Jimmy Devins (Sligo-North Leitrim, Fianna Fail)

I wish to share time with the Minister of State, Deputy Barry Andrews.

The future requires us to compete internationally in a global and increasingly knowledge-based world economy. It requires that we return to sustainable growth fuelled by our capacity to trade competitively by offering the world competitive and innovative goods and services. This budget sets us on that path.

The pace of growing international competition has created pressure for greater efficiency, quality and productivity. We are in the midst of a difficult international financial situation, as we all know, but in such times, the pace of change and the demands of customers become even more important and require Irish business to be creative, flexible and adaptable.

In response to competitive pressures of recent years, our economy has changed radically and continues to do so. It is with our eyes fixed firmly on the future needs of this country that the Government remains so committed to supporting Ireland's capacity to compete as a knowledge economy.

As Minister of State with responsibility for science, technology and innovation, I strongly welcome the provision for science, technology and innovation provided in this year's budget for the Department of Enterprise, Trade and Employment of €335 million, an increase of 3% on the 2008 allocation. We must appreciate that this allocation is over nine times what it was as recently as 2000 when we had an allocation of £27 million for Enterprise Ireland and an allocation of just £400,000 as a precursor investment to the establishment of Science Foundation Ireland.

I also welcome the allocation within the Department of Education and Science Vote of €265 million, an increase of 44%, for infrastructural investment for higher education, including additional capital funding for strategic research as part of the strategy for science technology and innovation, as announced in the budget.

These allocations are synergistic and my assignment to both Departments as Minister of State reflects the critical whole-Government approach. Critically, this budget also enhances the fiscal environment for research and development in Ireland, a point to which I will return later.

This budget and the Estimates announcement are the third in a series that clearly demonstrates the Government's commitment to investment underpinning a clear and cohesive Government strategy for science, technology and innovation. This budget in particular, set as it is against the backdrop of extreme financial difficulties, sends the strongest signal possible of the determination of the Government to maintain the already substantial effort to build a knowledge economy in Ireland. The Government has placed research and development at the heart of its economic development strategy because the ability to create and exploit knowledge is an essential feature of an advanced economy.

The level of support provided in the budget for the augmentation of research and development programmes sends a clear signal to Irish businesses that the Government is continuing to support their efforts to develop new products, to stay competitive and win new markets in a challenging environment. The process of developing and exploiting new ideas has a crucial role to play in bolstering Ireland's economic and social advancement. The Government's strategy for science, technology and innovation is driven by the principle that we must produce and attract world-class talent and have dynamic firms that use that talent to innovate and compete on world markets with world-class products and services.

Wealth and employment creation in Ireland will be achieved in global markets by Irish companies that are operating at the cutting edge. The strategy has a strong focus on the role that research and development can play as a provider of innovative, market-led products and services that are essential for economic competitiveness and growth. We have committed the economy to a high level of investment in innovation in all its forms with the aim of making Ireland a dynamic, knowledge-driven economy. The Government sees this investment as a priority to underpin Ireland's competitiveness in a knowledge-driven global economy and has delivered on this commitment in the budget.

The investment provided for in the 2009 budget will continue to drive our targets under the Government's strategy for science, technology and innovation. The funding will be used by the development agencies, Science Foundation Ireland and Enterprise Ireland and will be supplemented with IDA Ireland funding to increase in-company research and development; help small and medium enterprises to innovate and remain competitive; continue to build Ireland's third level research base; strengthen collaboration between industry and the education sector; promote the commercialisation of research; and bring the outputs of Ireland's growing research base to the marketplace.

Three State agencies under the Department of Enterprise, Trade and Employment, namely IDA Ireland, Enterprise Ireland and Science Foundation Ireland, are responsible for delivering the science and technology strategy to the business and research communities. Funding is provided for Science Foundation Ireland and Enterprise Ireland for research and development through the allocation of €335 million under subhead F of my Department's 2009 Vote, while IDA Ireland research projects, which are expected to involve support of about €50 million, is provided for separately under subhead D.

Funding allocated to Enterprise Ireland will be used to transform research and development activity in enterprise to drive productive collaborations between industry and enterprise and secure the commercial potential of Ireland's research community. In 2009, Enterprise Ireland will receive a science, technology and innovation budget increased by 1.5% over the 2008 level at €134.5 million. The funding allocation to Enterprise Ireland will enable the agency to focus on growing the quality and quantity of research and development performed in enterprise by supporting collaboration between its client companies and third-level institutions and maximising the commercial outputs such as spin-out companies and intellectual property licences from the enhanced research activity in third-level institutions.

Enterprise Ireland is charged with the particular responsibility of delivering support to Irish enterprises in what are termed "close to the market" activities. Enterprise Ireland will continue to work with industry and with the universities and institutes of technology to foster research and development activity through financial support and advisory assistance. This funding will build a robust research system and supports the efforts of the enterprise community to stay relevant and competitive in a harsher global environment.

By encouraging greater investment in research and development and through building effective collaboration between industry and third level research, small and medium enterprises in our country are helped to innovate and stay competitive. The development of an international reputation for familiarity with cutting edge technology means foreign direct investment companies are attracted to establish a research base here, often in collaboration with Irish home-grown companies.

Science Foundation Ireland funding will increase by 4.3% to €191.5 million. The focus of Science Foundation Ireland is on research excellence to enhance Ireland's human capital in strategic areas of scientific endeavour relevant to the future competitiveness of industry and enterprise. Since its establishment, the remit of Science Foundation Ireland has been in the areas of information and communications technologies and biotechnology. In May, its remit was expanded to include the area of sustainable energy and energy efficient technologies. Science Foundation Ireland will continue to add world-class principal investigators and their teams to those already established.

Science Foundation Ireland will continue to support strategic partnerships between industry and academia through centres for science technology and engineering, referred to as CSETS, and strategic research clusters. These Science Foundation Ireland funded projects involve partnerships with more than 300 distinct indigenous and multinationals companies.

The rapidly growing reputation of Ireland's research base and the availability of world-class researchers, high quality graduates and our increasing PhD output is greatly assisting IDA Ireland in winning highly competitive research investments for Ireland. In 2007, the IDA supported 45 research and development projects and the figures for 2008 and 2009 are expected to be close to 60. Global leaders now choose this country as a location for cutting edge research and development activities, a testament to the Government's foresight and clear evidence of the long-term dividend to Ireland of this investment. The companies established here during the past year include Business Objects, IBM, Boston Scientific, CITI, Pfizer and Houghton Mifflin Harcourt.

It is critical that the fiscal environment encourages private sector investment in research and development and for this reason I strongly welcome and endorse increasing the research and development tax credit which can be offset against a company's corporation tax liability from 20% to 25%.

This measure will enhance our competitiveness as a location for new internationally mobile research-related investment, and also encourage existing overseas and indigenous firms to add research functions to their operations in Ireland or to increase their level of research activity. This initiative is particularly significant for Ireland as the level of research and development undertaken by business here has traditionally been low for an economy whose output and exports are dominated by high technology sectors.

Private sector investment in research and development has begun to increase significantly since the tax credit was first introduced in the Finance Act 2004. Research and development performed in the business sector rose to an estimated €1.56 billion in 2006, almost double the level recorded in 2000. While this represents a significant investment and achievement, unfortunately our level of expenditure is still below the OECD average of 1.54%.

The Finance Act 2004 introduced a 20% tax credit, which is now 25%, for incremental expenditure on research and development. It also provided that where a company incurs expenditure on the construction or refurbishment of a building to be used for research and development, the company is entitled to a tax credit on the cost of construction or refurbishment. The credit is in addition to any normal tax deduction available to a company for research and development expenditure and is additional to and complements the various direct research and development grant supports, which are also available through agencies.

Subcontracting research and development work to unconnected parties qualifies under the tax credit scheme up to a limit of 10% of expenditure incurred by the company in any one year. This is also true of sums paid to a university or third level institution to carry out research and development, provided the amounts paid do not exceed 5% of the total expenditure incurred by the company on research and development.

Investment in research and development helps us to compete in highly competitive global markets and grow quality employment and productivity in innovative firms. As we enter a difficult economic period and face higher costs, the need for firms to innovate and add value across all aspects of business is greater than ever. Past experience has shown us that countries with long-term competitiveness have high levels of research and development and have dynamic firms which use their talents to innovate and compete on world markets with world-class products and services. There is clear and encouraging evidence that the investment being made is helping Ireland to compete. This is the route the Government must support so the Irish economy can return to export-led growth in the years ahead. I commend the budget to the House.

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