was a nice democratic roundabout. Unfortunately, that pattern was upset two years ago when, for some unknown and unaccountable reason, the current Administration was re-elected.

The Deputy knows the answer.

The reason is happiness. People are happy under this Government.

The frequency with which we changed Governments, and the fact that all the main political parties have been in Government over the last 15 years, resulted in continuity. There were no extremes of policy change as experienced by some countries. People could plan taxation rates in the medium term and know the next general election would not upset this.

The issue that has not been mentioned in terms of our preparation for economic advancement is our investment in education. Lacking the mineral, oil or gas resources that Norway has, we have invested in human capital and tried to focus on this. It has been of great advantage to us to have a trained and available workforce.

The challenge now is the next phase of development. I would be interested to hear the views of the delegation on this. The Minister for Enterprise, Trade and Employment has established a new strategic group to map out the next phase of economic development. Obviously, we have focused on ICT, pharmaceuticals, the chemical industry and medical devices as the mainstays of the economy. Where are we going next? As a committee, we have looked at the next cutting edge technologies - photonics, nanotechnology and biotechnology. As Mr. Akselsen knows, Wyatt is building Europe's largest biotechnology development unit here. We are trying to keep ahead of the next phase of intellectual development.

We are not going to have an MIT or CalTec here, or invent the major cutting edge technologies. What we have tried to do is create a niche and find how the application of new cutting edge technologies can be commercialised and used to add value. I would be interested to hear the Norwegian view of the future in sustaining employment and prosperity in Norway. As the Chairman has commented on it, I would be interested in hearing about the taxation regimes in Norway in respect of personal income and property taxes, and how services are funded.

Mr. Akselsen

First, I shall say a few words about Norwegian business and what is important to us and so on. As mentioned, oil and gas form by far the most important parts of the Norwegian economy. In 2002 they made up 60% of the value of our exports. The second biggest sector was fisheries, at 6%, just one tenth of the figure for the oil and gas sector. Petrochemicals and smelting also make up about 6%. Therefore, our economy is very much based on raw materials from which it has always been a goal to get more value.

Tourism is also growing as an important sector, making up something like 5% of earnings. I hope it will be possible for us to become more attractive for tourists. Norway has had a very long period of growth and enjoyed a very big surplus in state finances for the last ten years. We have built up a fund. This has mentally changed Norway because there is a feeling we can afford everything. Every year since 1998 there has been bigger growth in wages - 2% or 3% - than in any other country in Europe, including our neighbours. At the same time, we have spent a lot of public money on most sectors which has led to pressure being exerted in the Norwegian economy.

In 2003 we faced the situation where we had a very strong currency, the value of which rose between 15% and 20% against other currencies. This meant that our goods became much more expensive overnight. Therefore, we lost a lot of jobs. That is the downside but most people in Norway still feel we can afford more growth. Therefore, it is the opposite of the situation Ireland faced when it saw there was a potential crisis. There was understanding among the public here but the opposite is the case in Norway. The parties gaining most at the polls are the ones which want to spend most money on public services while cutting taxes at the same time. All of this is supposed to be paid for with the oil money.

The age profile of Norwegian society is also changing. Therefore, one of the main issues will be how we can afford the pension system in the future. That is one of the main discussions taking place.

Regarding the European Union, there has been a majority in the polls - about 58% - for at least one year in favour of Norway becoming a member, with about 30% against. However, we have twice held referendums on the question of joining. Therefore, even though there is a political majority in favour of joining, we are afraid of holding a new referendum as the outcome is not certain. We will have our next general election in September 2005 when I think EU membership will be one of the major issues.

We have another problem in that we have not had a government with a majority since the beginning of the 1980s. This leads to a very difficult situation, which has grown year by year. We are now trying to build coalitions. There are parties on both the left and the right in favour of as well as against joining the European Union. Therefore, this a difficult question with which to deal.

Mr. Akselsen will benefit enormously from conversations with Deputy Howlin later this morning.

Mr. Akselsen

In most parties there are differences on whether we should join the European Union. As the committee will probably be aware, we are a member of the European economic area. Therefore, for all practical purposes we are a member, apart from involvement in the political or decision-making process. Of course, that is a personal view.

Regarding taxation, as the Norwegian Parliament received a White Paper from the Government last Friday, there will be a discussion of the issue. Our system is quite different from that of Ireland. For instance, we have hardly any taxes on property. However, we have relatively high taxes on ordinary income——

What rates are used?

Mr. Akselsen

It depends on how one manages to fill out the forms.

What are the lowest and highest rates?

Mr. Akselsen

I would say the average is about 40%. For companies, it depends how the question is asked but formally the rate is 28%.

The company tax rate is 28%.

Mr. Akselsen

Formally, yes but there are a lot of tricks to——

The rate here is 12.5%.

Mr. Akselsen

We cannot compare the two figures because of the differences in the wider systems. There have been changes and the present Norwegian Government has much reduced taxed. In Norway, the VAT rate is high and there are special taxes on cars, spirits and tobacco.

We have a rate of 21%. What are the excise duties in Norway?

Mr. Akselsen

It varies but on average the rate is 200% for alcohol and tobacco. One problem is that many people now go to Sweden to buy these goods and other goods such as food. Within the EU system taxes are being cut. Sooner or later, Norway will have to do the same. Otherwise, more people will engage in cross-border shopping.

What is the Norwegian inflation rate?

Mr. Akselsen

It is approximately 0%.

What is the bank interest rate?

Mr. Akselsen

Currently, it is approximately 2%.

That is the same as the Irish rate.

Mr Akselsen

It used to be approximately 8%, but it fell rapidly.

I welcome the delegation from the Norwegian Parliament. What incentives does the Norwegian Government give to the offshore exploration sector in order to maximise the level of oil and gas prospecting? Is there a generous taxation regime for oil and gas exploration?

The delegation referred to the problems emerging with pensions provision. Are there proposals under consideration to extend the retirement age or reduce pensions in Norway? Are there any other proposals?

Mr. Akselsen

Oil and gas are now globally limited resources. If a country has these resources, it will attract interest from many companies. Taxation for the oil and gas sector is high in Norway, probably the highest in the world. On the other hand, Norway has a stable framework, while many of the oil and gas resources in the world are in politically tense areas. The oil companies are trying to be everywhere where quick money can be earned. However, these areas can be uncertain, with developments such as governments nationalising resources. It has, therefore, been easier to attract foreign interests to this sector in Norway. However, Norway's production is peaking, being the third largest exporter of oil and gas in the world. There have been different concession rounds but with the last two very few new resources have been found. No new large oil or gas fields have been found in the past five years.

Discussion in Norway now centres around opening new areas closer to the shore and further north. There is also a discussion about using more resources from the wealth already produced. When oil was first produced, only 30% of the oil in the well was extracted. Currently, the extraction rate stands at 60%. It is hoped that, with new technology, up to 10% more could be extracted which would be of enormous value in terms of oil and money. There is now a discussion on reducing taxes on existing fields and smaller ones connected to them. In the British sector, with production three to four times higher than that of Norway's and twice as many companies competing for these resources, this has already been done.

A white paper on pensions will be published and a public commission reported on the matter before Christmas. The Norwegian Government is attempting to reduce the amounts needed for the pensions system. One recommendation has been to make people work longer. The average retirement age is 59 years. Officially, it is 67 years of age, but most people retire at 62 to 63 years, while people with disabilities retire at 59 years. If this could be extended by some years, it would be better.

There have been changes in the tax system regarding research and development, allowing companies to subscribe to this.

I welcome the Norwegian ambassador and the delegation from the Norwegian Parliament. Times have changed since the Vikings came up our rivers in their longboats as Ireland is now a far more welcoming place.

It was interesting to listen to the outline of Norway's financial and economic growth. I am interested to hear the Norwegian arguments against joining the EU. Ireland in the mid-1980s had massive emigration, interest rates at 20% and large-scale unemployment. Now, up to 95% of eligible workers have jobs, with interest rates down to the 2% mark. Emigration is no more, with those going abroad doing so by choice. In the mid-1980s emigration was a huge drain on our human resources. Ireland now has the best education system in the world with most of our young people going on to third level.

Agriculture used to be the main industry but rapid changes are occurring in that sector. Being a member of the EU has been very beneficial to this country. It has brought enormous changes, mostly for the good. Society has probably changed too, and many of our young people today possibly have too much money, which is not always a good thing. What are the arguments in Norway against joining the EU?

I too welcome the deputation from the Norwegian Parliament, along with the ambassador. I hope he enjoys his stay in Ireland, and I urge him to look outside Dublin and see what is happening in other parts of the country.

Like the Chairman, I represent a constituency on the west coast of Ireland. A large gas field was found in the area in the recent past. Planning problems arose and objections were made to the gas coming ashore. An appeal was made to An Bord Pleanála, which found on the side of the objectors - though a further appeal has been made. Did such problems arise in Norway when oil and gas were discovered off the coast? Did people object to the oil and gas being brought ashore?

I am interested in fisheries, because we have a good fishing fleet all along the west coast, and some towns which process the fish. If not on this visit, the deputation should visit the west coast, which is greatly different from the east. It is possibly like much of Norway, rugged and beautiful. The deputation would also learn a little about tourism. We are good at that.

We could adjourn the meeting and reconvene in Knock, perhaps.

The deputation is very welcome to Ireland, and I hope it gains much from its visit. I wonder about gender balance in the Norwegian Parliament. As can be seen, it is not great on this committee.

The Deputy makes up for that in quality.

I also have to put up with a chairperson who does not want any improvement in gender balance.

That is quite incorrect. I know the Deputy's remark was flippant and will be withdrawn immediately. I am all in favour of sharing equally.

Absolutely. Our Chairman is very fond of women.

I thank the Deputy for clarifying that.

On a more serious note I would like to know more about Norway's oil and gas exploration. Deputy Carty mentioned a development off Ireland's west coast, but the issue is a little more serious, and not entirely about planning. It also involved the company which originally intended to exploit the gas field in question. Ireland has a problem in that it does not have a cast-iron commitment regarding the employment of local people in the industry. That is a major difficulty for us. Most of our gas lies about 20 or 30 miles off the coast. The exploration companies involved work under a very attractive regime, with most of their development costs offset against taxes. For the first ten to 15 years they pay virtually no tax. They are not compelled, however, to employ Irish labour, and could indeed service the wells from Norway. They could bring the ships directly to Norway and never enter Irish ports. In its contract documents, does Norway have paragraphs which deal with local labour?

That is a very good point, to which the deputation might respond.

Mr. Akselsen

We shall try to answer these questions together, starting with the gender issue. The composition of our deputation is like that of any party's group in Norway, because half of our group's representatives in Parliament are women. For the Norwegian Parliament as a whole, the situation is not so good, and has actually worsened. That is mainly because one of the parties in Norway, the so-called Progressive Party, includes hardly any women.

We have a so-called progressive party too.

They are cousins in government.

Mr. Akselsen

The Progressive Party did well in the last election in Norway and introduced more men. My colleague will add a few words.

Ms Grethe Fossli

The Labour Party in Norway has 20 women out of a total of 43 representatives in the Parliament, while the Progressive Party has three women out of a total of 25 representatives. The Progressive Party is reversing the gender balance. There are 165 representatives in the Norwegian Parliament, of whom 60 are women. In the Labour Party we have gender balance rules. When we put up the lists for election, the numbers of male and female candidates are equal.

We look forward to such an arrangement.

Ms Fossli

The Labour Party in Norway has that system, but the Progressive Party has not.

It is probably the greatest form of apathy.

Ms Fossli

Regarding women and work, there are increasing numbers of women in business in Norway and in leadership positions. Our Prime Minister has said that if companies do not elect more women to their boards, he will propose a motion to parliament. There have been major discussions in Norway on this issue.

We try to achieve a figure of at least 40% female representation on boards in Ireland.

I ask the deputation not to depart under any illusion. That figure of 40% is the ambition. The Government appoints people to State boards, and its policy is to aim for a 40% female representation. Usually, we end up with a figure of about 12%.

That is regardless of who is in power. We will try to conclude business at 10.25 a.m. because the Order of Business takes place at 10.30 a.m. in both Houses. The ambassador must also leave by 10.40 a.m.

Mr. Akselsen

One of the reasons we have done relatively well relates to our electoral system. In Norway we have only 19 constituencies, the same as the number of counties. The number of seats in each constituency varies from four to 15. In my constituency for example, the Labour Party usually has four or five seats. After that, one can compose the lists as one likes. It is much more difficult when one has a single-mandate system.

Regarding oil and gas, and planning in those areas, the ambassador will help any committee members who wish to visit Norway and learn more. The situation in Norway has changed over the years. All our energy resources are far offshore. In the beginning, oil was produced and taken directly to tankers, and then to Amsterdam or elsewhere, to the world markets. Later on, when gas production began, it was flared off at the outset. Subsequently we built numerous pipes, to take the gas to the Continent. Today, 99% of our gas is exported. There was discussion in Norway as to whether we should try to bring any part of this asset onshore. One of the main problems was the very deep rift along our coasts, which made it difficult to build pipes onshore. With new technology, that became possible. Now we have three landfalls for gas, with two more planned. It has brought gas onshore, and some work is done with it, but most is shipped out again in pipes. When it comes to oil, much is also now brought onshore, and that creates a great many jobs. In Norway, there has been enormous growth in standards of living and wealth because of oil. Most of the activity has been along the west coast. Much of the workforce was employed in producing rigs and platforms and in maintenance. People also work on the rigs.

The development will probably be that more of the offshore jobs will be taken care of from land because of new technology. We also see that many of the new fields are closer to shore and, with new technology, they will probably not have platforms or rigs. The gas will be taken onshore by various kinds of pipes. It will be cheaper because one will not need to ferry people by helicopter. It will also be safer for those working there and for the environment, since it will be easier to control everything. A debate is going on in Norway, especially in the northern part, about whether it will conflict with fishery interests or harm the environment. However, there will be more activity, including in northern Norway. Otherwise, there will be a dramatic drop in activity.

I am in favour of joining the European Union, so it may be somewhat difficult for me. Some of my colleagues are more sceptical. However, there are mixed feelings. Our history is a factor, since we were in a so-called "union" with Sweden, which meant that they ruled over us.

We are familiar with that.

Mr. Akselsen

Our experience during the Second World War means a great deal, especially to older people. In Norway our goal has been that there should be possibilities for people to live all over the country, so in rural areas fisheries and agriculture are very important. Many people are afraid that, if we join the EU, it will be difficult to have the same standards for such matters. In the fisheries sector in particular, people being afraid of Spanish fishermen and so on has played an important role. However, that we have done very well by ourselves is also important, since we are one of the richest countries in Europe outside the European Union. Therefore why should we join? Many felt that, if they were not sure about whether it was wise to go in, they should not do so. That is one of the reasons. In 1972 there were very big differences in the referendum between towns and cities and rural areas but, at the last election, the difference was no longer so great. There was a clear majority against in the towns too.

It is good to see the group from Norway present at the meeting. In a previous life, I worked with the telecommunications company Telenor, where I still have many friends. On the issue not so much of women's participation but of state boards in companies, do the Norwegians have the same problem as we do? Many private sector people, especially from the middle-ranking and higher levels of industry, are reluctant to allow employees to participate in state companies. In Ireland, many senior managers would not be allowed by their companies to be part of a State board because of the disclosure requirements once one enters the public sphere. It also seems to reflect a problem concerned with getting people from industry to participate in the political system. There is fear of disclosure and the attention, although not so much regarding our own profession since there are owner-managers in our system who find it easier to get into politics. However, regarding such boards, is there a reluctance on the part of senior industrial people to get involved in state level appointments?

In Ireland we tend to remember our links to the UK and Australia, where we have a strong diaspora. We do not tend that often to look back and consider the Viking and Norse settlements in Dublin, Cork, Wexford and all along the east coast. They were more than links, since they were settlements. People came from Scandinavian countries, settled in Ireland and integrated. Later still, the Vikings who landed in Normandy and became the Normans came to Ireland and became, as they say, more Irish than the Irish themselves. There were, therefore, two large waves of settlement from the Scandinavian countries. Having established those links, my question concerns demographics. Does Norway have the rich man's sclerosis whereby a large number of people are, like myself, getting older with only a small number of young people?

I apologise for my lateness and welcome the delegation. Norway is doing very well. How does it handle its waste? It is a significant problem in our country to get people to accept ways of managing it. Perhaps the delegation might briefly describe how Norway handles the problem.

That was a good question on which to conclude.

Mr. Akselsen I will try to answer the questions briefly. First, the three biggest companies in Norway are totally or partly owned by the state. The most prominent businessmen in Norway therefore work in state-owned companies. There is no problem in attracting people to the companies’ boards. Although they are owned by the state, they are run as private companies. The state only owns the stocks in the companies which conduct their dealings as if they were private. In political life, unfortunately, more people are recruited from the public sector.

Demographically, we are like most western European countries, growing older with each year. Too few babies are being born. We have a very good system for waste in Norway, so it is taken care of. I do not know how much one could say about it, but we have a very good system on every level. The local municipalities are responsible, but it has been dealt with in different ways. In Norway we take care of the problem. Yes, it is paid by everybody. One has to pay a certain tax to get rid of one's waste.

It is included in one's tax.

Mr. Akselsen

Yes. One pays a special fee.

Is this a special waste tax?

Mr. Akselsen

Yes. One gets a bill.

Is this administered by Government or by the local authorities?

Mr. Akselsen

By the local authorities, but it can be a combination of several municipalities. However, special waste is the responsibility of the state.

Chairman and Mr. Ambassador, I thank you on behalf of the committee. We can all agree that this morning's meeting has been interesting. I wish the delegation continued success on its visit to Ireland. I know it is in safe hands with Deputy Howlin and Deputy Lynch. It is always useful to meet other parliamentarians and to hear about experiences in other countries. I hope the delegation's visit to Ireland will be enjoyable and useful. It is a great pleasure to have the ambassador here. He is most welcome and I hope he enjoys continued success and working in our country.

The meeting will adjourn until 3 p.m., when the Tánaiste will address the committee. I would ask for a full attendance, if possible. Anyone who wishes to come along is welcome. I thank Deputy Carty for being with us this morning for this useful meeting with our colleagues from the Norwegian Parliament.

I thank the Chairman.

Sitting suspended at 10.30 a.m. and resumed at 3 p.m.
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