Richard Bruton (Dublin North Central, Fine Gael)

No. It is a pleasure to be in the Seanad to speak about this critically important issue. It is a long time since I was a Member of the Seanad, but I certainly learned here the importance of adopting a constructive approach to politics which, perhaps, has been lost a little in the Lower House in which the approach to issues tends to be more partisan or contentious and less constructive. I look forward to hearing the views of Senators. I need not tell any of them about the really difficult economic situation we face, but I want to point to a few dimensions that are important signals as regards where we need to go.

In the past three years we have lost almost 350,000 jobs. What is particularly depressing is that two thirds of these have been lost by persons under the age of 30 years and we are losing significant numbers of younger people to emigration as a result of the fallout. Last year approximately 30,000 Irish people emigrated. That is a level of attrition we cannot stick for the building blocks of a strong economy in the future. We need these younger people to work and find their future in Ireland. It is not simply for one Department or the Government alone. Society as a whole must consider the challenge of making jobs our most important priority and prioritise it in every way we can.

I will not give a political rundown of what went wrong but when we consider what happened in the past decade the legacy of the property boom has been very serious. While property boomed the things that really matter for employment in a small open economy decayed and we lost our competitiveness dramatically. Let us consider the world competitiveness ranking. We dropped from fourth to 24th place and we are down again this year according to recent figures. We lost our export market share dramatically for six years in a row. While the previous decade had been one of dramatic growth with up to 8.5% per annum growth in our market share it then swung into reverse. We lost approximately 30 percentage points on simple cost competitiveness against the likes of Germany with which we complete in key export markets. Our model which had been balanced became very distorted and instead of having exports balanced with growth in other sectors such as construction and so on, construction took over. Not only did this damage our competitiveness, it significantly damaged key elements of our system, most notably the banking system. We must address these significant issues and this is the legacy of that period.

Ireland has been in such a situation before and it is important to recall as much. The Whitaker-Lemass era was a similar period in which a Government and a public service with political drive on one side and public service innovation on the other addressed a series of failed policies and changed direction. We should think in such terms again. Ireland and the people must consider how we can create a different, stronger, sounder future for ourselves from what has passed in recent years. We must re-imagine our country's future and the type of economy we seek to create. This is why I spoke at the MacGill summer school about needing an innovation revolution and that was reflected in the title. We need to create an indigenous engine of growth in the country with enterprise as the driver. Innovation must become the norm not only in enterprises, which is crucial, but throughout the public service and the supports we have in place. This is the challenge the Government must address.

It will not simply be about enterprise strategy, it will also be about how we manage the support and activation of people who are out of work. How do we create an education system that is more geared to the challenges of a modern workplace? How do we create a public service that does not create regulatory burdens and drags on business and which recognises that one can have high standards without bureaucratic drag and creating cost? This requires innovation in thinking throughout the whole of Government and, most important, within business. One of the disappointing things I have found coming back to this Department after 14 years was to learn that exports were still dominated by foreign companies from which 90% of our exports continue to derive. Indigenous companies have only 10% and they have not been building market share for a considerable period. Questions must be asked about our enterprise development model. Why have we not created stronger companies within the indigenous sector? There are dynamic companies but many reach a certain level and then are sold or do not go to the next level. We need to consider seriously the strategies and policies that we pursue.

Also we must consider the multinational sector. Many countries would given their right arm to have the breadth of strength we have in the multinational sector. We have created a leading edge in information and communications technology, medical devices and pharmaceuticals and digital gaming. We have strong sectors but on examination their overall impact on the economy in terms of linkages and purchase of materials and services has been dwindling over the years. We must develop a new model to exploit the strengths of the multinational sectors and to turn them into clusters of growth that spawn indigenous companies which grow within the environment as well as strong export companies based largely on foreign research and development and marketing.

We have started to do this and we have laid down a bedrock of science and research capability in our universities. However, in many sectors we have failed to ignite a broader cluster of strength. The medical devices sectors is probably the exception. It is especially strong around Galway and the west and it appears to be spawning not only strong multinationals but strong indigenous companies which grow and flourish. We must examine our models for developing and promoting indigenous enterprise focused on the export market and we must examine how to deepen, strengthen and make the Irish-based multinationals more strategic within their own families so that we have the leaders within a multinational family.

These are great challenges for us but we have every reason to be ambitious and confident about our future. We have shown resilience through this period and we have successfully started to fix our banks. We now have proper, separated, pillar banks with the capacity to focus on the domestic economy. We are the location of choice for many of the most ambitious companies, especially in the USA. We have created real sectoral strengths and strengths within our colleges and universities. We must bring these together and we must be willing to transform the pieces of the jigsaw that are not working. Too often in Ireland when the issue of change comes up, whether change in wage setting mechanisms or the way we manage our public service, there is a tendency to see it as a zero sum game whereby for there to be an advance for one group there must be a retreat for the others. The truth is that in many of these areas there can be a gain for everyone if we start to transform the systems. It is not a question of penalising, victimising or pursuing one group in a penal way, it is a question of transforming a range of issues at the same time to create a more successful enterprise sector. We recognise that enterprise will be the driver of this transformation in the employment area which we need and it is a matter of examining what will help this process.

Some cross-cutting things will make a difference. We must drive down business costs and become more competitive. We lost ground and we must restore it. We must improve access to credit. Despite the work done by Government on getting the banks into healthier shape for many people they are not open for business in the way we would like. We must drive innovation in a new way. We must consider the resources and the substantial investment we put into research and development, whether we can sweat assets more effectively and whether we have best practice in terms of turning research into innovation and jobs. One person put it to me that research is about turning money into knowledge but that innovation is about turning knowledge into money. That is the major difference. We have been pretty good at turning the money into knowledge but the next level is how to turn that knowledge back into money, jobs and practical changes. We also need to look at the potential of businesses. As Senator Mary White will know, McKinsey undertook an analysis of Irish management which found there are capability gaps in management and concluded that if these were brought up to best practice, it would be worth €2 billion to the economy. We need to invest in our companies.

To develop those themes, the Government has been very focused on the theme of driving down business costs. As the House knows, the Minister cut PRSI and VAT and we have been reforming the wage setting mechanisms. We are now moving to reform the legal structures to make access to the legal system more cost effective and we are reviewing the upward-only rent regime, which is another important business cost. I have kick-started the whole issue of cutting regulatory burdens, and just one month ago I raised the audit threshold by 20% so that small companies would not have to get involved in the expense of an audit.

In my own area, I am seeking to reform the employment rights and industrial relations structure, which is at present very cumbersome and overemphasises bringing cases to expensive hearings that have become very legalistic. A good employment rights and industrial relations structure heads off all those problems at the pass whereas ours tends to rush them too quickly towards expensive dispute resolution. I believe we can make significant savings and give a better environment for workers in these areas if we introduce reform. There are many areas in which we can bring down business costs, and what I have outlined is by no means an exhaustive list.

We are also working on access to credit. I am sure Senators receive as often as I do details of the individual cases of people who are not getting the loans they sought from their bank. More people should use the complaint systems. The Credit Review Office recently published figures which show that only 300 cases were appealed to the banks and fewer than 100 were appealed from the banks to the Credit Review Office. In respect of cases on which the Credit Review Office made a decision, it overturned more than half. It is clear, therefore, there is a problem in the way banks are treating people seeking money but only a very small number are actually making it to that final level. There are all sorts of reasons for this, no doubt, but it is important and a signal that there are problems in the system. None the less, people need to give Government better sight of what is going wrong in order that the new powers the Minister for Finance is taking to have stronger oversight of the banks can work on hard information.

We recognise there are market failures, as economists would describe it. Some businesses would not get loans in the present environment because the banks are too risk averse. We are introducing a partial loan credit guarantee to fill that gap and we hope to have it developed before the end of the year. The first tranche is a temporary measure to find how this works and the target will be approximately €400 million in lending, which will fill an important gap. We are also developing the concept of microfinance to allow people who have no collateral whatsoever and are starting off for the first time. Again, this will be done in the context of the programme for Government.

We need to look at the support structure for microenterprise to make sure that structure is up to the highest standard and to find how best to support small start-up business. We also need to see more companies considering export. As I said at the outset, the level of export from our indigenous sector is too low at 38%, a figure which has not changed in a decade. Despite the opening up of huge markets on our doorstep, we have not, as a country, been exploiting this and increasing our sales abroad. This needs to be addressed and we need to consider whether there are obstacles to small companies putting their first foot on the exporting ladder, which I believe there are. Enterprise Ireland is setting up a new division to target exports, in particular first-time exporters.

We need to look at other areas that can deliver on the potential of business, such as access to public procurement. It is well known that a higher proportion of Irish public procurement goes overseas. While this is not always a bad thing, we need to make sure indigenous SMEs have a fair shot at it. The thresholds are sometimes too high or the pre-qualification conditions are too strict, so we need to examine how that can be improved, which is why a working group is working on that issue.

There are very positive signs for the future, meaning we can begin to have realistic grounds for optimism. Our export performance in the past three years has been exceptionally good, particularly in 2009 and 2010 and continuing on into 2011. We have reversed the trend of loss of market share and we are now building market share again. We will go into a trade surplus and a balance of payments surplus next year, so as a country we are actually paying down our debts and getting into a healthier position. The action on the public finances and of hitting our targets, which have continued throughout the year, are having positive effects. We are seeing bond yields coming down and greater confidence in the economy internationally, and we need to turn that confidence into domestic confidence as well. Many people are very nervous about spending and, obviously, the prospect of difficult budgets ahead is part of that. However, we have good grounds for confidence. For example, it is encouraging to see investment in plant and machinery picking up, which is an early indicator that confidence is returning.

As in the Whitaker-Lemass era, we need to set ambitious targets for ourselves. The Taoiseach has said that by 2016 he wants Ireland to be the best small country in which to do business, which is a realistic target. We need to drive our position back up in the competitiveness rankings. We need to set ambitious targets for the development of key sectors where we have strength. We have real opportunity in digital gaming, green economy-clean tech and other areas. What we need to do is decide whether there are obstacles in the way of those sectors and seek to systematically remove them.

I want to give a guarded sense of optimism about the jobs challenge. No one is understating the scale of the problem and the damage we have to overcome, and no one is saying this will be solved overnight. However, if we pursue consistent policies that are based on the needs of an enterprise-driven, export-oriented sector, we can regain the strength we had and create the opportunities for employment here. To achieve this, a huge amount of transformation is needed, not just in the narrow enterprise space but in many of the other dimensions of public service and our communities, which can make a difference.

Communities can really make a difference to the success of an enterprise. Whether a product gets onto a shelf in a local supermarket or in a supermarket chain, whether people are willing to value and spend on well-designed domestic products, whether mentors are available to support a start-up business which is going into what they call the valley of death, which is a difficult valley in which one is trying to make sure one does not fall into the potholes that await young entrepreneurs, all of these make a huge difference. There is much a community can do, whereas the State cannot do it all.

As part of this challenge, we will be looking to significant groups in the community to put their hands out to the needs of those starting businesses to see whether they can do that bit more and deliver more support. For example, the chamber of commerce in Galway is supporting people in that difficult period after they become unemployed and when they are starting to think about setting up a business, and this is done through mentoring, networks and so on.

Much can be done through communities, as well as through the enterprise support bodies. I look forward to hearing the views of Senators and hope to incorporate sensible and worthwhile ideas into our policy development work.