Dáil Éireann – Statement of the Supplementary Budget Address by the Tánaiste and Minister for Enterprise, Trade and Employment, Ms. Mary Coughlan, T.D.

Wednesday 8^th April 2009

Ceann Chomhairle, at the outset of my contribution this afternoon let me say that decisions which result in families having less disposable income each week are decisions not taken lightly by any Government. They are the product of the scale, depth and impact of current economic challenges. Indeed, it is a measure of the current unprecedented economic environment that the political consensus in this House over recent weeks has been that each of us who could, would now have to pay more to maintain public services and secure our collective futures. I want to acknowledge those contributions of Deputies opposite that were constructive over recent weeks as we have worked to craft a budget to address this challenge. The Government have listened carefully to those contributions and taken a number of them on board. I hope that the same Deputies will also acknowledge that in taking decisions, we have endeavoured to take the fairest and most progressive path possible in the current circumstances.

Ceann Chomhairle, when I say progressive, I mean to use the word in two senses. I mean it in terms of the tax system – that those who earn more, pay more – and also in terms of the spending choices made by Government. It is clear from the spending commitments outlined that this Government has prioritised investment in the most productive sectors of our economy and has invested in the creation of jobs by cementing the foundations for export led recovery and growth. The Budget provision for in excess of €500 million for capital investment in enterprise through various Government initiatives administered by IDA Ireland, Enterprise Ireland, the County and City Enterprise Boards and Science Foundation Ireland is a clear statement of our priorities. The clear message that it sends out to the world is that Ireland is open for business, open for investment and open for job creation by both indigenous enterprise and through attracting foreign direct investment.

It is my challenge now, as the Minister accountable for that level of investment in a climate where spending on other Government capital commitments has been reduced, to ensure that the best possible outcome is achieved for every euro invested in enterprise by the State. I intend to do so through the mechanism of my monthly meetings with the Chief Executives of my delivery agencies and through increased scrutiny of and the continued evolution of the enterprise policies we have in place. In that regard I can confirm to the House that in addition to the changes that I have already undertaken within my Department, more are follow in the coming months to ensure that my Department is in the best possible position to drive the enterprise and job creation agenda across Government in the current changed economic environment.

The Taoiseach and Minister for Finance have both made it clear in their contributions in relation to yesterday’s supplementary budget that the restoration of competitiveness must form part of the foundation for export led economic recovery. I have spoken extensively about competitiveness in the House over recent months, but in essence this means bringing our cost structure and price levels into line with our competitors, reassuring people involved in all sectors that Ireland is not only a good place to do business but a good value place to do business also. That is why we are taking a number of measures across Government to ensure that we identify and address cost issues in our economy and I can assure the House that driving this work remains at the top of my agenda as Minister for Enterprise.

Last December, the Government introduced a Framework for Sustainable Economic Renewal, called “Building Ireland’s Smart Economy”. This document sets out a clear roadmap for Ireland’s move back to economic growth and prosperity, with investment focused on those areas where we can build on our existing strengths, address our weaknesses and position ourselves for the inevitable upturn in the global economy. The overall approach we have adopted in this Budget builds further on this strategy, while dealing with the short term measures needed to restore fiscal stability and economic activity, in line with a longer-term vision out to 2025, that we are currently working on.

We are taking decisive steps to implement our overall plan, addressing immediate issues of economic turbulence, steering ourselves towards the calmer waters of measured but sustainable economic growth. As a nation we have successfully addressed critical situations in the past, an experience which gives us confidence in facing the future.

Stimulating Global Recovery

In the same way as Ireland benefitted from global growth and the booms in the technology and financial services in recent decades, so too are we more vulnerable in the face of global recession. There is a lot we can do domestically – and the Government has not been slow to take action, even criticised for being over hasty at times. This Budget continues that practice of getting things right at home in preparation for the global turnaround that will inevitably follow.

But as a nation most dependent on trade and investment from abroad, we need Britain, Europe, the US and Asia, to take the necessary action to boost global recovery.

That is why I warmly welcome the outcome of the last week’s G20 meeting and urge the participants to push on and deliver on the agreements as quickly as possible. We will certainly seek to encourage, both through the European Union and bilaterally, that the participants carry through with the various actions in order to provide confidence and a financial stimulus to the world economy. The G20 global stimulus package of $1.1 trillion has led the way and will greatly benefit exporting countries like Ireland.

Of critical importance is the agreement to provide some $250 billion in trade finance supports. The harsh reality around the globe is that the banking system has by and large gone into retreat. Excessive and ill-judged lending has been replaced by a policy of “when in doubt, say no”. This hits at the very day to day ability of firms around the globe, large and small, to do business, and has a disproportionate effect on open economies like Ireland.

At EU level, a similar framework for renewal was adopted with the publication in December of the Commission’s European Economic Recovery Plan. From an Enterprise perspective, Ireland has welcomed the competitiveness aspects of the EU Plan, which build on the ongoing implementation of the Lisbon Strategy, such as investing in R&D, reducing administrative burdens, improving infrastructure such as broadband, addressing access to Finance, and improving skills. We particularly welcome the decision by the EU to invest €100 million in our energy interconnector with the UK. This will bring additional security of supply as well as additional competition to the energy market.

At a National level, our own package of measures was built on the recent publication of a “Framework for Sustainable Economic Renewal”. This includes measures to secure the enterprise economy and enhance competitiveness; the Framework also addresses innovation, environment, energy and infrastructure issues, as well as seeking efficiency and effectiveness in public services and regulation.

While our budget this week has the central objective of restoring confidence in our economy, we still continue to invest in our future through the funding programmes of my own Department, which I would now like to outline.

Department’s Estimate

Let’s begin by putting things in perspective. The Government has not stopped supporting enterprise nor has it stopped investing prudently and strategically in our future. My department retains its central and strategic focus in support of business and in releasing the talent and potential of our people.

The Department’s indicative estimate for 2009 is €1.938 billion including €381 million from the National Training Fund. The finer details of this allocation will be finalised over the next week or two.

Supporting enterprise, innovation and research and development are of vital importance to my Department and this year it will spend €501 million in these areas. The intention is to send a strong signal, by way of tangible financial supports, to Irish business. The way forward lies in staying competitive and maintaining an innovative edge over competition by developing new products and processes, which will assist them to win new markets in the present challenging environment.

Our economy has benefited hugely in the past from having a highly skilled labour force. We must continue to invest in our people to ensure that we have the skills and knowledge to support the vision set out in our programme for Sustainable Economic Renewal. We must also support those who have lost jobs due to the economic downturn and provide them with opportunities to re-enter the workplace. To this end, €1.09 billion of my Department's budget for 2009 is targeted at labour force measures, including activation and training programmes for the unemployed, upskilling for those in employment, and employment programmes. Many of these have been refocused to deal with the new labour market realities and the new profile of people signing on the live register.

New Measures Supporting Enterprise

In addition to these major programmes, through the Cabinet Committee on Economic Recovery, we have been working across Government to deliver best results for enterprise. I have received many letters from business people explaining the difficulties they face. The Government recognises that businesses need help now to ease their cash flow at a time when money is very tight.

We must acknowledge the difficult environment in which businesses are operating at present. The Government recognises that, in the current climate, assistance needs to be available to companies that are basically viable, but in need of some additional supports to strengthen their business-base. With this in mind, the Government has approved the creation of an Enterprise Stabilisation Fund with an additional budget of €100 million.

The Fund will provide targeted support for internationally trading companies and will be administered by Enterprise Ireland. Approvals will be based on business plans submitted to the agency by applicant companies. Particular attention will be paid to supporting viable small and medium sized enterprises.

Assistance will be available to companies that meet particular criteria. For example,

• they must not have been in difficulty on 1st July 2008, but may now be facing difficulties as a result of the global economic crisis;
• they must be judged by Enterprise Ireland to have sound, robust and sustainable business models and business plans that are financially viable in the medium term;
• they must also be judged to be capable of significant growth in a global upturn.

It is envisaged that funding will be provided in a wide variety of forms and the details of these will be worked out in the coming weeks by Enterprise Ireland. However, it is likely that assistance will primarily be in the form of investment in preference shares. I am pleased to welcome this new support measure and I am confident that it will help sustain many Irish companies and their workforces through the period of the current economic downturn.

Enterprise Ireland will also continue its regular supports for indigenous companies in 2009. The total Capital funding available to Enterprise Ireland to support industry in 2009 will be €103 million.

These supports from Enterprise Ireland will be complemented by the supports given to micro-enterprises by the County and City Enterprise Boards (€20.2 million Capital funding in 2009), and by funding for foreign direct investment through IDA Ireland, amounting to €70 million in 2009.

As part of our joined-up programme to assist enterprise, the Minister for the Environment, Heritage and Local Government has written to all Local Authority managers to ask them to be more flexible in the fees and contributions demanded from enterprise at a local level. We all wish to encourage economic activity and employment and assist those losing their jobs, both at national and local level. As part of their actions, Local Authorities are establishing “Business Support Units” to act as a point of contact to ensure a quick, coordinated response to existing and prospective businesses by acting as an interface with local authority systems and departments.

Tackling Costs

Earlier in my contribution I mentioned the important of the issue of restoring competitiveness. Tackling costs to business is key in this regard.

The proposed reductions in electricity and gas prices of 10% and 12% respectively from 1^st May next will help reduce cost pressures on enterprise. We are working to identify and progress further strategic measures in relation to energy, including micro-generation, development of the grid and increasing the generation from renewable sources. These efforts will be assisted by a stakeholder roundtable this month.

The Government has already implemented an 8% reduction in professional fees for public service bodies from 1^st March of this year, as part of the overall package of measures to reduce public service expenditure.

The Government’s strategy for economic recovery, “Building Ireland’s Smart Economy” renews Ireland’s commitment to Better Regulation, and undertakes to develop a consolidated inspections programme to reduce the number of inspection visits to business. Enforcement will, in future, be based on risk so as to minimise the burden on citizens and businesses.

The Government has already set a 25% target to reduce red tape by 2012, and work is progressing strongly across all Departments, where officials are identifying the most burdensome aspects of red tape for business, with a view to targeting simplifications where they will reduce business costs the most.

Results and Successes

Let’s not forget, Ireland has a number of critical advantages in realising our potential to return to real long term growth:

• our well educated population – we have one of the highest numbers of graduates in the 25-34 age group of any country in the EU;
• we have the youngest working population in the EU;
• our significant investment in skills development over the last number of years;
• our significant growth in services, where we are now the eleventh largest exporter of services in the world;
• our increased investment in R&D, with the number of enterprises doing significant R&D having doubled in the last four years;
• we remain the fourteenth largest exporter of goods and eighth largest exporter of services into the US, and also receive the third highest share of US investment into Europe;
• we have a substantial potential in renewable energies,

All these reasons position us for a robust recovery and to again become one of the most competitive successful open economies in the world. How this is working for us even through these tough times is best evidenced by the confidence in Ireland by our investors.

FDI

Foreign Direct Investment has played a pivotal role in Ireland's economic growth and will continue to do so in to the future despite current difficulties. The level of Foreign Direct Investment in Ireland (FDI) relative to the size of the economy is one of the highest in the world. Almost 1,000 overseas companies have substantial international operations in Ireland employing in the region of 136,000 people. These include many of the leading companies in Information & Communications Technologies, Life Sciences, Globally Traded Business and Financial Services. IDA Ireland has developed a strong base of clients, which make a significant contribution to the wealth generation, and development of the Irish Economy. Furthermore, these companies have had a positive impression of Ireland and this provides a solid basis for future growth.

In the current global economic climate, multinational companies are restructuring their global operations leading to global job cuts. Ireland therefore will inevitably be affected. However, IDA is working, with its clients, on a daily basis, making every effort to keep these companies operating in Ireland while minimising the job losses encountered.

Traditionally, IDA concentrated on four sectors: life sciences, incorporating pharmaceuticals, bio-pharmaceuticals and medical technologies; the information and communications technologies area; the financial services and globally traded businesses, which would range from professional services to engineering to digital media. The agency is now targeting three new sectors

• convergence, particularly convergence in technology between the life sciences and the IT sector,
• cleantech, environment, environmental services and goods, the green agenda and others, and
• innovation and services. The Agency is strengthening its technical expertise in the area of International Financial Services and has a clear and strong focus on this sector.

Despite global difficulties, 2008 was a very good year for inward investment with a total of 130 Foreign Direct Investment Projects being won and 8,800 new jobs being created in IDA supported companies. There was an increase in the number of new companies setting up in Ireland for the first time with names like Facebook and Zimmer setting up here during the year. There was a 22% increase in Research, Development and Innovation Projects with 56 projects, involving a projected investment of circa €420m, announced by IDA supported companies. This is a testament to the fact that our increased focus on R&D is translating into jobs on the ground today.

Even in turbulent economic times there is still FDI to be won and our competitors will not be slow in targeting opportunities. A firm focus and a positive attitude in our ability to win FDI, by all stakeholders in Team Ireland, are key ingredients to a successful outcome. The ability to think beyond the present and reposition Ireland’s competitiveness will ensure that Ireland will continue to win significant FDI from a large number of the world’s leading companies.

Enterprise Development

Enterprise Ireland is the agency with responsibility for supporting the development of Irish companies with ambitions to grow in world markets. Many of its client companies are small to medium in size. Enterprise Ireland recognises the varied challenges facing such companies in the context of the changing economic environment and partners with companies to address their needs in a holistic manner. Indigenous internationally trading companies supported by Enterprise Ireland employ as many people as do IDA assisted overseas companies operating in Ireland and their focus is very much on the high-skill, knowledge intensive sectors in the “Smart Economy”.

There has been a significant cultural change in Ireland over the last couple of decades. Twenty years ago it was widely held that economic growth in Ireland was seriously inhibited by a lack of an entrepreneurial culture. However, Enterprise Ireland and the City and County Enterprise Boards have focussed help on supporting entrepreneurs and encouraging a grass-roots culture of entrepreneurship in Ireland. In recent years, Ireland has been rated by the Global Entrepreneurship Monitor as one of the most entrepreneurial countries in the EU. The success of our pro-enterprise strategies have been reflected in the high level of business start-ups in recent years, the number of small businesses in Ireland having increased by about 50% over the last decade or so. There are now almost 2,800 individuals starting new businesses in Ireland every month. In the current economic environment, entrepreneurship, and the growth and development of small Irish businesses, is central to economic recovery and it is essential that Irish enterprises continue to be supported.

In 2009 the CEBs will continue to assist micro-enterprises throughout the Country by both direct grant aid to businesses and also through the provision of a range of other important business supports such as business training and business advice designed to help to stimulate indigenous enterprise creation and to boost employment creation. The Boards have been allocated a Capital budget of over €20m to invest in Irish businesses this year.

Export-Led Growth

In a small regional economy like Ireland, economic prosperity ultimately depends on our ability to sell goods and services abroad and therefore on our competitiveness. Building and maintaining competitiveness is a ceaseless and dynamic process. We constantly have to improve, upgrade and change because our competitors are doing the same. Increasingly, companies are under pressure to offer products and services and to use production techniques and skills which are better than those of our competitors.

Ireland is a small, open economy – and as such, we depend on our capacity to export to the rest of the world to grow and prosper. We are one of the most open economies in the world and, because of this, have already seen that we are very vulnerable to sudden changes in the world economy, with our domestic rate of growth being very dependent on developments in the outside world. Because of our small size, we also have limited scope for influencing that change directly – although we are constantly active behind the scenes. We export more than some of the major players on the world trade stage, including Australia, Brazil and Denmark, as a percentage of GDP. Problems with the global trading system and reductions in the availability of trade credit are issues of grave concern to us and the measures announced by the G20 to tackle these issues are very welcome.

Ireland’s trade performance in recent years has been a key driver in our economic success, contributing significantly both to economic growth and to helping Irish companies to develop their capability and broaden their expertise, by helping them to obtain access to new markets abroad.

The proof of this lies in the official Trade data and I was very pleased to see that for last year – 2008 - the country’s total exports were €153.8bn; a fall of less than 1% on 2007 and our trade surplus was a very healthy €21.4bn. These statistics disproves the frequently-made suggestion that Ireland’s exports have suffered a significant decline. Preliminary data indicates that Ireland’s export performance over recent months has been comparatively resilient. Our share of global trade is actually growing. Ireland’s share of the EU-27 exports increased from 2.15% to 2.25% in Q4, 2008. With our slight increase in January 2009 as the EU27 declined by an average of 35%, our position should have improved further. Our Balance of Payments position will also have improved in January, as Ireland’s share of goods imports in the EU27 declined from 1.58% to 1.36%.

This outcome was a very impressive performance, when account is taken of the global recession and the adverse exchange rate between the Euro and both the US Dollar and Sterling, as the US and Britain are our two largest export markets. In addition we have achieved considerable success in developing new markets, with significant export growth realised to China, Malaysia, Saudi Arabia, UAE, Brazil and some of the new EU Member States.

What we need to do now is to bring the focus of our economy as a whole to a return to export-led growth and increase our levels of trade to increase the money flowing back into Ireland. For our size, Ireland has a disproportionately large share of the world trade markets, particularly in relation to services. I see the ability of the Irish for seeking out new market opportunities, exploiting niche sectors and charming potential customers as key assets in terms of our export-led recovery.

To build on our existing performance, the Government is committed to maintain its long-standing initiative of undertaking a wide range of Ministerial – led foreign direct investment and trade missions. I myself will be leading an foreign direct investment mission to the United States next week and a trade mission to Saudi Arabia and Qatar later this month. Having taken the necessary steps to stabilise our public finances and our economy in this Budget it is essential that we now sell that message abroad and let the world know that Ireland is open for business, open for investment and open for job creation.

Research & Development, Innovation

Our commitment to research and development is essential in that regard. The decision by Government to retain such high levels of invesment in this area for enterprise should send out a signal to the R&D community, and those enterprises looking for a base in which to expand their R&D activities, that Ireland is committed to the R&D led Smart Economy path.

That path dictates that a strong science base, matched by a paradigm shift in the capacity of our enterprise sector to create knowledge, to innovate, and to exploit new knowledge across global markets is critical.

Without innovation and even a modest element of research and development, few businesses will grow in today’s markets. The key to the success of a new innovation and technology-based business is the ability to sell and secure the all important first international reference sale. I firmly believe that creating a continuous positive loop between innovation and market knowledge will be the key competitive advantage firms have to acquire, just to even survive. Innovation will prove commercially successful if it is genuinely customer driven. Commercial success in turn leads to stronger profitability and a stronger enterprise base across the country. Ireland is doing well in innovation – we are above the EU average and are the best improving EU country within our peer group. We performed particularly well in relation to innovation in throughputs (4^th), human resources and economic effects (both 5^th position) in the European Innovation Scoreboard for 2008 published in January.

The work of IDA Ireland, Enterprise Ireland and Science Foundation Ireland, together with the R&D tax credit introduced in the October budget, puts Ireland to the forefront of R&D regimes globally. As well as increasing Ireland’s attractiveness as a location for R&D activity, it will provide a stimulus for value-added activities. R&D in Ireland has expanded dramatically in recent years reflecting the Irish government’s massive injection of funding into the sector. In the last five years, IDA client companies have invested €1.31bn in new Research & Development activities.

In this Budget, we have taken a further important step to drive the development of a Smart Economy through the introduction in the forthcoming Finance Bill of a tax deduction in respect of the holding and exploitation of intangible assets. This has the potential to establish Ireland as a hub for companies engaged in the ownership and development of intellectual property assets. The taxation of these assets plays an important role in Ireland’s attractiveness as an investment location. The introduction of a tax deduction will provide an important additional pull factor for this type of investment to Ireland, with resulting job gains. It will also act as consolidator for key high value activities in Ireland.

Activation Measures

Ceann Chomhairle, this Budget has also included additional provision for important training and activation measures for those that find themselves in search of work. It is vital that we keep jobseekers motivated, appropriately skilled and as close to the labour market as possible.

If I include the additional measures contained in this Budget we are now providing, through FÁS and my Department, a total of 128,000 training and activation places for the unemployed this year. This is a substantial increase on the approximate 66,000 places taken up last year and is representative of the seriousness with which we tackling the current challenge and the scale of activity being supported by this Government to ensure that people are best positioned to get back into employment.

In addition to this, the Job Search/National Employment Action Plan referral capacity has nearly doubled for 2009 from 6,500 cases per month to 12,250. This represents an unprecedented increase in capacity for this programme, which is being undertaken by FÁS.

In relation to Short Courses provided by FÁS, I increased the number of places by 51,000 in February, bringing the total to 78,000. However, with the additional 12,015 places announced in this Budget brings the total number of training places available to 92,000.

For redundant apprentices we are now providing in the Budget an additional 700 places on a new Institutes of Technology training programme, which means that approximately 3,400 redundant apprentices in total will now be able to progress their apprenticeships.

Further, an additional 400 places provided for in the budget will increase the number of places on Community Employment Scheme to 22,700 this year.

We have also introduced in the Budget a new work experience scheme, which will provide 2,000 six-month places to individuals who are unemployed and it will include the placement of graduates.

A pilot training programme of 277 places is also to be undertaken at a cost of €1 million and is to be introduced for sustaining vulnerable employment. Under this programme workers who are placed on a three-day week and receiving social welfare payments for the days they are not working will receive 2 days training a week for a period of 52 weeks.

Together with the Minister for Education and Science, I will be providing 1,500 third level places on a part time basis to the unemployed so that they may pursue a third level qualification.

These new measures will allow my Department to provide an additional 16,525 activation training places at a cost of €55.9 million, with the joint initiatives with the Department of Education and Science costing my Department €5.5 million.

These initiatives represent a substantial reallocation of resources within my Vote, in particular from training for the employed, but it is essential now that we concentrate available resources to helping those without jobs to best position themselves to get back in the Labour market.

My aim is to prevent the creation of a new cohort of long term unemployed, while simultaneously improving the skills and qualification levels across our labour force. This in turn will be of considerable benefit to the individuals who receive this support over the remainder of their working lives and assist them in overcoming their present difficulties.

Conclusion

Yesterday’s budget sets out the short-term measures required to address the current economic crisis and steers us on a credible medium term path of recovery to 2013. Having established this path of recovery I am conscious of the need to consider the longer-term and ensure that any short-term decisions are taken with a long-term perspective.

The magnitude and scope of the changes facing the country are significant, as are the policy responses required by Government in balancing the need to manage existing pressures with the need to prepare for future challenges. This is a time for leadership, courage and vision – which this Government has demonstrated yesterday.

I am convinced that the key to sustained prosperity, social justice and quality of life for the future is dependent on having a competitive, high productivity and innovation-driven enterprise base that provides fulfilling and rewarding jobs for our people.

Our overall strategy has to be to get confidence back into the business sector, continue to take the necessary action to ensure an adequate flow of lending to the productive sector, get the fiscal situation and our cost competitiveness under control, and invest wisely in the infrastructural needs for the future. There is undoubtedly a readjustment going on in the Irish economy compared to the heady days of record growth, but that will in reality, only serve to make us leaner and better positioned to resume a sustainable growth pattern over the medium term.

The range of measures which I have presented here today address the real need of the economy, of future job growth and of people seeking work. It is essential now that we get on with their implementation and put Ireland back on the track to sustainable future prosperity.

Thank you.

ENDS/2020