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Minister for Enterprise, Trade and Innovation, Batt O’Keeffe TD, to the Dáil on Budget 2011
Wednesday 8 December, 2010
Minister for Enterprise, Trade and Innovation, Batt O’Keeffe TD, to the Dáil on Budget 2011
I am pleased to have the opportunity to make some remarks on Budget 2011 in relation to its impact on Ireland’s enterprise sector and the innovation agenda.Yesterday’s Budget strikes an important balance between achieving the necessary adjustment of €6 billion in 2011 and doing so in a way that ensures that we continue to invest in our two most important objectives: economic growth and job creation.
Budget 2011 will see €508 million in capital spending alone dedicated to driving Gross Domestic Product (GDP) growth through increased exports, more foreign direct investments and the smart economy by significantly investing in research and development.
And there is a critical point that must be made here - a point which I believe has been lost in some of the rhetoric that followed the Minister for Finance’s statement.
The Labour Party said yesterday that the government has chosen a Budget that will not promote economic growth and employment.
Fine Gael said last night that the Budget fails the job creation challenge.
I want to put an end to these false claims here and now.
As I said, yesterday’s Budget provides capital investment of €508 million for 2011, up from €480 million in 2010, rising again to €558 million for the following three years.
That is a clear unambiguous investment of €2.2 billion in jobs and growth made by this Government through the Budget.
This multi-billion capital investment in growth and jobs is routed through my Department and its agencies, IDA Ireland, Enterprise Ireland, Science Foundation Ireland and the County and City Enterprise Boards.
That is a point that is missed by Members opposite, a Cheann Comhairle.
These enterprise agencies already support 82pc of all exports, some 500,000 direct and indirect jobs, or around 30pc of the entire workforce in the economy today.
The investment we committed to yesterday in the core programmes of IDA Ireland and Enterprise Ireland are fundamentally important because they enable them to win more global investments, grow exports and provide essential supports to help businesses improve their products and productivity.
And this is done for one simple reason.
It will deliver nearly 30,000 new jobs in 2011, just from the IDA Ireland and Enterprise Ireland client base alone, and 300,000 jobs altogether from the enterprise and tourism sectors over the next five years.
There is a negative thread running through much of the commentary on both the Budget and the four-year plan for recovery.
The thrust of this analysis is that Ireland is a ‘growth-taker’ – that we can do nothing to stimulate GDP growth from our own endeavours as a people.
I utterly reject that view.
I accept that global trading conditions are important but it is equally true that the investment we make in enterprise will deliver GDP growth as well as jobs.
I will tell you why.
Ireland’s GDP growth will come through export growth.
The client companies of IDA Ireland and Enterprise Ireland already provide €126 billion of the €153 billion in goods and services we export.
So, when this Government commits €2.2 billion to the enterprise agencies, we are investing in jobs and growth.
We are saying to the world that we can drive economic growth from within this country.
We can be ‘growth-makers’.
We have the track record, talent, technology and tax regime to do so and I do not agree with the Members opposite who believe Ireland is merely a ‘growth-taker’.
We can do much more than that.
We have proved that we are able to do more than merely hold our own among trading nations.
While the rest of Europe was suffering a double-digit collapse in exports - Denmark down 16pc; Austria down 20pc; Sweden down 24pc; and Finland down 31pc - Ireland’s exporters were resilient with just a 4pc fall.
The contribution net exports made to our economic growth actually increased last year with our agency-supported exporters spending a staggering €38 billion on payroll and purchasing Irish materials and services.
By making our investments in winning foreign direct investments, growing indigenous exports and increasing research and development activity, we are not ignoring the domestic economy.
We are investing in that too.
A Cheann Comhairle, along with this direct investment in enterprise, there is one other critical aspect of how we are driving economic growth and job creation: our continued strong investment in the smart economy.
The development of a smart economy is a key component in the Government’s economic renewal plans.
The allocation of €161 million to Science Foundation Ireland means an increase of €11 million for the provision for research grants.
This increase will enable Science Foundation Ireland to stabilise the number of researchers and research teams and strengthen industry collaborations.
This is vital to ensuring that Ireland will retain the excellent science base we have built over the past decade.
It will send a very strong message nationally and internationally that the Government’s focus on driving the smart economy is on track.
This investment has been critical to IDA Ireland’s capacity to secure research and development-related investments which run at €500 million annually.
It also supports indigenous companies reliant on knowledge for growth and job creation.
Yesterday’s Budget sees Enterprise Ireland receive €130 million for activity in the area of science, technology and innovation - an increase of €9 million, or 7pc, on the 2010
level.This is investment that will put Irish companies ahead by enabling them to develop the competitive edge that innovation delivers.
We are ensuring that we have the optimal business environment for innovation, exports and job creation.
The tax environment is an important element also.
It is worth noting that Budget 2011 balances new taxation measures with the need to do least harm to the businesses that will drive exports, growth and jobs.
While the Budget measures will see taxation contribute €1.5 billion to the overall €6 billion adjustment, it will be done in a way that is least harmful to enterprise.
Our competitive 12.5pc corporation tax rate will not change.
Our top marginal tax rates will not be disimproved and our tax wedge will remain internationally competitive.
The Budget confirms our commitment to investing in jobs and growth through exports and provides for targeted stimulus measures including the extension of the corporation tax exemption for small firms; the changes to the Business Expansion Scheme; tax changes to improve contractors’ cash flow; the extension of the PRSI exemption scheme; the extension of the car scrappage scheme; the air travel tax reduction; and the energy-efficiency measures.
All of these will generate jobs and growth in the domestic economy.
The programme of activation measures set out in the Budget will keep people close to the labour market, ready to take up the job opportunities arising as the economy recovers.
This programme includes 15,000 activation places, reduced labour costs and structural reform to incentivise people to take up employment.
To conclude, a Cheann Comhairle, this has been a very difficult Budget.
But as Minister for Enterprise, Trade and Innovation, I am satisfied that the Government has delivered the necessary investment to support Ireland’s enterprise sector - the engine for economic growth and job creation - which will benefit every sector and town in this country.
Wednesday, 1 December, 2010
Minister for Enterprise, Trade and Innovation, Batt O’Keeffe on the EU-IMF Programme and National Recovery Plan
I welcome the opportunity to discuss the EU-IMF Programme and the Government’s National Recovery Plan in the House today.The two are inextricably linked.
As was outlined earlier, the provision of €85 billion of international financial support to Ireland is on the basis of a specified programme whose details closely reflect the key objectives set out in the National Recovery Plan published last week.
As Minister for Enterprise, Trade and Innovation, I will focus my contribution on the areas of the plan most pertinent to our enterprise sector.
For me, the plan has three critical factors.
The first of those is certainty.
The plan is an extensive document containing a detailed blueprint of measures that will put the public finances in order, drive growth and support jobs.
We are clear about the nature of the task facing us, the strengths we can bring to that task and the actions we are going to take to bring about stability and growth.
Secondly, the plan solidly establishes the credibility of our proposed actions as a Government and as a people.
The plan has been endorsed by our international colleagues as a credible and appropriate set of actions to make the necessary savings of €15 billion and reach the broadly accepted deficit target of 3pc of Gross Domestic Product.
So by bringing forward the plan, we have presented to domestic and international audiences a credible set of actions to bring us to where Ireland needs to be.
Thirdly, the plan underpins our commitment to export-led growth and recovery.
I especially welcome the acknowledgment and commitment to continued investment in the enterprise sector.
The capital investment of almost €2.2 billion in the enterprise sector, and the maximum support and protection afforded to businesses throughout the period of the plan, is incredibly important.
So are the measures to tackle high input costs for businesses, action to remove barriers to jobs and the enhanced activation measures.
In addition to the benefits of improved infrastructure and direct jobs from construction, the new four-year capital expenditure programme in the plan recognises the critical importance of the work supported by my Department and its agencies in achieving economic growth.
That is obvious from the allocation of €2.2 billion to enterprise over the next four years.
Many often ask where investment, growth and jobs will come from.
The multi-billion investment by the Government in the plan means we will continue to win new foreign direct investments, grow indigenous exports and tourist numbers, further our ‘smart’ economy objectives and create 300,000 new jobs by 2016.
It is expected that unemployment will fall to below 10pc by 2014.
Today, we have further cause for optimism on growth, trade and employment.
Activity in the manufacturing sector was steady in November with output and new orders rising.
The NCB Purchasing Managers Index is rising, with new business boosted by a strong increase in new export orders.
New figures for redundancy claims for the first 11 months of the year show a drop of nearly 17,000, or 23pc, on the number filed for the same period last year.
Today’s live register numbers show the lowest monthly total since December 2009.
Although the live register has risen in November in each of the past five years, this November we have seen a fall.
The numbers are almost 42,000 lower than at the end of August - further evidence that the labour market is stabilising and our targeted investment in growth is working.
We will continue to invest for further growth under this plan.
IDA Ireland’s investment efforts to embed, transform and grow the foreign-owned firm base in Ireland have been completely protected.
The total sales of these companies was €119 billion last year and their value-added was equivalent to over 47pc of Gross National Product.
Enterprise Ireland will receive a 7pc increase in its capital allocation for activity in science, technology and innovation.
That increased funding will be used to enable Irish firms to develop the important competitive advantages that innovation will deliver.
Under the plan, we will make multi-million euro investments to encourage collaboration between industry and higher education institutions.
That will include the allocation of almost €8 million to create new high-tech competence centres that will undertake an industry-led research agenda.
The target is to double the number of competence centres to 16 by 2015.
The increased allocation to Science Foundation Ireland next year sends a strong message nationally and internationally that the Government’s focus on driving the ‘smart’ economy is on track.
That investment has been critical to IDA Ireland’s capacity to secure research and development-related investments running at €500 million every year.
The allocation will allow projects approved under PRTLI Cycle Five to move ahead.
It also supports indigenous firms relying on knowledge for growth and job creation.
In addition to the significant investment in growth, jobs and innovation, the plan sets out clear measures to further improve our competitiveness.
These measures will reduce energy costs and drive down waste and transport costs.
Under the plan, we are committed to appropriate State investment in next-generation broadband where the market fails to deliver.
There are a series of actions to reduce the cost of professional services.
Property costs will face more downward pressure.
When it comes to Government-influenced costs, we will extend the 15-day prompt payment rule to the wider public sector, avoid increases in government administrative charges and fully examine the scope for reductions.
Since 2007, measures we have implemented have saved small firms almost €53 million in red-tape overheads.
We will expedite work to achieve the targeted 25pc reduction in the regulatory burden on businesses.
We will minimise local authority charges based on the Local Government Efficiency Review Group.
On labour costs, we will reduce the minimum wage by €1 per hour.
I note that Fine Gael has signalled its intention to reverse the proposal if the party finds itself in power - totally ignoring the research showing that a reduction in the minimum wage would result in an increase in employment in the medium term.
Totally ignoring the needs of the sectors where the wage is most concentrated.
Crucially, we will review the other sectoral pay agreements - EROs and REAs.
I am determined to reform any agreement that constitutes another form of labour market rigidity by preventing wage levels from adjusting.
I want to mention briefly the welcome labour activation measures set out in the plan.
We have already provided 165,000 places this year to train and provide work experience for the unemployed.
The enhancements in the plan are an important element of our overall approach to recovery and growth and they will further ensure the proper functioning of our competitive labour market.
It is worth noting that the plan has been especially successful in balancing new taxation measures.
While taxation will contribute €5 billion to the overall €15 billion adjustment, it will be done in a way that is least harmful to enterprise.
Our competitive 12.5pc corporation tax rate will not change.
Our marginal tax rates will not disimprove and our tax wedge will remain competitive.
To conclude, a Cheann Comhairle, the EU-IMF Programme and the linked National Recovery Plan are important steps on Ireland’s road to recovery.
Along with the upcoming Budget, I urge members of this House to take a close look at what it contains - the certainty, credibility and hope it offers and base their assessment on the facts, not on short-term political considerations.
Dáil Éireann 23 November, 2010
Speech by Minister for Enterprise, Trade and Innovation, Batt O’Keeffe, on the Fine Gael private members’ debate on corporation tax
I move the counter-motion on behalf of the Government.I would not normally agree with an Opposition motion but, on this occasion, there is value in this House sending a united message on the importance of keeping our corporation tax rate at 12.5pc.
While our rate of corporation tax is critical, we must remember that it is but one element of the investment matrix Ireland offers to global markets.
Ireland’s value proposition to multinationals is strongly based on what we refer to as the four Ts: track record, talent, technology and tax.
Our reputation for excellence in all these areas continues to attract a strong flow of companies to Ireland.
In particular, all the multinationals I have met have commended our investment in research, development and innovation.
No matter what sector they are in they all see the potential benefits.
That means the Government’s investment strategy for science, technology and innovation is the right one to create high-quality jobs and support economic recovery.
Despite the period of global recession over the past two years, Ireland’s value proposition to multinationals operating from Ireland has not changed.
In fact, it has been enhanced.
Our competitiveness has improved significantly.
Business costs, including energy, private rents, office rents, services, construction and labour, are all more competitive.
The cost of industrial electricity dropped by 24pc between 2008 and 2009.
Gas prices decreased by 25.9pc last year.
Benchmark salaries for new employees in Irish companies are down between 5pc and 22pc.
Ireland’s track record can be seen in the range and quality of multinational companies - many of which have had operations in Ireland for many years - we have drawn to our shores.
It is reflected in the high level of expansions by these companies and in the fact that 80pc of our exports are now from the multinational sector.
Over 75 multinationals have chosen to make investments in Ireland so far this year.
Of these 22 were from companies new to Ireland; 28 were expansions or new areas of investment from existing client companies; 25 of the investments were in research and development.
They could locate anywhere in the EU - but they chose Ireland.
These investment decisions are a vote of confidence in our ability to deal with our financial problems.
They are a vote of confidence in what Ireland has to offer to the international investment community.
And most of all they are a vote of confidence in us as a nation.
Our export performance shows Ireland’s enterprise sector, combining multinational and indigenous companies, is the engine of growth.
Irish exports continue to perform very strongly - increasing by 3.5pc from quarter one up to the end of quarter three this year.
Given global market conditions, I think it is fair to say that this is a tremendous performance from our key export sectors.
An export-led enterprise policy is a whole-of-economy strategy.
Export-driven growth delivers sustainable economic growth and jobs.
The boost in secondary employment and the increased consumer confidence which arises from export-driven growth leads to increased levels of consumer spending in the local economy.
Increased export growth leads to sustainable direct job opportunities above those provided by serving the domestic market; growth in revenues for firms beyond what the domestic economy can provide; increased opportunities for locally trading businesses; substantial ripple effect in terms of job creation across the entire economy; and enhanced tax yields for government.
An export-focused approach impacts on the local economy in other ways.
For example, because exporting firms are directly exposed to international competition, innovation and high productivity are essential ingredients for success.
In turn, they demand high standards from their suppliers.
In that context, it is important to point out that foreign direct investment (FDI) to Ireland is now back at investment levels not seen since 2005/2006.
The combined influence of Ireland’s increased competitiveness and strong value proposition, commitment to our 12.5pc corporate tax rate, and quick and decisive measures taken by the Government to combat the challenging economic situation has resulted in an excellent flow of FDI.
The pre-crisis levels of investment hail from both our traditional markets of north America, mainland Europe and the United Kingdom, as well as from new high-growth markets.
On this point, IDA Ireland recently opened offices in Brazil, India, China, Russia and Singapore to increase the flow of investment from these markets.
Given Ireland’s strong and long-standing commitment to the 12.5pc rate, any move away from that would have a significant negative effect on existing and potential investments.
The Government's position on our corporate tax regime is unambiguous.
That commitment is protected in an EU context by the principle of unanimity in taxation matters.
And it is further enhanced by the insertion of a legal guarantee in the Lisbon Treaty.
Over the past decade, the Irish Government has pursued a consistent strategy of maintaining a low-tax burden on companies to support sustainable economic growth and social progress.
Ireland maintains a low general corporation tax rate by ensuring a wide tax base.
The Irish 12.5pc corporate rate is a general rate on trading activity so it is not focused on any particular segment of Irish industry.
There is no distinction between small and large enterprises or between enterprises that service the local economy or those that have a multinational focus.
The recent independent Commission on Taxation report reaffirmed that a low and stable corporation tax rate should remain a core aspect of Irish tax policy.
This view has been endorsed by the Organisation for Economic Co-operation and Development (OECD).
Its recent work on tax and growth suggests that high corporate taxes are most harmful for growth, followed by personal income taxes and then consumption taxes.
Some countries have high nominal rates of corporation tax but much lower effective rates due to the use of various base-narrowing devices.
This is not the case in Ireland - our system is relatively simple.
Corporation tax receipts in Ireland represent about the average collected by such taxes across the OECD.
Ireland does not support harmful tax competition.
We continue to play our part in the EU Code of Conduct on harmful tax competition and the OECD Forum on Harmful Tax Practices.
Ireland is fully compliant with the Code of Conduct and OECD processes.
It is important to note that the international community does not regard Ireland as a tax haven.
The Irish tax system is fully transparent and adheres to international norms.
That is evidenced by the large and growing network of tax treaties Ireland has in place with other countries around the world.
Ireland has now signed comprehensive double taxation treaties with 61 countries.
Our treaty network is rapidly expanding and now includes agreements with non-EU and non-OECD members.
Ireland tax treaties allow for full exchange of information with the tax treaty partner country.
Certainty is a key element desired by investors.
Higher corporate tax rates would change company behaviour by disincentivising activity in Ireland and, with such an open economy, it is relatively easy for this change in behaviour to translate into a smaller tax revenue base.
An OECD multi-country study found a 1pc increase in the corporate tax rate reduces inward investment by 3.7pc on average.
In other words, it would take only a 2.5pc increase in the rate to decrease Ireland’s inward investment by nearly 10pc.
In addition, internationally traded services are an important part of the Irish economy and they are expected to grow further as the smart economy develops.
It is likely that companies providing services products are more responsive to tax rates and therefore will react more negatively to rate increases than companies in the traditional manufacturing sector.
It is likely that if the rate increased some FDI would choose to leave Ireland.
Ireland competes with Singapore and Switzerland for many of its projects and it is likely that these countries would benefit from any change in Ireland’s offering to international investors.
It is important to point out that the countries against which Ireland competes for internationally mobile investment are continually improving their tax offerings.
Any erosion in Irish tax competitiveness enhances the position of competing non-EU jurisdictions.
The OECD has pointed out that raising corporate tax harms economic growth.
It is obvious that an increase in the corporate tax rate is unlikely to increase tax revenue in Ireland.
While some may argue that an increase in the rate now could increase revenue in 2011, this would be a short-term increase and over the medium-term revenue is likely to decrease.
Our 12.5pc corporate tax rate is a key economic driver in Ireland’s recovery.
It will enable Ireland to meet its external debt obligations.
That is good for Ireland and the eurozone.
The Government has set an ambitious target to create 300,000 jobs over the next five years in our new integrated trade, tourism and investment plan.
That plan will benefit all sectors of the economy.
These are jobs at all skill levels, in all sectors of the economy in every county in Ireland.
Our strategy includes a target of winning 780 new foreign investments over the next five years.
Our 12.5pc corporation rate is central to our ability to attract these investments to this country.
A Cheann Comhairle, as Minister for Enterprise, Trade and Innovation, I want to re-affirm Ireland’s long-term commitment to the 12.5pc corporate tax rate.
It is and remains a cornerstone of Irish industrial policy.
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