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Address by An Tánaiste on The Companies (Amendment) Bill 2009
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Tuesday 16th June 2009
Dáil Éireann – Private Members Motion Address by the Tánaiste and Minister for Enterprise, Trade and Employment, Ms. Mary Coughlan, T.D.
The entire global economy is facing a period of sustained and unprecedented economic challenge. Virtually every economy in the developed world is currently struggling to cope with the global economic storm which has been exacerbated by credit constraints and prolonged by a decline in consumer and investor confidence.We in Ireland are not immune to those challenges, which are impacting negatively on growth and employment. Domestically, as the recession which commenced during 2008 deepens further, GNP is projected to experience its sharpest decline on record, contracting by 8 per cent this year. As a result, we are now expecting a cumulative loss in national income around 13 per cent over the 2008 – 2010 period, but as the expected international recovery gains momentum and the sharp shock in residential housing output passes through, Ireland’s economic growth rate is expected to turn positive by 2011.
In the interim we must continue to pursue appropriate policies to position the economy to benefit from the global recovery when it eventually emerges.
Our labour force continues to be highly skilled and flexible and we are continuing to invest in education at all levels in order to ensure we have the skills demanded by our increasingly knowledge-intensive economy. We are also demonstrating wage flexibility in both the public and private sectors – a significant achievement which many countries would wish to emulate.
There are also adjustments in work practices and other labour market costs are changing in order to safeguard employment.
Our economy remains flexible and resilient and this will facilitate an adjustment to reflect the prevailing environment. For its part the Government remains committed to providing a pro-enterprise environment and to maintaining our relatively low tax burden on business. We are also maintaining capital spending at a very high level by international standards. This will allow us to continue our investment in productive infrastructure, which will help enhance our competitiveness. Through implementing the correct policies now we will safeguard our recent progress and secure our future prospects.
The European Commission have endorsed the measures we have taken in our recovery strategy and we also have the support of the European Central Bank. These non-partisian bodies recognise the extent and appropriateness of the measures this Government has taken to bring our public finances under control.
Economic Strengths
This Government has a proven track record of managing a successful and vibrant economy. The measures we have taken in recent months are designed to address our present difficulties and to ensure a return to sustainable economic growth and the creation of more employment. The Government is committed to continuing to take the necessary difficult decisions to achieve this goal.However, we must not forget that our economy still retains many of its underlying economic strengths. These strengths are borne out by the recently published World Competitiveness Yearbook 2009. It is encouraging to note from this Report that Ireland’s strengths lie in its continuing attractiveness for investment. We are: § 1st for real corporate taxes, § 1st for investment incentives, § 1st for foreign investor freedom § 1st for skilled labour, § 3rd for flexibility and adaptability of people, § 4th for labour productivity.
In spite of the difficult economic environment in which we are currently operating the underlying strength of the Irish economy is clearly evident when you consider our Trade performance and the continued impressive success of our exporters. Last year our trade surplus was a very healthy €21.4 billon. This was a very impressive performance, especially when account is taken of the deep global recession and the adverse exchange rate between the Euro and the currencies of both the US and Britain, our two largest export markets.
If the experience of recent years has taught us anything, it is that trade is the cornerstone of Ireland’s economic success and trade will undoubtedly be the instrument by which Ireland positions itself to benefit from the future global upturn.
Even in these difficult times many of our export-orientated companies continue to excel. It is therefore clear to me that we need to build on these strengths and use them to our advantage in ensuring that the Irish economy is well positioned to benefit when there is an improvement in the global economy.
Live Register
While we still retain many areas of competitive advantage, we must also acknowledge that the global economic downturn has had significant implications for our economy as a whole. This is most evident by the sharp rise in unemployment which we have experienced.While it is true that the Live Register is continuing to rise, the monthly rate of increase has been abating since February. In addition despite the major downturn in our economy, last month over 16,500 people left the Live Register because they found work.
In fact in the past twelve-month period almost 145,000 people left the Live Register because they secured employment. This is a positive trend that shows there are still jobs available and that the Government activation measures are assisting the unemployed to develop their skills and secure employment.
Activation and Training Measures
To respond to the increasing numbers of people on the Live Register, I am working closely with my colleagues, Minister Hanafin and Minister O’Keeffe, to ensure that appropriate responses are developed and put in place to meet the upskilling needs of those who are losing their jobs or facing uncertain employment prospects. My Department alone is investing €1 billion in the provision of a range of labour force measures that will provide training and work experience opportunities to assist those who have lost their jobs.Job Search Supports
FÁS employment services together with the Local Employment Services have put in place measures to double the capacity to cater for the rise in referrals from the Department of Social and Family Affairs. The implementation of these measures has increased the annual referral capacity to 147,000 persons in 2009. These measures and others represent a significant step in meeting the huge challenge of supporting the unemployed.Training Initiatives
In a difficult employment climate such as that which we are currently facing, the importance of training and education is vital for everyone within the workforce. The impact such opportunities can have for those who are out of work and are seeking to rejoin the labour market, cannot be overstated. To assist individuals through the provision of education and training opportunities, I have also almost doubled the number of activation training and work experience places provided by FÁS to 128,000. This is a substantial increase on the 66,000 places, which were available at the end of last year.Specifically, there are additional training places on short courses available to the unemployed. The courses are designed to be flexible in responding to individual training needs in the development of new skills and competencies. These places are specifically tailored to individuals who wish to add to their existing skills level and improve their prospects of re-entering the labour market.
Work Placement Programme
In addition, in the Supplementary Budget the Government announced its intention to establish a programme that will provide valuable work experience to individuals who are unemployed and who have had limited experience to date. Both my colleague Minister Hanafin and I jointly launched the Work Placement Programme, on the 2nd June. This programme will provide 2,000 individuals who have been unemployed with a six-month work experience placement. Under this programme there are two streams each consisting of 1,000 places.The first stream is for graduates who before this year have attained a full award at level 7 or above on the National Framework of Qualifications and who have been receiving Job Seeker's Allowance for the last six months.
The second stream is open to all other individuals who have been receiving Job Seeker's Allowance for the last six months. Under this stream 250 places are being ring-fenced for those under 25 years of age.
As a result of the co-operation and dialogue between my Department and the Department of Social and Family Affairs the scheme has been innovatively designed to allow participants on both streams of the Programme to continue to receive their existing social welfare entitlements from the Department of Social and Family Affairs for their duration on the programme.
Short Time Working Training Programme
A further initiative both my colleague Minister Hanafin and I launched on the 2nd June is the Short Time Working Training Programme. This new initiative offers individuals the opportunity to receive training that suits their specific requirements. With individuals who are on short time working, this Programme will provide two days training a week for 277 workers over a 52-week period.Employment Retention Scheme
Support for jobs, and those who have unfortunately lost their jobs, remain at the centre of our collective efforts. That is why we need to be imaginative and break new ground in intervening to sustain jobs. I can inform the House that the Government is currently examining possible new approaches in relation to retaining people in employment who are in danger of becoming unemployed. This is currently being discussed with the Social Partners.Measures to Assist Redundant Apprentices
Since the beginning of 2008 there has been a significant contraction in activity in the construction sector. This contraction has been accompanied by a substantial reduction in the numbers of people employed in the construction sector. This has had a severe impact on individuals who are currently undertaking an apprenticeship.The Government is fully aware of the difficult situation these redundant apprentices find themselves in. That is why the Government is committed to assisting redundant apprentices to gain employment as soon as possible in Ireland or abroad in order that these individuals may complete their apprenticeships.
I have introduced a wide range of measures designed to help alleviate the present situation by enabling 3,600 redundant apprentices to progress their apprenticeships this year. The measures include the following: § FÁS have put in place a measure whereby apprentices who are made redundant can progress to the next off-the-job training phase in the education sector. This means that they do not need to do their on-the-job phase and can go directly to the next off-the-job phase.
§ FÁS introduced an Employer Based Redundant Apprentice Rotation Scheme to provide support for employers to provide on-the-job training to 500 redundant apprentices when they have released their employed apprentice to a scheduled phase 4 and phase 6 off-the-job training phase in the Institutes of Technology.
§ ESB Networks have agreed a programme with FÁS to provide on-the-job training to eligible redundant electrical apprentices at phase 5 and phase 7. This programme will provide up to ESB Networks will provide 400 places over a period of eighteen months.
§ The Institutes of Technology are also providing an 11-week certified training programme for 350 redundant apprentices who have completed their phase 4 training but where another training opportunity is not currently available to them.
Support for Enterprise Sector
The key to overcoming our rising unemployment levels is to provide the necessary support to the enterprise sector to create employment.This Government has always displayed a strong commitment towards assisting the continued development of our enterprise sector.
In the Supplementary Budget the Government made provision for in excess of €500 million for capital investment in enterprise through IDA Ireland, Enterprise Ireland, the County and City Enterprise Boards and Science Foundation Ireland. In doing so, the Government has prioritised investment in the most productive sectors of our economy and has invested in the creation of jobs by cementing the foundations of export led recovery and growth.
Enterprise Stabilisation Fund
As part of this investment the Government has established a €100 million Enterprise Stabilisation Fund. This Fund, which is administered by Enterprise Ireland, is aimed at viable but vulnerable internationally trading companies to help them survive the current global downturn by supporting their drive to reduce costs and gain sales in overseas markets and to sustain employment. Sustainable economic recovery will be driven by enterprises focused on increasing their exports of innovative products and services in global markets.Companies from all sectors are seeking support with the main issues of concern being the Sterling exchange rate, loss of sales, funding from the banking sector, competitiveness, construction industry and Energy Prices.
Companies have been engaging with Enterprise Ireland regarding the Fund, of which 60 companies are now being intensively worked on to develop definitive project applications to the Enterprise Stabilisation Fund with a view to releasing such funding as soon as practicable.
Access to Finance
I am also fully aware that access to finance is a concern for SMEs at start-up phase and development phase. A properly functioning banking sector is an essential element for the maintenance and development of SME enterprises.Government’s focus over recent months has been on creating a fit-for- purpose banking system through the introduction of a Bank Guarantee Scheme, agreement on a Recapitalisation Scheme, the nationalisation of one Irish bank and the establishment of the National Assets Management Agency (NAMA) to deal with impaired bank loans.
A key principle of all these actions is the recognition of the importance of business lending to SMEs. The Banks’ Recapitalisation Package contains a range of initiatives to directly assist our enterprise sector, including the following: · The recapitalised banks have committed to increasing their lending capacity to SMEs by 10% over 2008 equivalent figures.
· A €100m environmental and clean energy innovation fund is also being established by each bank as well as a further €15m each to new or existing seed capital funds.
· Three Banks (AIB, BOI and Ulster Bank) are providing funding for SMEs on foot of €300 million facilities provided by the European Investment Bank to assist developing SMEs.As part of the banks’ recapitalisation package, the Government decided to have an Independent Review of Bank Lending to try to have an objective assessment of the current lending situation. This process, which is being undertaken by Mazars, is underway and although originally only the two recapitalised banks agreed to participate and fund the Review, now all the six leading banks are engaged in the project. The results of this Review will be available shortly and this should allow all stakeholders to have an objective view of the state of lending.
Credit Supply Clearing Group
Last month I and my colleague the Minister for Finance established the Credit Supply Clearing Group. This Group will identify patterns of events where the flow of credit to viable businesses appears to be blocked and will seek to identify credit supply solutions relating to these patterns.The Group has already held its first meeting and will meet again after the publication of the Report on the Independent Review of Bank Lending.
To help alleviate the cash flow problems facing the SME sector the Government has agreed to reduce the payment period by central Government Departments to their business suppliers from 30 to 15 days. The commitment will have effect in respect of all valid invoices received on or after 15 June 2009.
This Government fully recognises the importance of SMEs for the economy and their need for access to bank credit. We will continue to support SMEs during the current economic difficulties.
For my own part, I will continue to meet regularly with Irish business representative bodies, our main banks and my Department’s Enterprise Support Agencies to ensure that all sides have a common understanding of the issues and a common commitment to support viable businesses.
Wednesday, 6th May 2009
Address by An Tánaiste on The Companies (Amendment) Bill 2009
2nd Stage Speech
Irish Company Law is a significant part of the infrastructure underpinning the development of Irish business. It provides the framework that governs how Irish companies conduct their business, how they communicate with shareholders and other investors and how they deal with creditors. To remain fit for purpose, Company Law has to be, and indeed has been, updated and refined on a regular basis since 1963 in response to dynamic changes in the Irish and international corporate environment.The Bill that is being introduced in this House today is the latest proposed revision of the sophisticated and interrelated suite of Acts and Regulations that make up the Irish Companies Code.
Arising from recent experiences in the enforcement of company law in the banking sector, in particular, I consider it necessary to introduce a small number of important changes to company law.
As the House is aware a wide ranging analysis of current company law is well advanced and it is my intention to publish a very significant piece of legislation containing 1,250 sections next year. In the meantime the intention of this short Bill is to provide in primary legislation a framework to support the Director of Corporate Enforcement in his efforts to enforce compliance with company law by ensuring he has the range of powers required to support him in this task. It will improve the transparency of loans made by companies, that are licensed banks, to their directors, and to persons connected with them.
In addition, it will amend certain existing provisions relating to Irish registered non-resident companies to meet EU Commission concerns.
On my initiative extensive consultations took place with the Director of Corporate Enforcement in drawing up the amendments contained in this Bill. His experience of the operation of company law “on the ground” and of the issues that arise when carrying out investigations of possible breaches of these laws are a source of vital and practical feedback.
Recent experience has shown that compliance with company law could more effectively be enforced if a number of targeted amendments were made to existing company law.
I will explain each of the amendments proposed in the Bill in greater detail later but in summary, the Bill will improve overall enforcement of compliance with company law by, inter alia:- - providing for the ODCE’s right of access to certain company and third party records; - it allows for extensions to search warrants granted to the Office; - it introduces a mechanism, together with appropriate safeguards, for an extended power of seizure so that large -volumes of paper or electronic information that may contain relevant material can be removed for later examination; - it lightens the evidential burden on the Director of Corporate Enforcement when taking action against companies in default of existing provisions regarding loans to their directors; - it amends existing requirements relating to the disclosure of loans to directors in the annual account of licensed banks.
One of the issues the Bill addresses relates to the large amount of documents and computer records seized by Gardaí as part of the ODCE’s investigation into Anglo Irish Bank on Anglo’s premises. Of course, this issue has general application and could be relevant to any large investigation. Before examining the seized material, its legal professional privilege status must be determined. To this end, on 13th March last ODCE applied to the High Court for its approval of a mechanism agreed by the parties whereby such privilege could be decided.
While the High Court Judge stated that the method of resolving difficulties in the manner outlined to the Court was "eminently sensible", he did not believe that section 23 of the Act as it stands provided the Court with a statutory authority to outsource a function currently reserved to it. The judge could not therefore approve the proposed procedure. As I will be explaining shortly, section 6 of the Bill will give legislative underpinning to an appropriate mechanism, which is similar to the one proposed to the High Court.
The ODCE report that the Anglo investigation is the largest and most complex investigation that it has undertaken since the Office was established in late 2001. According to the Director, a substantial amount of further work needs to be done in order to complete the examination, which he hopes to conclude by the end of this year.
I should of course point out that while company law governs the disclosure of directors’ loans in the annual accounts and elsewhere, it does not extend to regulating bank lending and other banking activities. This task falls to the Financial Regulator who is also empowered under the Central Bank Acts to make rules to change conditions attaching to bank licences. I understand that the Regulator is currently proposing to amend its rules in relation to disclosure of loans by banks to their directors and connected persons - areas that are also covered by the Companies Acts. My proposed changes to the Companies Acts take account of the rule changing powers of the Financial Regulator but do not seek to duplicate its role in determining how best to oversee prudential supervision of the banks.
I wish to turn now to the provisions of the Bill and explain what each is designed to achieve.
Section 2 is a provision affecting the generality of companies and not simply the small number of companies that hold banking licences issued by the Irish Financial Regulator.
Subject to certain restrictions, existing Company Law allows a director to legitimately have a private interest in contracts or proposed contracts with his company. However he must declare any such interests to his fellow board members. Failure to do so could make him liable to a fine and to have to account to the company for any profits he has gained.
The company is obliged to keep a record of directors’ declarations of interests in a book that is kept for this purpose.
The amendment being proposed in Section 2 of the Bill will give the Director of Corporate Enforcement a specific right of access to this book. It will also provide a sanction in any case where a company fails to allow the Director access this information. This will assist in enforcing compliance with the Companies Act provisions.
Sections 3 and 4 are linked and deal with the powers of the Director of Corporate Enforcement to require the production of records from a third party where these records relate to a company under investigation.
This power is vital to the Director when he is investigating companies whose books are incomplete for whatever reason. The Third Party might typically be a director, auditor or employee of the company being investigated. However, it may be the case that other individuals possess the relevant documentation and if so, this provision could be relevant to them.
The right of the Director of Corporate Enforcement to access third party records has already been provided through Section 19(3) of the Companies Act 1990 and the Director has informed me that he has already used it successfully in a number of cases. However he has requested that the power be reworded to provide greater clarity and to avoid doubt in the future about what records can be sought from third parties.
Also for the avoidance of doubt, the Bill stipulates that the clarification being introduced here will not invalidate any previous requests for access to third party records. This would be important for the continuity of any ongoing investigations that relied on material discovered through the use of the existing powers.
Section 5 is another provision with general application. It deals with the entry and search of premises by the Director or authorised officers of the Office of Director of Corporate Enforcement on foot of a search warrant issued by a judge of the District Court. At present, the Companies Act 1990 provides a limit of one month on the lifetime of such warrants. While this can be sufficient in some investigations, it may not allow sufficient time to conduct large and complex searches or where substantial amounts of information are contained in electronic format.
The amendments in the Bill provide for situations where an extension of the period of a search warrant can be sought from and granted by the Court. This will allow the Court to take account of the grounds given for seeking an extension and to use its discretion in deciding whether to allow the extension or not.
The Bill also makes provision for the removal of paper and electronic information from premises being searched, for subsequent examination elsewhere, to determine their relevance to the matters under investigation. This is referred to in the Bill as “extended power of seizure”. Appropriate detailed safeguards are also provided in the Bill to ensure that this extended power is only used when appropriate.
For example, the Bill stipulates the issues that should be taken into account by the Director in deciding whether or not it is reasonably practicable to determine the relevance of something on the company’s premises. It also provides for the arrangements he must put in place before the extended power of seizure can be used. These include the maintenance of confidentiality of seized information and granting the owner reasonable access to it. The Bill also provides for arrangements to be adopted in cases where the Director believes it necessary to avoid possible concealment, falsification, destruction or disposal of relevant material. It requires the Director to deal as expeditiously as possible with the material seized and to return any material that proves not to be relevant to the owner as soon as possible.
In drafting the Bill, every effort was made to provide for all situations that might arise during the course of an extended search. However, should any new or unforeseen issue arise the Minister for Enterprise, Trade and Employment is being empowered to make appropriate regulations.
Section 6 makes a number of amendments to section 23 of the Companies Act 1990 which at present protects a person from having to disclose certain information under Part II of the Companies Act 1990, which the Explanatory Memorandum inadvertently referred to as Part III. The protected information in question in Part II is that which, in the opinion of the court, the person would be entitled to refuse to disclose on grounds of legal professional privilege.
While the 1990 Act allowed for a blanket prohibition on the seizure of such material, the Director of Corporate Enforcement reports that there are sometimes difficulties in deciding during a search whether privilege pertains to specific documents. The situation becomes even more problematic given the prevalence of electronic data storage. A legal solution is necessary which recognises the inevitability of legal privileged data being mixed up with information not enjoying that privilege.
The arrangement provided for in this Bill will permit the seizure of information, whether privileged or not, on a sealed basis. It will then be a matter for the court to decide on matters relating to privilege. Application to the Court for such a ruling must be made by an officer of the Office of the Director of Corporate Enforcement or a Court appointed inspector. It may also be made by any person from whom disclosure is compelled or material taken.
The amendments also provide for the introduction of a mechanism where the court can be assisted by the appointment of an independent person with suitable legal qualification to examine the information and prepare a report with a view to assisting or facilitating the court in making its determination. This amendment addresses the concerns that were expressed by the High Court during the hearing on 13th March last, that I referred to earlier.
To preserve confidentiality of sensitive information, the Bill provides that the court hearing can be held otherwise than in public.
Section 7 relates to the very important provisions contained in section 31 of the Companies Act 1990. This prohibits companies from making loans to their directors, except in certain defined circumstances. This limitation on the personal use of a company’s assets by directors and persons connected with those directors is to ensure that the company has the available resources to pay its creditors as their debts fall due. This prohibition is a very important safeguard in company law and it is applicable to all 180,000 companies incorporated in Ireland.
For this reason, breaches of the provisions have been a particular focus of the work of the Office of the Director of Corporate Enforcement (ODCE) since it was established in late 2001. Concerns were expressed that the success in prosecuting offending directors or companies might be affected by the current wording of section 40 of the Companies Act 1990 which puts an onus on the Director of Corporate Enforcement to prove that a company director was aware he was in default of the company law prohibition on loans to directors.
Section 7 of this Bill therefore substitutes section 40 of the Companies Act 1990, which sets out the penalty for breaches of section 31 of 1990 Act. The substituted provision will provide, in future, that if a company enters into a transaction or arrangement that contravenes section 31, every officer of the company who is in default will be guilty of an offence. This aligns the offence with numerous similar offences under the Companies Act, and replaces the existing requirement for a successful prosecution to effectively prove wilful default.
Section 8 amends sections 41 and 43 of the Companies Act 1990 and deals with the disclosure in the annual accounts of loans - that is transactions, arrangements or agreements - made by a company to its directors and to persons connected with them. To remove any doubt, the amendments include appropriate penalties for failure to disclose such loans and defences that can be made.
Section 8 also makes some amendments that relate solely to companies that are licensed banks. As Section 9 also deals with this subject I intend addressing both sections together.
In providing for a disclosure regime for company loans to their directors and to those connected with them, the Companies Act 1990 treated companies that are licensed banks differently to the generality of companies. While most companies must disclose such data on an individual named basis in their annual accounts, the accounts of companies licensed as banks require a lesser degree of disclosure. This was supplemented by a requirement to keep a Register of relevant loans, details of which had to be disclosed to shareholders in advance of the banks annual general meeting. This different disclosure regime took account of the fact that lending is part of the day-to-day operations of a banking company and unlike most other companies, the business of the banking sector was regulated and supervised.
The generality of companies must disclose in their annual accounts prescribed details, as set out in section 42 of the Companies Act 1990, of all such loans to named individuals. To date, the annual accounts of companies that are licensed banks were obliged to disclose aggregated data on such loans, where amounts were still outstanding at the end of the financial year. Given this different disclosure regime, companies that are licensed banks, are also currently obliged to keep a statutory Register of loans to named directors and connected persons. Particulars from the Register are also included in a pre-AGM Statement.
The Companies (Amendment) Bill 2009 changes the disclosure requirements for the banks as follows: Directors: The Bill provides that in future loans to directors of companies that are licensed banks will be treated in the same way as non-banking companies. Specifically all loans above a de minimis threshold to each individual named director will have to be disclosed separately in the annual accounts, as opposed to in aggregate format. The maximum amount outstanding during the year will also be disclosed and not simply the amount outstanding at the end of the financial year.
Connected Persons In so far as connected persons are concerned, the Bill provides for additional disclosure but this is not as detailed as is required for directors. It retains the existing aggregate disclosure of favourable loans in the case of connected persons, but provides that the maximum amount outstanding during the year will also have to be disclosed.
Other disclosures in the accounts: The Bill recognises that licensed banks may be required to make more detailed disclosures in their accounts under rules, directions or requirements imposed by the Financial Regulator.
The Register and pre-AGM Statement This Bill retains the requirement for the statutory Register, because of its value as a source of up-to-date data on current loans but provides that information that will -as a result of the Bill or other requirement, such as the Financial Regulator’s Rules- be required to be published in the accounts need not also appear on the pre-AGM Statement.
The Bill provides a specific right to access for the Director of Corporate Enforcement to the statutory Register of Loans to Directors and Connected Persons, so that he can take enforcement action if necessary.
Section 10 amends sections 43 and 44 of the Companies (Amendment)(No.2) Act 1999 in order to meet the concerns of the European Commission that certain elements of the current provisions are not compatible with the EC Treaty. A company law amendment introduced in 1999 sought to deal with Irish registered companies that were controlled and managed from abroad and were treated as non-resident for tax purposes. The 1999 Act required a company wishing to register in Ireland to have a director resident in the State or alternatively, through a process involving the Revenue Commissioners and the Companies Registration Office, to show that it has a real and continuous link with economic activity that is being carried on in the State. The amendment proposed in the Bill replaces the necessity to have at least one Irish resident director with a requirement that one director must be resident in the European Economic Area.
The Government is committed to supporting the work of the Director of Corporate Enforcement in every possible way including through the provision of appropriate statutory powers and resources to that Office.
My objective in proposing these legislative changes to the Government and to the Oireachtas is two-fold. Firstly, as I observed recent events unfold in the banking sector, I was anxious to ensure that the Director of Corporate Enforcement had available to him an up-to-date suite of enforcement powers that are fit for purpose.
Secondly, I wanted to ensure, from a business perspective, that our body of Company Law is relevant, transparent and proportionate both as regards the facilitation of the conduct of business in Ireland and as regards good governance and penalties. Having a strong, transparent and proportionate legal framework is critical to our competitiveness and to our international reputation as a place in which to invest and conduct business.
I commend the Bill to the House.
Wednesday 8th April 2009
Statement of the Supplementary Budget
by Minister Jimmy Devins TD-Minister of State for Science, Technology and Innovation
There can be very few people who are now unaware of the very difficult circumstances facing the Irish Economy. This Government has had the unenviable task over the past weeks of taking some very hard decisions and making some very stark choices. We have remained resolute to our task and it has taken both courage and conviction to devise the package of reforms that has been presented in yesterday’s Budget.While the announcements contained in the Budget include strong medicine, we are today in a much better position in that a diagnosis has been made of the ills of the economy and the prescription written – the economy has now been put on the road that will, in time, lead to recovery.
The strategy adopted by the Government has combined the efforts of reducing Exchequer costs to bring them into line with Government revenue, and of putting in place a strategy that will lead to economic renewal, while at the same time selecting the instruments to do this task that will minimise the negative spin-off effects on jobs and on enterprise. It has been necessary to deal with the problems of the present while at the same time keeping a careful eye on building for future recovery.
It is a difficult balancing act, but an honest effort has been made, and now the solution to the present difficulties and the resolution of future opportunities lies as a responsibility on all of our shoulders.
We will only get out of the present situation by drawing together and striving as one for the good of the State, for the benefit of the whole community of people that live in Ireland, and with hope and determination to create a better future for all.
When tackling the Budget, the emphasis has been on fairness, on economic renewal and on building a better future. In this context, the elements of the Budget covering the area of Science, Technology and Innovation have sought to achieve a proper balance the between the scarceness of the resources available and the need to keep up the effort to develop an innovation-driven economy that will allow Irish enterprise achieve competitive advantage and increase productivity and jobs in the future. This, I believe, has been delivered.
Funding has been concentrated in the areas where greatest economic benefit can be achieved speedily. In a difficult economic environment, the Science and Technology subhead of the Department of Enterprise Trade and Employment Vote has been kept at a level above the level of spend in this area in 2008. What is being done is to hold the line in terms of the level of support provided to allow the consolidation of the investment made over recent years in the whole area of research, development and innovation.
I would particularly like to welcome the introduction of a scheme of tax relief for the acquisition of intangible assets, including Intellectual Property. The details of the scheme remain to be worked out by the Department of Finance in conjunction with the Revenue Commissioners. This measure will help to attract high quality employment to this economy.
Budget for Science, Technology and Innovation The expenditure provision for Science, Technology and Innovation provided in the 2009 Budget of my Department is €311 million, which is €2m more than was spent under this heading in 2008. In addition, there will be a further €6 million made available as capital carried over from the 2008 Budget allocation, allowing for a total science, technology and innovation budget of €317 millions for 2009, which is 2.6% of an increase on last years spend.
The fund of €317 millions will be used by the development agencies Enterprise Ireland and Science Foundation Ireland, and supplemented with IDA funding to: o provide an important support to Irish business in their efforts to be innovative and stay competitive, by increasing in-company research and development, o assist IDA Ireland in winning research investments for Ireland, o promote the commercialisation of research and bring the outputs of Ireland's research base to the marketplace, o and strengthen collaboration between industry and the education sector, and consolidate the investment made in Ireland's Third Level research base.
Enterprise Ireland Enterprise Ireland will receive a science, technology and innovation budget of €133.7 million. This together with a capital carry over sum of €500,000 will give a fund which is a 3.5% increase over the 2008 spend. This funding will enable the Agency to provide all important supports to industry with a sharp focus on identified industry needs, and seeking to create a real impact in terms of the commercial spin off from research and development.
This level of support provided in the budget for Enterprise Ireland’s Research and Development activity will drive industry-led research, enhance collaborations between third-level institutes and companies and maximise the commercial potential of publicly-funded research. The development of a dynamic and innovative enterprise sector will be a key factor in creating and maintaining employment in these difficult times.
Enterprise Ireland will continue to promote and foster start up companies with the potential to develop new products and services and create high-value jobs. Through it’s suite of Research and Development programmes, Enterprise Ireland is ideally placed to provide financial support and advisory assistance on the ground for young and innovative companies. This investment will stimulate growth of more competitive companies and ultimately create long-term sustainable employment Enterprise Ireland has adopted a lead role in driving the effective commercialisation of research in Ireland, through stimulating collaboration between industry and the third-level institutes. Through its Commercialisation Fund, Enterprise Ireland will secure the commercial potential of the output from our investment in the Irish research community to the benefit of Irish companies.
By encouraging greater collaboration between industry and third level research through initiatives such as Innovation Vouchers and Innovation Partnership, Enterprise Ireland will further the development of an innovation culture among Small and Medium Enterprises.
Science Foundation Ireland The Science Foundation Ireland funding will be €170.5 million. In addition a sum of €5.5 million in capital carry over will be available, giving a total budget of €176 millions which is a 3.2% increase over last year’s spend year. The allocation of €176m will enable SFI to continue to build a critical mass of internationally competitive research teams in the sciences and engineering underpinning Biotechnology, Information and Communication Technologies, and Sustainable Energy and Energy Efficient Technologies.
This funding will primarily assist SFI to continue to support and grow its Centres for Science, Engineering Technology (CSET) and Strategic Research Clusters (SRC) programmes. Currently SFI is supporting a total of 26 centres with a number of new CSET and SRC awards anticipated later in 2009. It is through these industry-embedded research groups, which are formally linked to over 150 multinational and small to medium high-tech enterprises here in Ireland, that SFI is supporting the retention of employment of over 60,000 people in high-value jobs in this country. This employment figure will grow when new industrial partners become involved in the CSET and SRC programmes on the back of further SFI investment.
SFI funding provision will increase Ireland’s global reputation as a location of excellent scientific research and as a source of human and knowledge capital, such that business creating next-generation products, services and related employment are attracted to and retained in Ireland.
Overall, SFI funded activities are consistent with promoting research and development as a key part of the enterprise agenda, assisting as they do the retention and attraction of quality employment in Ireland, and thereby increasing the value of Irish industry.
IDA Ireland The growth that has already taken place in Ireland's research base has brought to Ireland world-class researchers, and made available high quality graduates and PhD graduate output, and this has been of demonstrable assistance to IDA Ireland in their effort to win highly competitive research investments for Ireland. In 2008 IDA provided funding for 56 internationally mobile research-related investment and in 2009 IDA Ireland will continue to support a similar number of R&D projects.
Strategy for Science Technology and Innovation The Government’s commitment to investment in Science, Technology and Innovation has never been more relevant than it is today. While the current economic crisis is creating real challenges for businesses, continued investment in research, development and innovation is essential to maintain competitiveness, address shifts in markets and to prepare for economic recovery. The development of the ‘smart’ or innovation-based economy is a key opportunity that we must grasp. We require, a sharp focus on the fundamental principle that a small open economy must compete globally and be competitive globally. We must continue to invest in Ireland’s research base as an important cornerstone underpinning our future competitiveness.
There are indications that research and development is counter cyclical - as markets contract, the importance of developing new products and services, and the importance of using innovation to increase competitiveness becomes much more clearly relevant to business. Irish companies are keen to exploit the benefits of innovation, and it is incumbent on us to facilitate them. Already, there are real, tangible benefits arising from the Government’s commitment to Science, Technology and Innovation.
Direct investment in enterprise yields a positive return to the Exchequer and the economy, generally within a short timeframe. Some recent major projects illustrate the point:
• Between 2000 and 2007, EI supported 430 High Potential Start-ups.EI HPSU’s yielded sales of €638m, exports of €344m and generated employment of 5,500.
• In March of this year, Hewlett Packard announced an investment of €18 million to create 500 highly skilled multilingual technical support positions over the next 12 months expanding its Global Service Desk operation in Dublin.
• In February, Intel announced a €50 million major expansion at its research and development facility in Shannon, which will create up to 134 new jobs and bring employment at the facility to approximately 300.
• In November, Houghton Mifflin announced a €350 million expansion of its R&D facilities which will create 450 high-value jobs.These are not isolated cases. Over the last year we have had research and development announcements from a wide base of world class companies: Aon Corporation, Boston Scientific, CITI, Diageo, ON Semiconductor, Oriflame, Business Objects, Synopsys International, Houghton Mifflin Harcourt IP, three separate announcements from IBM, announcements from Pfizer, EMC, Intel, HP, PayPal and Helsinn Holdings.
Overall, the level of investment totals to €842 million and will contribute to almost 1,700 high value jobs in our economy. These companies were attracted to establish R&D operations in this country as a direct result of the Government’s investment in, and commitment to developing Ireland’s science, technology and innovation base.
The return on our investment in enterprise is dramatically improved when coupled with and underpinned by strategic investment in R&D, because the outputs and impacts of such investment are a significant draw for Foreign Direct Investment firms and a significant catalyst for adding volume and value to the activities of indigenous firms. The establishment of a strong research base in Ireland is proving to be a vital driver of major investment decisions by overseas and indigenous companies as the following illustrates - • In 2007 IDA concluded negotiations for 114 new investments, 40% of which were in the area of R&D. In 2008 43% of IDA investments won were research related and are valued at €420m.
• Almost one third of RD&I investments involved collaboration with Irish third level institutions and research institutes, many of which have been supported by Science Foundation Ireland.
• EI client companies continue to open up new markets with innovative products and services. Our R&D support is vital to keeping these companies competitive.
Finally - In this difficult economic climate, the development of the knowledge economy in Ireland is key to maintaining competitiveness. 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 to Ireland’s future.
In the current economic circumstances, we will have to ensure that the return on our investment in science, technology and innovation is maximised, by a prudent application of resources, by active management, and by careful coordination of the resources available. The structures to do this are in place, and I have every confidence that we will continue to build on the achievements to date.
What I wish to do to-day is to send a strong signal to Irish business that the way forward lies in staying competitive and maintaining an innovative edge over competition by developing new products and processes, that will assist Irish enterprise to win new markets in the present challenging environment. This exhortation is backed by tangible financial support that will continue to be available through my Department’s Vote, and which will be a sound platform from which to spring forward to deal with the challenges facing them on many fronts.
Wednesday, 8 April, 2009
Dáil Éireann – Statement of the Supplementary Budget
Address by the Tánaiste and Minister for Enterprise, Trade and Employment, Ms. Mary Coughlan, T.D.
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,
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 1st 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 1st 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 (4th), human resources and economic effects (both 5th 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.
n 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.
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