Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

He is well settled in north Kildare at this stage. I thank Deputy Lawless for raising this question. Research and development is an important source of growth because it contributes to ideas and products which affect productivity. One of the key insights of modern economic theory has been that per capitagrowth ultimately comes from changes in productivity. As such, research and development can be a key input in ensuring positive and sustainable economic growth in the long run, alongside other important factors such as openness to trade, the level of competition and the quality of infrastructure. The Government acknowledges the importance of research and development. We believe it needs to be examined comprehensively because all sectors of the Irish economy contribute to research. The vast majority of research and development conducted in Ireland is done by businesses rather than by the public sector. According to the CSO, business expenditure on research and development stood at €2.1 billion in 2014, the most recent year for which data are available. Total business expenditure on research and development, including such expenditure in the public sector, was €2.9 billion in that year. The level of business expenditure on research and development in Ireland, at €331 per inhabitant, is considerably higher than the EU 28 average of €297 per inhabitant in 2014.

The Government has a variety of supports in place to stimulate business expenditure on research and development, including research and development grants and research and development tax credits. I assume Deputy Lawless's matter is being taken by the Department of Finance because of the tax credits. The research and development tax credit is regularly reviewed by the Department of Finance. The latest review, which was published along with budget 2017 in October 2016, found that 60% of the research and development supported by this tax credit was additional in the sense that it would not otherwise have taken place. This is an important result because although it is generally agreed that research and development provides an important contribution to growth, public support for research and development cannot be justified unless such intervention can be demonstrated to lead to improved outcomes. The result also holds up well in an international comparison.

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In 2015, a total of 1,534 companies availed of the research and development tax credit and the total Exchequer cost was €708 million. This represents approximately 10% of corporation tax receipts, a share that has been fairly constant for the past three years. As already mentioned, the Government readily acknowledges the importance of research and development. Its importance is embedded in the Innovation 2020 strategy, which provides a whole-of-Government response to ensure that Ireland becomes a global innovation leader. Among other targets, Innovation 2020 commits to increasing public and private investment in research. As for public investment in particular, data published in early 2017 by the Department of Jobs, Enterprise and Innovation show that the Government allocated €761 million for research and development in 2016. This was the third year in a row that funding had increased and represented a 3.2% increase on the 2015 figure of €736 million. Public investment in 2017 is expected to be broadly in line with the figure for 2016.

In conclusion, the Government is keenly aware of the importance of research to Ireland's economic future. Policy tools to stimulate additional research and development, such as the research and development tax credit, continue to play an important role in this regard, as does a concerted and comprehensive effort from all areas of the public sector, as envisioned by the Innovation 2020 strategy.

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