The total Estimate for 2005 is €1.230 billion, an increase of 9.4% on last year. The brief circulated to the committee itemises the 2005 Estimate amounts to be approved. It also shows the corresponding outturn figures for 2004.
Following a robust performance in 2003, the Irish economy continued to grow throughout 2004, helped by the recovery in economic activity globally, particularly in the United States. Gross financial product grew in real terms by 5.5% in 2004 and the corresponding GDP growth rate was 4.9%. This strong growth is reflected in aggregate employment levels which increased by over 55,000 to 1.89 million during the year, with unemployment falling to 4.3% for the final quarter of 2004. Initial forecasts for 2005 suggest continued economic growth in Ireland.
Employment growth in 2004 was led by the construction and private services sectors. Construction employment rose by almost 10%. Employment in private services experienced its fastest growth rate since 2000, with a 3.8% rise in 2004. Financial and support services were the fastest growing areas in this sector. Unfortunately, the more traditionally export-orientated industrial sectors did not experience the same growth rates observed in the overall economy. Financial and support services were the fastest growing areas in this sector. Unfortunately, the more traditional export-oriented industrial sectors did not experience the growth observed in the overall economy. Full-time permanent employment in manufacturing firms fell for the fourth successive year, with job losses outweighing job gains by 3,302. Most of these losses were accounted for by traditional manufacturing sectors such as textiles, clothing and paper and printing. In contrast, modern sectors with a strong export base like chemicals and medical devices enjoyed net increases in employment, mainly through increases in the employment levels of foreign companies. Employment increases in the electronics sector marked a turnaround after three years of retrenchment. The internationally traded services sector continued to expand in 2004, helping to offset some of the job losses in the manufacturing sector. International trading services companies supported by the agencies recorded a 1,783 net gain in jobs in 2004.
The quality of jobs in firms supported by the development agencies has also continued to improve when measured in terms of productivity. Latest data available for 2003 show that total value added per employee in agency supported firms increased by an annual average of 7.7% between 2000 and 2003 in nominal terms. This supported growth in total payroll costs per employee of 6.6% over the same period. National data for 2004 suggests that average weekly manufacturing pay grew by a similar magnitude as in 2003.
Subhead F of the Department Vote in science and technology has been increased by 12% in 2005 and an additional €10 million has been added by way of capital carryover. The spend in this subhead has increased from €28 million in 2000 to €228 million in 2005. This reflects my belief that the ability to create and exploit knowledge is an integral feature of every successful advanced economy. Research and development is at the heart of Ireland's economic development strategy.
In the national development plan, we are achieving a fivefold increase in investment in technology, innovation and scientific research. Spending of €2.5 billion is planned for the period 2000 to 2006, compared with €500 million over the period 1994 to 1999. This is aimed at building the skills for a modern knowledge-based economy and strengthening our research base.
We have achieved some notable successes under the NDP. Science Foundation Ireland has already provided over €450 million in research support involving more than 1,000 individuals, research teams, centres and visiting researchers. Several other Departments and agencies, including Enterprise Ireland and IDA Ireland, are delivering the research programmes in the NDP. This is also the case across Departments. The Department of Education and Science and the Higher Education Authority PRTLI scheme have helped to create a core physical and human foundation for research excellence. Our integrated science awareness programme, "Discover Science and Engineering", is now fully up and running. A 20% tax credit for research and development was introduced in 2004 for qualifying incremental expenditure by companies on research and development. This will help to enhance Ireland's competitiveness as a location for new internationally mobile research related investment.
The Irish action plan for promoting investment in research and development, published in mid-2004, sets the vision that Ireland will be internationally renowned for the excellence of its research by 2010 and will be at the forefront in generating and using new knowledge for economic and social progress. The new Cabinet sub-committee on science, technology and innovation, which I chair, as well as the Government's chief science adviser, Dr. Barry Mc Sweeney in his first year of office, have a central role to play. I have asked my officials to prepare a roadmap showing how we can achieve the 2.5% GDP spend on research that is outlined in the Lisbon strategy. We have all signed up to the objectives and the issue is how to get there. We will try to have that roadmap completed by the middle of this year for the Cabinet subcommittee. I hope to return to the committee with the plan by next autumn.
Another priority is the consumer agenda. The consumer strategy group, which was established in March 2004, presented its final report to me on 2 March 2005. The core recommendation in the group's report, which was recently approved by the Government, is that a new national consumer agency be established. The national consumer agency will build on and incorporate the critical functions of the Office of the Director of Consumer Affairs as well as additional statutory functions in areas such as advocacy, research and education. To maintain the momentum of the consumer strategy group report, I propose to appoint a board of the new national consumer agency to act in an interim capacity until such time as the agency is established on a statutory basis.
While the expenditure line currently voted to the Office of the Director of Consumer Affairs will most likely be allocated to the national consumer agency on its establishment, the new agency's expanded role and additional functions will require additional funding. One of the interim board's priorities will be to prepare a detailed budget for a fully operational national consumer agency on the basis of the consumer strategy group recommendations.
The establishment of the Personal Injuries Assessment Board has been a very direct response to consumer needs in the area of insurance costs. Since July 2004 all motor, public and employer liability personal injury claims must be referred to the Personal Injuries Assessment Board before legal proceedings may be issued. The establishment of the PIAB was one of the key initiatives in reforming the process of the delivery of compensation in personal injury cases. Using the book of quantum as an aid, the amount of compensation to be received by claimants will continue at the level equal to that awarded before the establishment of PIAB, while the delivery costs and timeframes will be greatly reduced.
Over 7,000 cases have already been received by the PIAB and it is expected to assess approximately 10,000 cases per annum when fully operational. The establishment of the PIAB was one of a number of key initiatives contained in the Government's insurance reform programme. These initiatives have led to reductions in insurance premiums for consumers and business in the past two years.
Ireland is at a turning point in its economic development. New approaches are required by both industry and the State. To this end, Enterprise Ireland finalised a full review of its mission resulting in a new strategy, which I launched on 4 May 2005. The agency took into account the enterprise strategy group's report, Ahead of the Curve - Ireland's Place in the Global Economy, which provides a blueprint for the actions that need to be taken to secure and build on Ireland's position as a developed economy. The enterprise strategy group's vision was designed to give Ireland a long-term competitive edge in world markets. The key elements of the new strategy include structural reorganisation. This is in line with the enterprise strategy group's report to provide a more coherent approach and to ensure a better focus by the agency on export and sales development. Enterprise Ireland has established three new major sectoral divisions. Its strategy also targets an increase in group interventions to assist sectoral development. It is also introducing a new productivity improvement fund aimed at increasing participants' productivity by 20%. A budget of €17 million has been allocated up until the end of 2006. Pilot programmes with other agencies to increase Ireland's pool of marketing graduates and internationally experienced professionals will also be developed.
In recognition of the key role played by small businesses in Ireland, I propose that my Department review the environment for small business, with particular reference to the factors that facilitate development and growth.
In respect of foreign direct investment, IDA Ireland continues to win significant new greenfield and expansion projects, particularly in the areas of high technology, pharmaceuticals and medical devices. A total of 70 such projects were negotiated by IDA Ireland during 2004. Prospects for global foreign direct investment in 2005 are considered positive and despite a general decline in the volume of foreign direct investment available internationally, Ireland has managed to increase its share of both global and EU investment. At present, IDA Ireland has more than 30 potential projects in the pipeline.
Total employment in IDA-supported companies is now just short of 129,000, which is 10,000 more than ten years ago. IDA Ireland is attempting to achieve a balanced regional spread of development by operating within the frameworks of the national development plan and the national spatial strategy. While it is the investor who decides where to locate, the development of strong and vibrant urban bases within each region is vital to achieving this objective.
The labour market continues to show positive trends with employment growing by 65,200 or 3.6% in 2004. There were 1,894,100 people in employment at the end of 2004. Increases in the numbers in full-time employment accounted for over 80% of the growth. The sectors demonstrating the largest increase were construction and financial and business services.
Unemployment, including long-term unemployment, continues to be maintained at a low level and now stands at 4.3% and 1.5%, respectively. This compares to an EU average of 9% and 4%. In keeping with commitments to raise the skill levels of the workforce there will be a sharp increase in investment in training in 2005. Most of this activity will be managed by FÁS whose training and integration budget, comprising Exchequer and national training fund allocations, is to increase by nearly 22% in 2005. Particular emphasis is placed on in-company training, given its centrality to company and, consequently, national competitiveness. The FÁS budget for in-company training activities is to increase from €9 million in 2004 to €35 million in 2005. An initiative on the "One Step Up" as recommended by the enterprise strategy group will be announced soon. This will be augmented by a new national training fund programme whereby FÁS and other bodies will invest €64 million over a four year period in order to stimulate a significant leap of up to €100 million in employers' investment in training.
