Address by Minister Devins to Dáil Éireann on the Budget 2009
16 October 2008
I commend this Budget to the House because it faced up to the economic realities, which are before us and, where some might have lost nerve, it displayed a clear understanding of and vision for our future.
That future requires us to compete internationally in a global and increasingly knowledge based world economy.
It requires that we return to sustainable growth fuelled by our capacity to trade competitively, by offering the world competitive and innovative goods and services. This Budget sets us on that path.
The pace of growing international competition has created pressure for greater efficiency, quality and productivity. We are in the midst of a difficult international financial situation, as we all know, but in such times, the pace of change and the demands of customers become even more important and require Irish business to be creative, flexible and adaptable.
In response to competitive pressures of recent years our economy has changed radically and continues to do so.
It is with our eyes fixed firmly on the future needs of this country that the Government remains so committed to supporting Ireland’s capacity to compete as a knowledge economy.
As Minister for Science, Technology and Innovation I strongly welcome the expenditure provision for Science, Technology and Innovation provided in the 2009 Budget to the Department of Enterprise, Trade and Employment of ¤335 million, an increase of 3% on the 2008 allocation.
We need to appreciate that this is over 9 times what it was as recently as 2000 when we had an allocation of £27m for Enterprise Ireland and an allocation of just £400,000 as a precursor investment to the establishment of Science Foundation Ireland.
I also welcome the allocation within the Education and Science Vote of ¤265 million, an increase of 44%, provided for infrastructural investment for higher education, including additional capital funding for strategic research as part of the Strategy for Science Technology & Innovation as announced in yesterday’s Budget.
These allocations are synergistic and my assignment to both Departments as Minister reflects the critical connectedness across Government. Critically, this Budget also enhances the fiscal environment for R&D in Ireland and I will return to this measure in some detail later.
This Budget and estimates announcement is the third in a series that clearly demonstrate the Government’s commitment to investment underpinning a clear and cohesive whole of Government Strategy for Science, Technology and Innovation.
This Budget, in particular, set as it is against the backdrop of extreme financial difficulties, sends the strongest signal possible of the determination of the Government to maintain the already substantial effort to build a knowledge economy in Ireland.
Ireland has placed Research and Development at the heart of its economic development strategy because the ability to create and exploit knowledge is an essential feature of an advanced economy.
This level of support provided in the present Budget for the augmentation of Research and Development programmes sends a clear signal to Irish business that this Government is continuing to support their efforts to develop new products, to stay competative and win new markets in a challenging environment.
The process of developing and exploiting new ideas has a crucial role to play in bolstering Ireland’s economic and social advancement. The Government’s Strategy for Science, Technology and Innovation is driven by the principle that we must produce and attract world-class talent and have dynamic firms that use that talent to innovate and compete on world markets with world-class products and services.
The key to wealth and employment creation in Ireland will be achieved in global markets by Irish companies, that are operating at the cutting edge. The strategy has a strong focus on the role that research and development can play as a provider of innovative, market-led products and services that are essential for economic competitiveness and growth.
We have committed the economy to a high level of investment in innovation in all its forms with the aim of making Ireland a dynamic, knowledge-driven economy.
The Government sees this investment as a priority to underpin Ireland’s competitiveness in a knowledge-driven global economy and has delivered on this commitment in this budget.
The investment provided for in the 2009 Budget will continue to drive our targets under the Government’s Strategy for Science, Technology and Innovation. This funding will be used by the development agencies, Science Foundation Ireland, Enterprise Ireland and will be supplemented with IDA funding to:
- increase in-company research and development,
- help Small and Medium Enterprises to innovate and stay competitive
- continue to build Ireland’s Third Level research base,
- strengthen collaboration between industry and the education sector
- promote the commercialisation of research and bring the outputs of Ireland’s growing research base to the marketplace
The level of funding that has been provided this year will provide an important support to Irish business in their efforts to develop new products, to stay competative and win new markets in a challenging environment.
Three State Agencies under the Department of Enterprise, Trade and Employment –IDA Ireland, Enterprise Ireland and Science Foundation Ireland – are responsible for delivering the science and technology strategy to the business and research communities.
Funding is provided to Science Foundation Ireland and Enterprise Ireland for Research and Development from the allocation of ¤335 million in Subhead F of my Department’s 2009 Vote, while IDA research projects (expected to involve support of about ¤50m) is provided for separately through Subhead D.
Enterprise Ireland
Funding allocated to Enterprise Ireland will be used to transform Research and Development activity in enterprise, drive productive collaborations between industry and enterprise and secure the commercial potential of Ireland’s Research Community. In 2009 Enterprise Ireland will receive a science, technology and innovation budget that has increased by 1.5% over the 2008 level, to ¤134.6m
The funding allocation to Enterprise Ireland will enable the agency to focus on growing both the quality and quantity of Research and Development performed in enterprise, on supporting collaboration between its client companies and third level institutions and maximizing the commercial outputs, for example spin-out companies, intellectual property, licenses etc) from the enhanced research activity in third level institutions.
Enterprise Ireland is charged with the particular responsibility of delivering support to Irish enterprises in their “close to the market” activities. Enterprise Ireland will continue its work with Industry, and with the Colleges and Institutes, to foster Research and Development activity both through financial support and advisory assistance.
The funding will build a robust research system and by this Government is supporting the efforts of the enterprise community to stay relevant and competative in a harsher environment .
By encouraging greater investment in research and development and through building effective collaborative between industry and third level research Small and Medium Enterprises in Ireland are helped to innovate and to stay competitive.
The development of an international reputation for familiarity with cutting edge technology Foreign Direct Investment companies are attracted to establish a research base here, often in collaboration with Irish home grown companies.
Science Foundation Ireland
Science Foundation Ireland funding will increase by 4.3% to ¤191.5m . SFI’s focus is on research excellence to enhance Ireland’s human capital in strategic areas of scientific endeavour relevant to the future competitiveness of industry and enterprise.
Since its establishment the remit of SFI has been in the areas of Information and Communications Technologies (ICT) and Biotechnology. In May of this year, its remit was expanded to include the area of sustainable energy and energy efficient technologies. SFI will continue to add world-class Principal Investigators and their teams.
SFI will continue to support strategic partnerships between industry and academia through Centers for Science Technology and Engineering (CSETS) and Strategic Research Clusters. SFI-funded projects involve partnerships with over 300 distinct companies both indigenous and multinationals.
IDA
The rapidly growing reputation of Ireland’s research base and the availability of world-class researchers, high quality graduates and increasing PhD output is greatly assisting IDA Ireland in winning highly competitive research investments for Ireland.
In 2007 the IDA supported 45 R&D projects and the figures for 2008 and 2009 are expected to be close to 60. Global leaders now choose Ireland as a location for cutting edge research and development activities, again a testament to the Government’s foresight and clear evidence of the long-term dividend to Ireland of this investment.
Business Objects, a SAP company, IBM, Boston Scientific, CITI, one of the world’s largest financial services companies, Beckman Coulter Inc, Pfizer and Houghton Mifflin Harcourt are just some of the companies that so far in 2008 have chosen Ireland for major R&D investments worth hundreds of millions of Euro and providing hundreds of high quality jobs.
R&D Tax Credit
It is critical that the fiscal environment encourages private sector investment in research and development and for that reason I strongly welcome and endorse increasing the R&D tax credit which can be offset against a company’s corporation tax liability from 20% to 25%.
This measure will enhance our competitiveness as a location for new internationally mobile research-related investment, and also encourage existing overseas and indigenous firms to add research functions to their operations in Ireland or to increase their level of research activity.
This initiative is particularly significant for Ireland as the level of research and development undertaken by business here has traditionally been low for an economy whose output and exports are dominated by high technology sectors.
Private sector investment in R&D has begun to increase significantly since the Tax Credit was first introduced in the Finance Act 2004. R&D performed in the business sector (BERD) rose to an estimated ¤1.56 billion in 2006, almost double the level recorded in 2000. A 17.3% annual increase between 2005 and 2006 facilitated a rise in the BERD intensity ratio to 1.05% of GNP. While this represents a significant achievement, our level of expenditure is still below the OECD average of 1.54%.
The Finance Act 2004 introduced a 20% tax credit, now 25%, for incremental expenditure on research and development. It also provided that where a company incurs expenditure on the construction or refurbishment of a building to be used for R&D, the company is entitled to a tax credit on the cost of construction or refurbishment.
The credit is in addition to any normal tax deduction available to a company for R&D expenditure and is additional to and complements the various direct R&D grant supports, which are also available through Agencies.
Sub-contracting research and development work to unconnected parties qualifies under the tax credit scheme up to a limit of 10% of expenditure incurred by the company in any one year. Also sums paid to a university or third level institution to carry out R&D qualify for the tax credit, provided the amounts paid do not exceed 5% of the total expenditure incurred by the company on R&D.
Increasing the tax credit rate to 25% sends a very clear signal that Ireland is open for R&D business.
In conclusion
The investment in Research and Development is helping us to compete in highly competitive global markets and grow quality employment and productivity in innovative firms.
As we enter a difficult economic period and face higher costs, Irish business requires improved efficiency, quality, and productivity the need for firms to innovate and add value across all aspects of business is now greater than ever.
Past experience has shown us that countries with long-term competitiveness have high levels of R&D and they produce world-class talent and have dynamic firms that use that talent to innovate and compete on world markets with world-class products and services.
There is clear and encouraging evidence that the investment being made is helping Ireland to compete. This is the route the Government must support so that the Irish economy can return to export led growth in the years ahead.
ENDS/IP68
Last modified: 16/10/2008
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