Oireachtas Joint and Select Committees
Tuesday, 27 November 2012
Select Committee on Jobs, Enterprise and Innovation
Estimates for Public Services 2012
Vote 32 - Department of Jobs, Enterprise and Innovation (Supplementary)
I welcome the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton. The purpose of the meeting is to consider a Supplementary Estimate for Vote 32 - Department of Jobs, Enterprise and Innovation. I invite the Minister to make his opening statement.
I thank the Chairman and select committee for giving me the opportunity to present this Supplementary Estimate. I am seeking members' approval to make provision for additional capital funding for the following: €10 million for the Industrial Development Agency, IDA, under subhead 5A; €3 million for the INTERREG enterprise development programme under subhead A10; €738,000 for the Tyndall National Institute under subhead B4; and €5 million for the programme for research in third level institutions, PRTLI, under subhead B6. These amounts are being provided from an underspend that has arisen within the Exchequer allocation for Enterprise Ireland under subheads B4 and A7 of my Department's Vote. The underspend has arisen because of reduced demand from companies for research and development grants and capital, employment and training grants and owing to timing issues in the payments to technology centres and drawdowns under the innovation fund Ireland's seed and venture capital fund.
Approval to reallocate funding is being sought on the understanding that the amounts to which I have referred will be expended by the agencies in question before the end of the year. With the exception of an Exchequer allocation of €1 million under subhead 5, IDA Ireland's property function is self-financing. However, due to the collapse of the property market, IDA Ireland is finding it increasingly difficult to generate income to meet obligations arising under its property programme. Moneys generated from property sales in recent years have decreased substantially. The funds which IDA Ireland has on hand to meet its obligations under its property programme have fallen from €63 million at the start of 2009 to slightly more than €8 million as we approach the end of 2012. In addition to meeting the day-to-day costs of running its business parks, IDA Ireland has a number of other property related contractual obligations. To ease the financial pressures on the agency, I am proposing to provide it with a further €10 million in 2012 in respect of subhead 5. Payment of mature liabilities before the end of the year will ease the financial pressures on the agency and enable it to meet contractual obligations that will arise in 2013 in respect of its property portfolio.
I am pleased with the progress IDA Ireland is making in delivering its Horizon 2020 strategy, which sets out the agency's job creation targets over the period from 2010 to 2014. This year was the best year in almost a decade in terms of the number of projects won and their job content. We must do everything possible to ensure the strong flows of jobs and investments continue. It is my intention that the proposals we are discussing, when implemented, will enable the agency to manage its resources, Exchequer and non-Exchequer, to optimum effect and successfully implement its Horizon 2020 strategy.
On the proposal to allocate a supplementary amount of €3 million to INTERREG, the 2012 allocation for INTERREG enterprise development under subhead A10 is €3 million. The INTERREG programme for the period from 2009 to 2014 funds cross-Border initiatives under several themes. My Department is responsible, with its counterpart Department in Northern Ireland, for funding the enterprise theme. I am proposing to provide an additional €3 million to INTERREG to enable it to meet commitments that will arise in respect of a wide range of projects such as the construction of a technology enterprise centre in Carrick-on-Shannon, County Leitrim, to provide support to a range of innovate, high growth, technology based businesses in the region, and a managing training initiative aimed at improving the management capabilities of manufacturing and traded service sector companies in all the Border counties, North and South, through the development of leadership and management competencies.
From the inception of the INTERREG programme until this year, good projects were late coming forward for approval from the relevant European Union managing authority. This meant the Departments rendered unspent funds back to the Exchequer for several years. However, the programme is now getting into its stride and a wide range of projects was approved over the course of 2012 and these projects are under way. All approved projects have gone through a rigorous vetting process and payments are made in stages. By securing and paying an additional €3 million for these projects at this point, we are proactively funding existing commitments and liabilities and avoiding a build-up of payments falling due in early 2013, thereby easing pressure on my Department's future capital budgets. I have no doubt the Chairman and his colleagues will agree with me that INTERREG cross-Border projects should have a high priority for political reasons and that funding should be provided accordingly.
The 2012 allocation for the Tyndall National Institute under subhead B4 is €3 million.
The Tyndall National Institute is Ireland's largest dedicated centre of research specialising in defined areas of information and communications technology. I propose to provide it with an additional €738,000 to fund the purchase of a new film deposition system for precision optical devices such as lasers and LEDs. At present the institute has an old film deposition system which is now severely limited in its capabilities due to its age and the related device technology needs have surpassed its abilities generally. The purchase of this new equipment is part of a long-term strategic investment programme clearly aligned to national priorities such as research prioritisation, FP7 participation and provision of support for start-up companies and the wider commercialisation agenda. It has broad national appeal to key Irish companies and SMEs in the high-tech photonics area and would facilitate them in developing new innovative products for the global marketplace.
The purchase this equipment is outside the normal grant capability of the institute. As such the use of capital savings from the Department's 2012 budget presents a valuable opportunity for the institute purchase this equipment at this point in time. Failure to secure this funding in 2012 would delay for a number of years the purchase of this equipment and the realisation of the benefits derivable from this purchase. As with all research infrastructure, as soon as it is installed, commissioned and operational it will be available for access by interested researchers and users in the third level sector and industry. I am happy to make this re-allocation to fund the purchase of this equipment which will allow the Tyndall National Institute to continue to undertake cutting edge research and lead the field internationally in the development of world leading photonics devices with the potential to deliver significant employment due to a combination of new spin-off company licensing to Irish MNCs and SMEs and new foreign direct investment.
The 2012 allocation for the programme for research in third level institutions, PRTLI, under head B6 is €27 million. Capital funding for PRTLI is largely for capital infrastructure for top-class research buildings and laboratories which are needed to maintain and enhance Ireland's competitive offerings in research and innovation. The PRTLI also complements other capital investments being supported through the Department of Education and Skills and in a number of instances the PRTLI forms an important part of much larger projects being led by that Department. The programme is administered by the Higher Education Authority and is a mixture of Exchequer, private and EU funding. Under PRTLI cycle five which supports 18 capital projects, we are supporting approximately 2,000 jobs in the construction sector.
I propose to provide an additional €5 million to PRTLI for a number of reasons. It will help to accelerate payments on existing matured liabilities in a number of universities and institutes of technology. This will facilitate earlier payoff of Exchequer commitments which have arisen in respect of a wide range of projects approved and commenced under PRTLI cycle five launched in 2010. Some higher education institutions have taken out significant loans from the European Investment Bank which must be repaid by 2016 or 2017. An earlier Exchequer payout through PRTLI reduces the future higher education institutions funding requirement which falls to the Department of Education and Skills.
PRTLI funding supports ongoing jobs in the construction sector in several colleges. Additional monies will contribute a quicker completion of such projects which in turn will assist the education and training of our future workforce talent. An additional payment of €5 million for PRTLI by the end of 2012 will also help ease pressure on the Department's future capital budgets thus allowing for redistribution of capital funds in favour of other enterprise programmes, particularly on critically important activities involving industry supported by IDA Ireland, Enterprise Ireland, and Science Foundation Ireland in 2013.
The main beneficiaries of the proposed capital transfer to PRTLI would be a number of large-scale projects spanning UCC, NUI Galway, UCD and TCD to name a few. To give a specific example, the new Trinity biomedical facility on Pearse Street is a €131 million overall project which has already been showcased repeatedly by IDA Ireland as a key element of its Ireland value proposition to prospective new FDI clients, as recently as the week before last to a high-level US delegation. This truly world-class facility brings together a critical mass of five medical schools and related research capability over 700 researchers in all in a single central location. I am happy to deal with questions committee members may wish to raise.
I welcome the Minister and his officials. The projects he mentioned are very worthy and strong. I am concerned it is coming from an EI underspend in the grant to industry. The Minister glossed over that a little. Will he give an idea of how much we will take from the EI spend? When was the underspend in this subhead anticipated? I cannot imagine EI giving money particularly as it has had really good programmes such as the women in enterprise programme which is completely over subscribed and will not have enough funding. Will an additional allocation be made to EI for this next year?
The Minister mentioned property related contractual obligations and the day-to-day costs of running business parks. Will he go into a little more detail on this? Given where we are now with regard to property has the IDA renegotiated its property related contractual obligations downwards in line with the markets?
My questions are similar to a certain extent. We saw the figure of six additional Enterprise Ireland jobs developed last year. While great work is ongoing, indigenous businesses often tell as they have difficulty drawing down grants. In addition, sometimes after grants have been drawn down, so many steps are put in front of them they are better off not drawing down the grants and trying to complete projects themselves. It is difficult to access. It seems very odd that Enterprise Ireland, which focuses on the indigenous sector, which has crashed compared to the FDI sector, would have for the second year a transfer of its budget from it. IDA property seems to be the source of a large chunk of the redistributed funds. It would be interesting for the committee to find out exactly what these property costs were. If money is being assigned to deal with a property portfolio we could get details on these property portfolios and the elements of costs requiring these annual transfers. There is an opportunity cost to these transfers because they remove money from Enterprise Ireland and potential indigenous businesses and put it into property which at present is not an enterprise opportunity for the State.
I have much experience with INTERREG and it does excellent work with regard to the PRTLI and the Tyndall National Institute. I would be interested to see what its key performance indicators will be. When we speak about foreign direct investment, IDA Ireland and Enterprise Ireland we often ask the cost per job. It would be useful for us to start analysing the outputs of the PRTLI and the Tyndall National Institute with regard to whether a cost per job key performance indicator exists or what key performance indicators are used. It would help us measure comparatively the benefit of expenditure in these sectors as opposed to others.
On page 32 of a document I have there is a section on jobs, enterprise and innovation which mentions an original Estimate and Revised Estimate for 2012. The science, technology and development programme is reduced by €5.738 million. However, the totals for the original Estimate and the Revised Estimate do not show a difference of €5 million. The difference is €738,000. I do not know whether this is an anomaly or a print error but I would like to draw the attention of the Minister to it.
It could be an error but at the bottom of the table it refers to "less savings in subheadings B4 of €5.738 million".
However, when one looks at the original Estimate totals, it appears as though the difference is only €738,000. While I acknowledge this could be an error, the Minister might explain it.
My general questions concern the key performance indicators on where those funds are going and then the specific property portfolio that is attracting such a substantial amount of money for the second year running.
I have just one question and will not hold up the meeting. I refer to the €5 million provided for research in third level institutions. The Minister mentioned supporting universities. He should provide members with a more detailed breakdown outlining where precisely the money is going.
As I indicated, the underspend was across a number of headings. One such heading was the innovation funds, which have been slower to be drawn down. Some of this arose from the delay after they were put out to tender, as some participants were slower to close off their funds. It is a process in which they must raise matching funds. Enterprise Ireland creates a draw-down profile on the expectation of a certain profile or speed with which they will ramp up. However, they did not meet that pattern and, as a result, this was a significant area of shortfall. Moreover, the Deputy correctly asked whether this was anticipated. I refer to the manner in which Enterprise Ireland must put together its budgets. It must make provision for all the approvals it has made in the past that are planned to mature. As a result, the planned payouts in 2012 comprise approved projects from 2008, 2009 and 2010. It is a mixture of fractions of approvals and as the Deputy can imagine, the approvals for 2007 and 2008 fell sharply. This has been partially due to it being slower in the recession wherein people who had historic approvals actually postponed them and did not go ahead with them. Many such projects require matching funds whereby a company with an approval for a certain amount of money must provide the matching amount and such a company may have postponed it for those reasons. I note it has returned to a more normal spread and the sort of roller-coaster effect in the approval rates now has left the system. This is in part a residue and in part people resiling from commitments they had planned. However, even had one anticipated this development, as they legally were due to fall for payment, this was the reason there had to be provision. It went across the entire range of programmes and was not simply related to research and development, as it also affected employment grants that had been committed, as well as capital and training grants.
Another influencing factor was that back in 2010, ceilings began to be put on the advance commitments that could be made as part of a budgeting process and this also appears to have had an impact. It is quite a complex matter but effectively, Enterprise Ireland is making a forecast of the draw-down of an historic stream of approvals and obviously, there is a series of factors that has led to the underspend.
That is a very large amount of money. While I appreciate all the draw-downs and whatever, I refer to all the other funds that probably could do with that money this year and the number of people who have been turned down because of the lack of capital within Enterprise Ireland. While Enterprise Ireland is a superb organisation, it is always telling members that, like any organisation, it could do with greater resources. However, it is one organisation that actually can do something with it and it just appears to be a large amount of money to be coming in during November and December.
Enterprise Ireland makes a projection of what will be the level of activity in this year. It is a combination of the approvals it made in 2012 with those made historically. Consequently, it is not all about making approvals, as it built into that figure a certain number of approvals made in 2012 that will mature in 2012 but much of the budget pertains to the previous years. Consequently, one cannot suddenly ramp up programmes across the board on the basis of underspending but these particular allocations I seek today are maturing commitments. They are ongoing programmes that can be met today in order that the Department has the scope in next year's budget to meet commitments. I believe the best way to utilise the underspend is to put it into things one knows will mature. If such commitments can be met now, it leaves the Department with greater spending capacity next year. Interestingly, even though this level of underspend has taken place, Enterprise Ireland is set to deliver on the target for the number of job projects it would approve this year. Moreover, its export sales are on target. As of today, the companies Enterprise Ireland expected to support and the flow of projects it hoped to get across the line are meeting the targets it set for itself and metrics are available to show this. Obviously, however, it is a disappointment that the innovation fund has not been taken up as quickly as would have been hoped. One company did not fulfil to the extent that was expected and it will be necessary to have a replacement.
As for the other issues raised, Deputy Tóibín raised the question of whether the draw-down of grants was cumbersome. They certainly are not intended to be and if the Deputy wishes to send case studies to the Department, I certainly will have them assessed. One hears how some people will rave about an organisation while others will state they have nothing but heartache when they deal with that organisation. However, I would be happy to investigate any case in this regard. In my experience, I find Enterprise Ireland to be particularly supportive and that it goes as far as it can with companies. Obviously, it is dealing with State money and must be sure that proposals are commercially robust. As for any cases that Deputies have brought to my attention, I must state the decisions being taken by Enterprise Ireland, if they were being questioned, were robust. However, one certainly wishes to avoid having sand in the wheels of any of these schemes.
I was in County Donegal a week ago and met representatives of a manufacturing company that had carried out an Enterprise Ireland lean manufacturing programme. While the company was going to the next level of that programme, it found it far too cumbersome to engage with Enterprise Ireland in the delivery thereof and sourced it itself, albeit in a much scaled-down version, because obviously the company lacked the funds to provide for a full-scale on-site consultant itself. While this was the experience of that company, from my perspective it would not be unusual. I make the point that this is happening at the same time as the reduction of funds for Enterprise Ireland.
If the Deputy cares to submit the details of the company concerned, I certainly will look into that. The other question was on property costs involved. Essentially, the IDA is the property manager for all the enterprise agencies and there are contractual obligations. Obviously, it manages property and at times, albeit much less frequently, acquires property. It is obliged to honour some contracts but because they involve individual companies I cannot go into the details. However, it sometimes makes decisions that involve making commitments. I understand that I am not at liberty to talk about individual companies and contracts that might have been entered into. Essentially, however, it is dealing with its own clients, planning its advance property, as well as planning land and building acquisition. Obviously, it has a number of business parks. It is part of Ireland's competitive offering to have an active property portfolio in this area.
Some of those issues might be commercially sensitive but others will not be. Would it be possible to provide the committee with examples of all those which are not commercially sensitive so that we can get an understanding?
Some of them would come down at rent reviews but obviously they are in the same position. The IDA is in the same bind when it comes to upward-only rent reviews. It is caught with the rents it has so whether or not it has vacant property, which inevitably occurs, it is stuck with rents until the review date. Many of them are upward-only rent reviews. It is in the same category.
I do not have the KPIs here. Science Foundation Ireland has just produced its eight-year strategy up to 2020. Obviously, one has things like licences, patents, publications in meritorious journals and the number of people placed from the centre in industry - it currently has approximately 30% and obviously SFI is seeking increase that. Another metric is the extent to which it gets co-funding either from FP7 or from industry. There is a separate one for industry and for other State funding. The intention is to force it down the commercialisation route. Spin-outs is another criteria. There are eight or ten different ones and Science Foundation Ireland has set itself a metric of increasing those from the base position by a certain percentage. In regard to placement in industry, it is from 30% to 50%. It is seeking to double the number of spin-outs over a very long period of time. I can get the Deputy the metrics for the Tyndall Institute. Those sorts of metrics apply in all of them.
In regard to the individual PRTLI referred to by Deputy Lawlor-----
The EI applications are near completion. Is it anticipated that there will be an increase in funding next year above what would have been spent this year? Does the Minister have any indication of EI demands?
We have not finalised budgets but we would not expect to get any major increase in funding. We have a capital envelope published from last year. While the final figure has not yet been decided, it will not be substantially different from what was published in anticipation of this year.
The Minister's budget was not cut last year as far as I understand in terms of expenditure. Enterprise Ireland may anticipate funding based on this year's funding. If a number of applications is near completion at this stage-----
It is demand-led and I suppose that is why we get things like under-spending. We make a best stab which is based on the commitments it made last year and the year before. That will influence a percentage of the 2013 drawdown. It will anticipate the additional drawdown from its 2013 applications. In deciding what approvals it gives in 2013, it must be conscious of its budget for the next number of years. There is no provision for an increase in its budget over the next number of years. Like every other Department, we must live within our budget.
If there were some major projects, we could seek a Supplementary Estimate but on a planning basis, we plan on the committed profile of spending given to us.
Under savings on subheadings, on the version we have, there are no figures for A7 and B4 but on the copy Deputy Tóibín has, there is a figure of €5 million for B4. There seems to be a difference which I cannot explain.
In regard to money that is not spent from earlier budgets, the same thing happened last year. In next year's Estimates, I presume the fact we have had to revise this for the past two years will feed into the budget. It would be ideal if the money could be allocated in January to a different section, if it is not going to be spent. There is a pattern developing there.
I have a graph somewhere of the approvals. We are entering into a more even sort of pattern and we are also seeing an upturn in interest among private sector companies in research and development. We expect we are returning to a more normal pattern.