Speech by An Tánaiste, Mary Coughlan, TD to Dail Eireann,

Thursday 10 July 2008

Without doubt, the key consideration in addressing the challenges in the environment we now face is to maintain and enhance our competitiveness in the fullest sense: competitiveness that will enable our economy to develop on a path of sustainable export-led growth; competitiveness in terms of enabling us to remain an attractive location for foreign direct investment and to provide the right conditions for building a strong indigenous inductrial base; competitiveness that will underpin our development as a knowledge-based, innovative economy capable of sustaining high quality employment. Such an ability underpinned the impressive growth of the recent decade and this Government is committed to creating the same conditions to allow us to be competitive when the current challenges abate.

Against that background, I am happy to provide clarification to the House of the savings to be achieved by my Department during the remainder of 2008 following the recent Government decison on the need to curtail Exchequer spending in the current year.

Minimum savings amounting to €24.551 million (on a total budgeted spend of almost €2 billion) will be achieved across all areas of my Department’s vote as required by the Government decision. However, a number of key principles arise. Firstly, I am determined that the key agencies of the Department will remain sufficiently resourced to ensure strong delivery in terms of inward investment, growth of the indigenous sector, research and development and upskilling the workforce. These are all areas of productive investment that will ensure that Ireland is well placed to capitalise on the economic upturn that will inevitably arise.

Secondly, the savings have been designed to ensure that the most vulnerable in our society are protected. Thus there will be no reduction in places on Community Employment or Jobs Initiative schemes and no savings are being sought on programmes for people with disabilities.

€19.15 million of the 2008 savings will be from the FÁS allocation which is the largest single spending area within the Department’s Vote. In general, the savings include areas where spending requirements will be less than budgeted due to lower apprenticeship entrants, lower dependant allowance costs and savings already yielded by lower than expected activity in the first half of the year.

A small saving of €400,000 arises as a result of reduced training provision by Skillnets.

Combined savings of the order of €2 million have been identified across the Competition Authority, the NCA, IAASA, the CRO, ODCE and the Health and Safety Authority while administrative savings will also be delivered by the development agencies operating under the aegis of my Department including IDA, EI, Shannon Development, Science Foundation.

A saving of some €1 million will arise on my Department’s administrative budget and remaining savings required will be spread across other smaller areas of the Department’s budget.

It would be wrong to suggest that delivering these savings will be painless. They will require stringent measures and tight controls. However, they will be managed in a manner designed to minimise the impact on programme delivery by exploiting natural savings arising from reduced activity and delays in filling staff vacancies. As required by the Government decision, savings will include a reduced spend on areas such as consultancy, advertising and PR. The measures identified are both prudent and targetted to have minimum impact on front line services and reflect the Government’s commitment to take determined action on matter within our control.

Of course, some of the factors impacting negatively on the economy and on our competitiveness are beyond our control. Therefore it is all the more vital then that, in areas where own actions can influence our cost environment, we act responsibly and work together to ensure that we safeguard and enhance our competitiveness. This is our best route to job creation and increasing living standards in the medium term.

This Government is committed, through the NDP, to investing in competitiveness—through our funding for training and upskilling, for science and research and for the attraction of new industry and the growth and development of our existing industry. This agenda goes hand- in- hand, as far as I am concerned, with maintaining and enhancing standards in the workplace and employment rights through the Partnership process. We do not and cannot seek to advance one at the expense of the other.

At the outset, we should not forget where we are. On our overall competitiveness, Ireland stands out in a number of important categories. The World Competitiveness Scoreboard as recently as May this year ranked Ireland 12 up from 14 last year. The Centre for European Reform ranks Ireland 6^th in the EU27 for overall competitiveness in 2008. WTO data show that Ireland is now the twelfth largest exporter of commercial services in the world. The Lisbon Council’s “European Jobs and Growth” monitor ranks Ireland 2^nd most competitive economy in Europe in 2008. Our GDP expanded at an annual average rate of 6½ per cent over the period 1997 – 2007, which has facilitated a substantial improvement in living standards.

As Minister for Enterprise, Trade and Employment, the central thrust of my Department’s policy will be to continue to strengthen and build on our competitiveness through the provisons of the NDP.

The ability to create and exploit knowledge is an essential feature of an advanced economy and therefore Ireland has placed Research and Development at the heart of its economic development effort. The Government, through the Strategy for Science, Technology and Innovation, recognises the importance of moving our economy to a knowledge driven one. The objective of the Strategy is to provide the opportunity to achieve convergence, coherence and synergy in our national innovation system. The current NDP provides for a very significant increase in the investment in technology, innovation and scientific research, amounting to a commitment of €8.2 billion over the period 2007 to 2013. The aim is to build the skills needed for a modern knowledge-based economy and to strengthen Ireland’s research base.

As a result of significant Government investment, both multi-national and indigenous companies now see Ireland as a location for world-class innovation activity. Ireland’s overall innovation performance remains strong according to the latest evidence released jointly by Forfás and the Central Statistics Office. The level of product and process innovation activity is above the EU average for manufacturing and service sector firms.

A strong R&D and innovation performance is one of the many elements in ensuring that Ireland remains a competitive location for attracting Foreign Direct Investment (FDI). Such FDI has been, and will continue, to play an important role in the development of our economy. In recognition of this, the Foreign Direct Investment (FDI) Sub-Programme, of the NDP, IDA Ireland (and Shannon Development in the Shannon Free Zone) will invest €1.6 billion over the lifetime of the Plan to promote new and expansion FDI in Ireland. While international competition for FDI continues to be relentless, Ireland continues to punch above its weight when it comes to attracting overseas investment.

The level of foreign direct investment in Ireland, relative to the size of the economy, is one of the highest in the world. Today, there are in the region of 1,000 overseas companies employing over 136,000 people in this country. These include many of the leading companies in Pharmaceuticals and Biotechnology, Medical Technology, Financial Services, International Services, Digital Media and ICT.

The economic impact of FDI in Ireland is pervasive and goes much deeper than just job creation. Foreign owned companies are at the cutting edge of demand for high skills, of advanced management training and of business processes, which permeate the wider business community. These companies are leading contributors to the national research and innovation agenda. They have contributed greatly to the broadening of the economic base in Ireland by fostering entrepreneurship and promoting the start–up of indigenous enterprises.

In addition during 2007, these companies have put €15.87bn in direct expenditure back into the economy. Of this €5.7bn was on services and €3.43bn was on material and components from Irish sources. In addition the corporation tax generated by these companies was €3bn or almost 50% of the total corporate tax take in the same year.

In line with the National Spatial Strategy and the NDP, IDA Ireland is actively enhancing the potential for regions to prosper

IDA has been instrumental in the development of high quality flagship technology parks in the Gateway and Hub locations, ensuring full integration into the surrounding business and economic environment. Over the lifetime of the NDP, IDA Ireland will maintain a strong focus on maximizing the capability of regional locations to absorb a greater proportion of high quality FDI. Last year alone IDA Ireland secured 114 new investments, amounting to €2.3bn+ in capital investment. 64% of the investments secured by IDA in 2007 were located outside of Dublin.

Ireland's competitiveness is based not on Irish tax benefits and costs alone, but on knowledge, innovation, flexibility, and connectedness - how everything works together. Ireland continues to be one of the most attractive places in the world as a location for global business. With our highly educated, skilled and adaptable workforce, our strong focus on R&D and knowledge, and our can-do, responsive and open attitude, we remain a location of choice. As a small open economy, Ireland welcomes the continued strong interest demonstrated by many of the world’s leading companies in investing and expanding here. Ireland has transformed as an economy over recent years, and we are well positioned to continue this transformation over coming years. We are pro-business, pro-European and proud to be always to the forefront of the minds of global business leaders as they make critical investment decisions.

Of course, FDI is only one side of the enterprise-equation. A strong and vibrant indigenous enterprise sector is also important to ensure that our economy grows and develops. An investment of €1.7 billion has been allocated under the NDP for enterprise development in the indigenous sector.

Enterprise Ireland has delivered handsomely on its 2005-2007 strategy by meeting or exceeding the publicly stated targets it had set. The agency now has a new strategy in place for the next three years and are reflected in the objectives of the NDP. Specifically Enterprise Ireland client companies delivered €4.4 billion in new export sales against a three-year target of €3 billion, €1.4 billion of which was delivered in 2007. Enterprise Ireland also assisted in the creation of 221 new high potential start-up companies against a target of 210, seventy of which came into being in 2007.

A new objective for Enterprise Ireland in the NDP is to grow companies of scale to compete in international markets. They aim to increase the number of client companies achieving annual global sales of €5m to 635 (+15%) and annual global sales of €20m to 225 (+20%). In 2007, twenty client companies of Enterprise Ireland achieved worldwide sales of over €10 million.

Allied to the work being done by Enterprise Ireland, the small business sector is making an important contribution to our economic prosperity. Over 250,000 small businesses operate in our economy and employ over 800,000 people.

The development of the strength and depth of our small business sector will be critical if we are to sustain and build on the prosperity achieved in recent years. We will need to foster the emergence of significant numbers of new indigenous businesses that have the potential to achieve significant growth; are highly innovative; embrace and develop new technologies; are export driven, and above all else, are productive and sustainable.

The role of the 35 City and County Enterprise Boards is crucial in this context. We will only be able to foster the emergence of such enterprises if the operating environment for business, particularly small businesses is supportive. This has been a key focus of Government policy and we have put in place policies and programmes that encourage the emergence of new business creations and facilitate long-term business survival. Of particular note was the adoption of new strategies to support the enterprise sector, included in the Reports of the Enterprise Strategy Group and the Small Business Forum.

By producing highly educated and skilled individuals we have ensured that the country has a labour force with the ability to not only meet the needs of enterprises but also more importantly to allow Ireland to quickly respond to emerging opportunities. Today this Government remains committed to the continuous improvement of our education and training system. This commitment is reflected in both the National Development Plan and the current social partnership agreement “Towards 2016”.

Training for the unemployed is part of wider Government policy in the context of the Government Human Capital Priority commitments in the National Development Plan 2007-13. Over the period of the NDP the Government will invest €7.7 billion in public funds to support training and skills development – both for the unemployed and those who are in employment. This is a significant increase when compared with the level of spending over the previous seven-year period (2000-2006) of €5.9 billion. The current level of investment reflects the importance the Government attaches to developing and maintaining an educated, skilled and adaptable work force in Ireland.

Of course, our competitiveness is also influenced by prices and competition considerations. Promoting competition, in particular removing barriers to competition in our domestic markets, is one of the tools we can utilise to steer the economy.

This Government will continue to deliver policies that enhance competition and reduce barriers to competition help reduce costs, particularly in domestically trading sectors of the economy.

One particular issue, which has been raised in relation to prices, is the concerns expressed by a number of commentators that retailers are failing to pass on the benefits of the Euro’s appreciation in value particularly against Sterling and the Dollar. In this regard, the Euro-sterling rates were relatively stable from 2003 up to the middle of last year. However since then the Euro, which is currently trading at around £0.79, has appreciated in value by approximately 17%.

It is difficult not to accept the view of the National Consumer Agency that too often the price charged by retailers reflects a price level that the retailer anticipates the Irish market will bear. The Agency’s recent north/south survey showed that the price charged by retailers in their outlets south of the border were between 28% and 31% dearer for a range of branded goods and between 11% and 17% dearer for a range of own brand goods than the price of such goods in the outlets of the same retailers north of the border. Notwithstanding that the recent CSO consumer price bulletin does show modest reductions in the price of a number of UK sourced food items, both I and the Government remain strongly of the view that much more needs to be done to achieve a satisfactory outcome for consumers on this matter.

As pointed out earlier, the competitiveness agenda goes hand- in- hand with maintaining and enhancing standards in the workplace and employment rights. We do not and cannot seek to advance one at the expense of the other.

The Government has never sought to gain competitive advantage by overseeing unacceptably low employment standards in the economy. Similarly, the Government wishes to see unscrupulous employers who short-change workers on their entitlements held to account.

That was one the key motivations behind the establishment of the National Employment Rights Authority (NERA) which is now fully resourced and actively vindicating the rights of employees all over the country. The amount of arrears recovered by NERA on behalf of employees increased to almost €2.5m in 2007.

Complementing this agenda, however, there has to be equal measures of flexibility in the labour market. This will allow for expansion and contraction in particular sectors and for overall readjustment in times when the very existence of jobs is under threat. . We should ensure that workplaces remain open to change and real partnership. We must recognise and preserve those facets of our labour market that were attractive in the first place to those who create jobs in the economy.

In summary, while the issues facing the economy are challenging, we are starting from a very strong position. Ireland has a good economy whose fundamentals are right. The Government is committed to building on this and ensuring that we remain competitive and in position to take full advantage of any upturn in the global marketplace. Through its plans and programmes under the NDP, the Government will create the environment whereby we will continue on a path of sustainable export-growth; they will enhance our attractiveness as a location for FDI ; they will continue our development as a knowledge-based and innovative economy which is capable of sustaining high quality employment ; and which will see us ensure that, as a nation, we continue to enjoy the heightened standard of living which was hard earned over the last ten years.