Thursday, 21 January 2010
Employment and Competitiveness: Statements
I take this opportunity to wish the Seanad the best for the year. I also congratulate the new Members and wish them well.
I welcome the opportunity to discuss the focus of the work of my Department, employment and competitiveness. The Minister of State, Deputy Dara Calleary, will deal with issues of the measures we are taking to assist those who have lost their jobs, keeping the unemployed connected with the labour force, improving the skills base and giving further education opportunities. Ireland is seeing the first signs of recovery at home and in our main international markets. The Government has taken the necessary steps in the course of the past year to build recovery and to position Ireland to take advantage of this recovery. The banking system has been supported and stabilised, the public finances have been brought back under control and, according to the National Competitiveness Council, Ireland's current trade-weighted international price competitiveness has improved since April 2008. Exports have held up and I believe further export growth will form the core of building recovery and getting people back to work.
I am pleased to set out what we have achieved and what we will deliver over the coming year to drive an export-driven recovery. The Government has laid the groundwork for recovery, and as we are all aware reducing expenditure is a crucial part of that plan. In order to build on that groundwork, my Department is refining, driving and implementing forward-looking policies based on targeting resources to position Ireland as a competitive, innovation-driven location in which to do business, grow employment and increase prosperity and well-being. We are positioning Ireland to respond quickly to international stabilisation and recovery. We do so in light of the positive GDP forecasts for our main trading partners, the US, the UK and the euro area, for 2010 and projected global economic growth of 3.1% over the coming year. That is our focus.
While we are working in the context of an EU recommendation and timeframe to reduce our deficit, we are first and foremost taking action to improve the macro-economic climate and trading environment for our businesses and workers, driving recovery and maintaining living standards. This is why we took tough corrective budgetary action last year, why we are working to create better-functioning financial systems, why we are taking steps to improve our competitiveness, why we are focused on maintaining and creating jobs and why we are supporting innovation. Improved competitiveness, increased employment and world-class innovation are the policy-objectives being relentlessly pursued by the Government, and by my Department in particular.
I want to outline briefly the measures we have taken to address the issue of jobs and unemployment and, in particular, to keep people connected with work. According to the latest CSO statistics, there are over 1.9 million people in employment in Ireland. The Government acknowledges that the current conditions in Ireland's labour market, particularly the live register figure, which currently stands at approximately 424,000, very much reflect the international economic downturn and our openness to events affecting the global economy, such as the international financial and banking crisis. The Government has put in place measures to support more than 80,000 jobs in the enterprise sector under the employment subsidy scheme, as well as having doubled the referral capacity for FÁS employment supports in 2009 to 147,000 places. In addition, we are also backing businesses through the difficult period. The enterprise stabilisation fund has helped keep viable businesses going and people in work. Some 148 companies were approved for funding of €59 million by the end of 2009.
Furthermore, the recent budget also saw the Government announce that it would introduce a new jobs stimulus measure this year. Under the employers' jobs (PRSI) incentive scheme, where an employer creates a new job and takes on a person who has been unemployed for six months or more, the employer will be fully exempted from liability to pay PRSI for the first year of that employment. This will give employers an 8% to 10% saving on employment costs for each new job created. The Department of Social and Family Affairs is managing this scheme. The Minister of State, Deputy Calleary, will describe the other comprehensive measures being take to address the current labour market difficulties.
I want to turn to recovery measures which will take us along a jobs and growth pathway through investment in new industries and jobs. Our manufacturing base has changed significantly in recent years and the services sector has grown exponentially. These factors will be reflected in the new strategies and actions which will be delivered by me and the enterprise agencies on my behalf over the coming year.
Trade is the cornerstone of Ireland's economic success and Ireland's enterprise base can take some pride in the resilience it has shown in the past two years. While global exports in goods fell by approximately one third in the first quarter of last year, Irish goods showed a 1% increase for the same period. While global services exports fell by almost 20% over the same timeframe, Irish services declined by just over 2%. Indigenous Irish exporters have, remarkably, sustained growth in total exports at almost 4% between 2007 and 2008. The latest EU trade data for the ten months to October show that Ireland has the second highest trade surplus, exporting €32.6 billion more than we import, behind only Germany. Ireland's exports have been virtually stable in that same ten months, falling by 2%, while in most other EU countries exports fell by over 20%. As Minister for Enterprise, Trade and Employment, my goal is to maintain and enhance the policy environment that has facilitated this resilient performance that will drive export growth. We know that export growth can help create the jobs required to reduce unemployment, fund public services and manage the national debt.
We have seen in this recession that the companies that have invested in research and development and ensured their products or services had a competitive edge, are the same companies that have held or grown market share and employment. This has reinforced our belief that our research and development strategy is the right one. The IMF envisages a significant return to global growth this year of approximately 3%, which will greatly enhance Ireland's ability to benefit from an export-led recovery. I remain committed to maintaining a business environment that supports enterprise and encourages further investment, both from Irish industry and foreign investors. This will be delivered through Enterprise Ireland, IDA Ireland, Shannon Development, the county and city enterprise boards, through cross-Border programmes with Northern Ireland and through Údarás na Gaeltachta. We will also extend the three-year corporate and capital tax exemption for new start-up companies in 2010.
We consistently strive to diversify our export profile, exploit our talents and opportunities and guard against over-dependence on specific markets. Our track record on this is strong and is exemplified by the Government's Asia strategy. In 2005 we set specific targets to be achieved through concerted effort by the relevant Departments and agencies to develop links with eight key economies in the region. As a result, our exports to Asian target markets have shown strong double digit growth. My Department is devising and progressing new policies to build on the success of the Asia strategy. The Government has committed to developing a new action plan for improving trade, investment and tourism links with fast developing markets. We also need a new export and investment strategy that focuses not only on the new high growth markets that will deliver future dividends, but also on our key trading partners such as the European Union, the UK and the US. This will ensure a coherent single-minded focus on driving and delivering on Ireland's international economic and commercial interests.
Our recent export performance has been impressive in the context of the size of our economy compared to others. We will continue to incentivise enterprises to invest further in high value research and development, to increase exports and create new employment opportunities in communities across the country. The recent strengthening of the US dollar and sterling against the euro will also help to sustain our key markets abroad. Exports within the eurozone, which are free from currency exchange risks, are also increasing.
International investment will continue to be a key driver of employment, exports and growth. Ireland's corporate tax rate of 12.5%, our multilingual skilled workforce and our strategic location for serving markets in Europe has served us well in attracting investors, and will continue to do so. Many multinational companies are restructuring their global operations, leading to global rationalisation, making it particularly important to work to retain current investment, stimulate expansion and secure new projects. We are working to develop the opportunities for Ireland to become a key European hub for the international funds industry. In this regard, I look forward to the proposed changes in the Finance Bill to strengthen Ireland's competitive edge. We will continue to market Ireland as a location of choice for the newcomer and for existing investors. In September, I launched IDA's new innovation focused overseas market campaign, designed to position Ireland as the pre-eminent location for companies seeking to invest in future innovation.
During 2009, we won a total of 125 foreign direct investments. Almost 70% of these investments were from existing IDA clients who are making further investments in this country and reinforcing Ireland's reputation as a key strategic global business hub. In these turbulent economic times it is extremely significant that many of the world's leading companies continue to invest in Ireland in a wide array of activities, including high end manufacturing, global services and research, development and innovation. In absolute numbers, Ireland is moving up the global rankings with regard to employment in research and development, having risen from 19th to 11th place in the latest global location trends survey, testament that the strategy being pursued is the right one. During 2010, the IDA will continue its work to capitalise on our quality workforce, our creativity, our international attitude to business, attractive incentives for research and development and our favourable tax climate in order to attract multinationals to set up a base in Ireland as a launch pad for markets in Europe, Africa and the Middle East.
I am in the process of reviewing a new strategy for the future direction of foreign direct investment, which the IDA has developed and which, subject to my approval, will shortly be published. This strategy will outline the historic performance of foreign direct investment and its contribution to the development of the economy. It will set out some specific initiatives which the IDA will undertake to retain existing and secure new foreign direct investment. We will be identifying new opportunities in the foreign direct investment markets while stressing the importance of restoring our relative international competitiveness if we are to maximise foreign direct investment potential.
Growing exports and building investments are intrinsically linked to the framework condition in which our businesses operate. Over the past year, we have taken a number of important steps to improve the environment in which enterprise operates. More work will be done, particularly on competitiveness.
The Government's strategy to support businesses, improve competitiveness and sustain employment is aimed at returning to export-led growth. Improving our competitiveness requires addressing our costs. To move towards a lower-cost environment, a number of issues are being tackled together. These include incomes policy, Government-controlled prices and costs, the regulatory burden and the level of competition in our economy. The Government is acting in a concerted way and with urgency to address all of these issues.
Ireland is undergoing a sharp price correction and prices and rents are dropping. As measured by the harmonised index of consumer prices, Ireland's inflation rate during 2009 fell by an estimated 1.7% compared with an increase of 0.3% in the eurozone as a whole. We have also seen a decline in unit labour costs, which has a direct effect on competitiveness. A further relative improvement in price levels is expected this year, again improving our competitive position.
Further wage adjustment can drive continued improvement of the overall competitiveness of the Irish economy. It is essential for our economy to be in a competitive position internationally to reduce the cost of doing business, in addition to taking steps to restore order to the public finances. On the basis of European Commission forecasts, unit labour costs in Ireland are estimated to have improved by 5% relative to the euro area last year. The ESRI has recently forecast that, given our current control of costs, productivity should grow by over 3% in 2010. Combined with necessary, although difficult, wage adjustments, this represents a significant improvement in the overall competitive position of our economy.
The most recent data from the Central Statistics Office provide further evidence that wages in Ireland are adjusting downwards and that, when the profile of job losses is taken into account, the decline in weekly earnings can be estimated to be in the region of 4% to 5%. The pension levy has reduced public servants' pay by an average of nearly 7%, and there were further reductions arising from the budget in December.
The Government has taken steps to tackle the relatively high cost of energy for business, and energy prices have decreased. Following double-digit energy price reductions in May 2009, from last October there has been a further significant reduction in gas prices and a modest reduction in electricity prices for medium-sized business customers. Gas prices are set to decrease by a further 8% this coming February.
Overall, all categories of businesses, including SMEs, have benefited from these significant energy price decreases in 2009. I will continue to work with my colleagues towards reducing costs and driving competition to bring energy costs into line with our competitor countries.
We have been actively progressing recommendations to increase competition and remove anti-competitive restrictions in the sheltered sectors of the economy. These include competition in transport, electricity, professional services, pharmacy services and the private rental sector. Upward-only rent reviews are now banned.
Preliminary information for 2010 suggests that many local authorities have either frozen their commercial rate or decreased it. I expect this trend to continue throughout the country.
My Department is leading the governmental process to ease the administrative burden that regulations can place on businesses. The high level group on business regulation has already identified more than €20 million worth of administrative cost savings for business in its first report, through cutting out paperwork, revising the rules for small businesses and making better use of on-line services. The group's 2009 work programme initially contained more than 50 recommendations from businesses. Twenty-five of these recommendations have already been progressed by the group to the satisfaction of businesses. In 2009, my Department completed the measurement of administrative burdens in company law, employment law and health and safety law.
In 2010, the high level group intends to focus on the simplifications that will help us reduce these measured burdens. As Senators will know, we have a target to reduce business red tape by 25% by 2012. The continuing dialogue with business is essential for the success of this process. It is from businesses and business organisations, such as those represented on the high level group, that many of the ideas for simplification will come. I will welcome and consider any suggestions made by Members in this context.
Undoubtedly, the retail sector, more than most, is being severely affected by the current downturn. Retailers have responded by reducing prices to boost trade. This is reflected in the consumer price index which shows prices are falling more rapidly in Ireland than in Northern Ireland, the rest of the United Kingdom or elsewhere in the European Union. This narrowing in the differential in prices is very much to be welcomed and clearly will help the competitiveness of Irish businesses, especially those in the Border region. The Minister for Finance has reduced the excise duty on alcohol products and has reversed the 0.5% VAT increase imposed last October. The UK VAT rate increased on 1 January to 17.5%, further reducing the price differential.
One of the most important issues with which we have still to grapple is access to finance. I have held regular meetings with the representative bodies of the SME sector and other stakeholders on access to finance. The Government has taken a series of steps in this regard, including the bank guarantee scheme, the bank recapitalisation scheme, nationalising Anglo Irish Bank and establishing the round table on access to bank credit.
I set up the credit supply clearing group which brings together the banks, business interests and relevant State bodies in an effort to build understanding and communications between the key stakeholders and to get credit to business flowing again. The National Asset Management Agency, NAMA, has now been established. In this context, I welcome the new credit review system announced by the Minister for Finance. It will examine the credit policies and practices of the banks, particularly for SMEs. This new system will inform the Government as to what further action might be necessary to secure the flow of credit to Irish enterprise and, through the publication of the analysis from the review process, help ensure the performance of the banks participating in NAMA is obvious to all.
I want to highlight the prominence I have given to the ongoing process of reforming public procurement. I fully recognise the importance of the public sector market for SMEs, particularly now that demand from the private sector has slowed. Government purchasing, whether by the HSE, local authorities, agencies or Departments, can play an important part in driving SME growth and employment. I recently introduced new policy guidance across the public sector to ensure a level playing field for all companies wishing to participate in public tendering and to promote greater access for SMEs to public sector contracts.
When I travel abroad with the representatives of the SMEs, which are superb, they always say to me that they cannot engage in public procurement at home. We need to strive to solve this. We facilitate the SME sector to avail of the public procurement opportunities that exist in Ireland. This fact did not attract the credence it deserved in the context of the new public procurement policy guidelines. We are still spending astronomical sums of money and it should be to the benefit of our innovative companies. I will continue to strive vehemently to ensure those companies have access to public procurement staff.
One of the first points one will note in the document I launched is that the public service is risk averse. This is natural but there are great opportunities for efficiencies in the context of providing services to the taxpayer. I will strive to ensure further work is done on public procurement policy.
While these issues are of immediate importance to Ireland's recovery in the near term, I am making progress on a number of longer-term issues. For Ireland to compete on global markets for investment and for sustainable export growth to be achieved, we need to be relentless in ensuring our economy has the infrastructure, skills and knowledge to compete and win. This means we need to re-engage publicly with the debate on productivity. Continued progress is necessary on our long-term infrastructural needs, such as next generation network broadband, sustainable and cost-effective energy networks and suitable transport links. These are all important to the country's future growth.
The development of the knowledge economy and the focus on innovation are essential facets of our reputation as a creative and responsive economy. It is in this regard that we are committed to continuing to invest in research and development, as has been clearly articulated and demonstrated. My Department is determined to ensure incentives for businesses to undertake research and development are strong and that Ireland will continue to invest in building its reputation as a leading knowledge economy. A renewed focus is correctly being placed on stronger commercial outputs and the efficiency of investment. As in other areas of public spending, the State is seeking more from less in regard to this expenditure item and the Government is working continuously to ensure this happens.
Supporting innovation as a driver of export growth is critical to sustaining enterprises, maintaining current jobs and driving job creation. The budget sees the total spend on science, technology and innovation exceed €593 million, with core investments being prioritised. The allocation of €297.3 million for science, technology and innovation in my Department's Vote compares favourably with the 12% overall reduction in the Government's capital allocation in the budget. In protecting Science Foundation Ireland's funding the Government recognises the pivotal role it plays in the framework for sustainable economic renewal as outlined in the Government's policy document, Building Ireland's Smart Economy. My Department's policy approach is focused on deriving maximum commercial benefit from the investment made to date. The decision to create a single funding stream for science, technology and innovation will greatly enhance the efficiency of the spend and the State's ability to re-prioritise as economic circumstances change when the economy recovers. Building Ireland's Smart Economy and the programme for Government recognise the importance of the productive public and private investment in research and development and intangible assets. We will shortly be examining the recommendations of the innovation task force in the context of the Finance Bill to determine how we can further enhance the incentives for research and development and intellectual property activity in Ireland.
The smart economy framework emphasises our strong commitment to the pursuit of a green economy involving the transition to a low-carbon economy. I am determined to ensure the opportunities for enterprise investment and jobs which arise from this transition will be vigorously pursued. This vision for the development of the green economy has clear growth prospects for green enterprise to meet domestic needs and also to profit from exportable products and services. Ireland has demonstrable competence in these areas. I will ensure the correct framework conditions are in place to support growth in this sector. The report of the high level group on green enterprise, launched in December, is being implemented across Departments and we will shortly see results in many areas from the measures in this green stimulus package. This is a large and growing sector worldwide and the high level group identified the potential to create about 80,000 jobs in Ireland in coming years. This is an achievable target and I am overseeing implementation of this strategy to drive the development of an internationally competitive green economy in Ireland. Every other country in the world is going green. Ireland, therefore, must use its competences and natural resources to ensure greater creativity in this area and focus on what it does well.
Despite its difficulties, Ireland continues to score well in some key relevant international indices. It was rated first for foreign direct investment and corporate taxes and fourth for ease of doing business in the OECD report, Doing Business. It was rated 14 out of 127 in the 2009 edition of Forbes "Best Countries to do Business". Ireland continues to be a pro-business economy, with one of the lowest tax wedges in the OECD and a commitment to maintaining corporation tax at its current level.
The answer to Ireland's challenge remains a return to export-led growth. That is what drove the economy in the foundation stages of the boom. In Ireland exports mean jobs. Our export engine of high quality, competitive companies is fundamental to our return to economic prosperity. The courage and application shown by the measures we are taking send a strong and clear message to the international community that Ireland will not hide from the challenges it faces and is positioning itself for the future.
I hope I have demonstrated both the progress the Government has made to date with the economy and our serious intent to continue on this road. We are witnessing extraordinary economic changes. Ireland is one of the countries that have made some of the most difficult adjustments. However, we are serious and determined about completing the adjustment, a task that is well under way.
I thank the Tánaiste and Minister for Enterprise, Trade and Employment for her comprehensive address. We could not have chosen a more opportune time to discuss the issues of employment and competitiveness. We have just begun the second decade of the 21st century with our unemployment figure heading towards 500,000 from 180,000 in January 2008. At the same time tax revenues have dropped by over €6 billion. The effect of the deep wound to our society inflicted by such high levels of unemployment is not just social and financial; there is also the loss of skills and entrepreneurial acumen.
Over Christmas most Members will have had opportunities to speak with local businesspeople to hear what was really happening in the trenches. Some of us involved in businesses have spent time in those same trenches during the past few weeks. We have seen nothing but grim despair and a real sense that things may get much worse before they get better. We have also had time to fully digest the implications of the recent budget. One can only conclude that it offers no real hope to businesspeople or the thousands lining up in the dole queues every week. I do not know how we would have expected better from a Government which had created an unemployment task force which itself was unemployed for the first ten months of its existence. The Government is now bereft of ideas and vision, while Ireland, sadly, returns to the old safety valve of emigration in an effort to lower the unemployment figure. Against a background of having almost 90,000 people under the age of 25 years unemployed, budget 2010 simply ignored the issue of youth unemployment, made little or no effort to stimulate job creation and slashed jobseeker's payments to those aged under 25. The message to our young people was loud and clear - "Leave Ireland". If they want a future, they should go abroad because there is no future here for them.
One cannot blame anyone for being disillusioned, yet we must rise above the despair to offer vision and hope to our young people and the nation. In offering this hope the Government must be convinced to make a fundamental change in its mindset. To date, all of its focus has been on cuts in expenditure, not job creation to boost revenue. Every job lost costs the Government €20,000 extra per annum. It is perfectly obvious that the unprecedented rise in unemployment, delivering with it the twin evils of higher welfare payments and lower tax revenues, has been the main reason for the deterioration in the public finances. We urgently need a total refocusing on job creation to restart the economy, a challenge which has been the focal point of Fine Gael policy development in the past 12 months. To kick-start the process of job creation, we need, first, to immediately restore the flow of credit to small and medium businesses. Despite numerous assurances before and after the establishment of NAMA, this financial lifeline to businesses is still not in place. Second, we need to examine how competitive Ireland is globally. Our success in attracting foreign direct investment will soon dwindle if this issue is not addressed. Third, we need to invest in our national infrastructure. It requires much work to be done on it. While many want to work, we need to be innovative in linking the two together in an efficient and cost-effective manner.
Last weekend Dr. Alan Ahearne, chief financial adviser to the Minister for Finance, in a lecture at NUI Galway indicated approximately €19 billion of loans would be transferred to NAMA next month, with the remainder to be transferred by the end of September. He said that when the risky loans were taken off the banks' balance sheets and they were recapitalised, the banking sector would be well able to meet the needs of the economy. At a conservative estimate, this means it will be early 2011 before the banks get around to lending again to small businesses, assuming that they will begin to lend again, as there is nothing in the NAMA legislation to oblige them to do so. Unfortunately, early 2011 will be far too late for hundreds of businesses. Every employers' group, from the Small Firms Association to ISME to the Restaurants Association of Ireland, continues to point to the crisis in business lending. The Government immediately needs to take a firm hand with the banks to ensure credit lines are restored immediately, not in 12 months. If this requires some kind of Government-backed working capital guarantee scheme, it should be seriously considered. Such a scheme is already working in other countries and could work here. The recapitalisation that has occurred should have led to some money finding its way to small businesses but this has not happened. If further recapitalisation is to take place, the Government must seek far more binding assurances that lending will begin immediately.
The issue of competitiveness should form a central plank of any recovery plan. The Government needs to be more proactive in this regard and be the main driver in lowering our cost base. Efforts with regard to banking and the public finances would collapse without the keystone of improved competitiveness to form the bridge to recovery. Far from being a constraint on competitiveness, the Government can be one of its key drivers.
The National Competitiveness Council produced its most recent report last September and it does not make pretty reading. It produced 130 indicators of competitiveness, colour-coding them green, amber and red. On 40% of the indicators, Ireland is in the red zone. If one adds the amber ratings, the figure rises to 75% in need of attention. This is red alert territory but it has not triggered a serious response from the Government. Our competitiveness in international markets has deteriorated by 35% during the past eight years and our export share in the markets in which we trade has fallen each year of the past six years. In terms of goods, we have lost almost 40% of our market share.
Many policy weaknesses identified in the report have now come home to roost in an alarming performance, in particular in regard to non-pay business costs. More than three quarters of these costs are flashing red and the remainder are amber. Many of the chronic areas, including electricity, telephone, broadband, waste disposal and health insurance are directly in the control of Government. Excessive professional fees also figure prominently, with accountancy, legal and IT fees all way out of line with our international competitors. The report also concludes that wage levels in Ireland are among the most expensive in the world, substantially ahead of competitors like the US, the UK, Italy and France. In key skills areas such as engineering, finance and IT, Ireland ranks among the most expensive in Europe.
How are we to confront the challenge of competitiveness? A focus on wage cuts alone is simply not fair. A serious assault on competitiveness must also confront boardroom pay, monopoly profits, rents, professional fees, State charges and utility prices. I welcome the recent change in rent policy. We urgently need an action plan on competitiveness. This is a real challenge where social partnership could show its worth. The argument can be validly made that cutting earnings is in itself deflationary. However, this is not an argument for refusing to confront our excessive costs. Indeed, it points to another necessary element of a pact on competitiveness. As the savings in the cost base are achieved and the cost of delivering public services is reduced we will then be able to afford to set aside more money for investment in the infrastructures which are so clearly failing us. This allows us to attack our competitiveness problems, high costs and productivity impaired by poor infrastructure, from two sides.
It is worrying to learn that in the run up to the recent budget almost every party, except Fianna Fáil, included some sort of State funded stimulus package in its plans for recovery. Even the Green Party proposed a €3 billion stimulus for the green economy. However, what should be another central plank of our recovery was omitted completely from the budget. As I mentioned earlier, Ireland is a country in which much work remains to be done and we have a lot of people who want to work. One can only imagine the jobs that could have been created had we decided to invest €4 billion in our national infrastructure rather than investing it in the zombie bank that is Anglo Irish Bank. This morning, we hear that the same bank, which is little more than a private investment club for the elite of this country, might require another €10 billion of taxpayers' money to survive. The argument for Anglo Irish Bank's supposed systemic importance rests entirely on a belief, frequently voiced by Government, that depositors and other creditors would have abandoned all Irish banks if even the worst of them, Anglo Irish Bank, went under, an argument which I do not believe is credible. We have given €7 billion to the banks, including Allied Irish Bank and Bank of Ireland, €4 billion to Anglo Irish Bank and €50 billion to NAMA. Why can the Government not pump a miserly €3 billion to €4 billion a year into our national infrastructure over the next two years? It remains wedded to the idea that it must sit and wait with its hands tied behind its back for the banks to lend, which is a huge fallacy.
There are many areas in which thousands of jobs could be created and which are still in global demand. There is a huge need to improve public infrastructure. I agree with the Green Party that there are thousands of "green" jobs that could be created. The Government is pouring billions of euro into research clusters yet very few of the innovative projects produced by these clusters are being selected by Government for mainstream investment and job creation simply because there is no investment capital to be had. Fine Gael's NewEra plan proposes to address this problem and to immediately kick-start our economy. That plan has been described by Mr. Jim Power and many others as detailed, costed and relatively easy to implement.
What we must demand of our Government is a complete change in mindset. It must quickly realise that it is not our economic collapse that is causing unemployment and must acknowledge that unemployment is the root cause of our problems. If the Government persists in prioritising cuts which will depress the economy further and destroy more jobs then this time next year the public finances will still be in tatters and unemployment will have hit 500,000. We cannot allow this to happen.
I welcome my friend and colleague, the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Coughlan, and congratulate her on the overview she has given us in terms of her endeavours in regard to what lies ahead for the Department of Enterprise, Trade and Employment under her stewardship. I wish her well in achieving same.
While I usually have the highest regard for the contributions made by Senator Cannon his contribution today is a little disappointing and politicised. It clearly did not acknowledge some of the good work done by Government. There is no doubt that 2009 was a difficult year for the political system and structures and, in particular, the Government which faced international difficulties compounded by global difficulties and other issues in terms of our role in Europe, national financial difficulties and the need to ensure we continued to have a functioning banking system. The initial part of Senator Cannon's contribution does not reflect in true fashion what was actually achieved by Government. The Government entered 2009 with a great deal of baggage in terms of the difficulties we faced and was required to address important and crucial issues in the interests of this country. It did so by addressing the second referendum on the Lisbon treaty and our financial situation by putting through one of the most difficult budgets in this history of this State, all of which should be acknowledged and not politicised.
I take this opportunity to congratulate the Tánaiste and her colleagues, in particular the Minister for Finance, on taking what were tough, correct and brave decisions. I would like to have heard Senator Cannon's contribution were he still a member of the party through which he was elected to this House. I believe such a contribution would have been totally different from that which he made, which was clearly politicised. Given his calibre and intellect and in terms of what he is able to offer the House, I believe his contribution today was disappointing. I believe Senator Cannon's contribution would have differed greatly from that which he made were he still a Member from this side of the House.
We are all aware that we have suffered a combination of international and external negative economic factors which have had a critical impact on the Irish economy during the past 18 to 24 months. There is no point crying about from where we have come or whether a particular decision made by a particular person, regardless of the position he or she held or holds, brought us to where we are. The public wants us to move on from that phase. They want to hear positive contributions. It is important that we acknowledge and learn from past mistakes and that we stomach the medicine in this regard. We must learn from our mistakes, move on and remain positive. We must be empowered with confidence to move forward.
The good news is that the business cycle is changing. The fundamental attraction of Ireland as a place to do business is returning. The international economy has exited recession and recent indicators suggest that economic activity in this country is, as the Minister also indicated this morning, turning the corner. The number of people losing their jobs has stabilised and the appalling crisis in terms of job losses which commenced early in 2009 has almost come to an end. I support the undercurrent of the Minister's contribution, namely, we need to ensure that we maintain our attractiveness as a location of multinational investment, indigenous industry and enterprise and jobs and export-led growth. It is only through doing so that we can earn our way as a country with profitable enterprise, growing employment and the means for the State to provide jobs and services for those in need.
In the limited time available I want to refer to an issue also mentioned by the Minister in her contribution, namely, small and medium sized enterprises, SMEs. Small businesses are being starved of credit and working capital. That is the feedback. In fairness, Senator Cannon also referred to what he had picked up on the ground during the Christmas recess. We all are picking up the same message. I have had the opportunity to meet representatives of some of the main banks through my membership of the Joint Committee on Enterprise, Trade and Employment and they are giving us a slightly different story from what we are picking up on the ground. They are also being open and honest and stating that if we bring individual cases to their attention, they will have them looked at. However, there is much more to be done than bringing individual cases to their attention.
There is the nonsense of whether an inquiry or an application was made. It something is recorded, it is deemed to be an application for credit or a loan; it is not, it is considered to be an inquiry. We need to move from this space to the new enterprise-driven sector with a low pain threshold. We do not want people to run around. That is not the way we should do business. We should help one another and be positive.
I made contact with the Department of Enterprise, Trade and Employment to indicate that I was meeting a number of people to discuss enterprise. However, there was not a positive reaction - that there would be a person available to feed into the discussions of this group. This is frustrating. We need to take a step back to look at how we react. We should look at them with a fresh pair of eyes and be prepared to be brave and make correct decisions.
The banks have overreacted because they were exposed. If the House will excuse my use of the phrase, they are covering their asses. That is probably unparliamentary language but that is what the banks are doing. In some cases it is a reaction to the capital constraints but in others there appears to be an unwillingness to extend credit where there is the slightest business or trade risk. Even though businesses may be trading properly, their credit facilities are not being renewed or expanded as was the case. As a result, companies are at risk of failure because they cannot access credit. This is unacceptable, particularly as the taxpayer has already contributed to the recapitalisation of the banks. I welcome the credit appeals mechanism announced for SMEs, farm enterprises and sole traders. I ask, however, that we ensure the mechanism works, that we bring some body of people together to ensure it does and that we provide for some asset testing.
The other aspect we should welcome is the cost reductions, to which the Tánaiste again referred. The reductions in energy prices which she mentioned, among others, are welcome. However, we must continue to reduce the cost base faced by small and large businesses and consumers. In particular, we need to ensure there are incentives to reduce costs and increase productivity and service delivery in all areas and sectors, both private or public. This means, for example, that State-sponsored bodies cannot be immune from the pay adjustments being made elsewhere in the economy. There is an enormous number of such bodies. A clear message must be sent to them that their rates of pay, from the top down, must not be excessive, that their overheads must match their requirements and that their manning levels and procedures must be compatible with the efficient and effective delivery of services. The message must be that all wages and salaries paid from the public purse need to be reduced in line with the reductions in pay and other payments already suffered by public servants and private sector workers. This is the only way we can ensure strong competition in any area we need to revisit and review.
There is one other matter I want to mention in support of the Tánaiste, that is, the need to ensure we continue to sell the message internationally that Ireland is open for business and that we have taken the corrective action necessary. In that regard, I want to see additional funding being provided for all of the development agencies.
Unemployment is one issue on which I wanted to touch. We are given different figures. The one that is quoted regularly is that of the 420,000 on the live register. I often look at the quarterly national household survey. Its latest seasonally adjusted figure, for the period July to September 2009, indicates that there were 279,000 unemployed. The Tánaiste also mentioned the figure of 1.9 million employed in the third quarter of 2009. In the light of what has happened, these figures are not bad. However, there is one aspect that concerns me. Irrespective of whether the figure one picks is 279,000 or 420,000, which figure includes seasonal and other workers, there is one sector, the community and voluntary sector which I have mentioned previously, in which we should be able to give people hope.
As I have run out of time, I will be happy to write to the Tánaiste on the matter. We should be able to encourage those concerned to participate in the community and help them to learn and train through voluntary activity while they are unemployed.
I, too, welcome the Tánaiste to discuss this important topic. I apologise for not being present earlier but it was in the interests of hearing everything she had to say. I was about to leave my office when she stood up and I said to myself it was better to wait and listen to everything she had to say rather than leave and miss a few minutes of her contribution.
I want to focus on the issue of competitiveness. Competitiveness is a function of the cost of labour, transport, rent charges, rates, service charges, utility charges, etc., but it is also a function of output and scale, in which regard it is important to be able to spread fixed costs and overheads in terms of the price of a product. It is because Ireland is such a small country, with a small market and a small population, that exports become so important. It is important for us to resolve the scale issue by focusing more on our exports potential and, from a public policy point of view, for the Government and the Department to facilitate companies in getting over this hurdle and exporting their products.
I welcome the Annual Competitiveness Report 2009, Volume Two, which has just been released. With the previous report - we received volume one in August - it is a welcome contributor to our understanding of Ireland's status when it comes to competitiveness and can be used as a driver of change in public policy. It highlights the most important competitiveness issues facing the economy. I am also encouraged by the statement in the Associated Press release made by the chairman of the National Competitiveness Council, Dr. Don Thornhill, that Ireland can have a bright future, provided we confront the challenges we face and exploit the opportunities to create a more competitive economy. We must approach the challenge of competitiveness with a positive can-do attitude, otherwise we will not be successful.
Our ability to recover economically and our future prosperity in terms of job creation will depend on our ability to compete in international markets. This is something I have stated previously and I have heard the Tánaiste mention it: we must improve our export performance. We are likely to see growth in other economies with which we have traditionally traded such as the United States, the United Kingdom and countries on mainland Europe before we witness a return to growth here. It is essential, therefore, that we can tap into this at the earliest possible time. Productivity improvement is essential to allow us to compete in these markets again. Competitiveness improved during 2009, as the Minister stated, and this is positive. However, the recent report contained additional comment to the effect that this was not brought about by any structural changes in the economy but rather by the effects of the recession and that it should not give us any comfort.
The priority policy issues that must be addressed are to create jobs and tackle unemployment. I welcome some of the comments from the Minister in terms of some initiatives she is taking. This must be the number one issue. The haemorrhage of jobs has been a most significant contributor to the state of the public finances. In many ways the Government has been too focussed on the issues of banking and the public finances - obviously that must be done - but to the relative neglect of the unemployment issue. Training and education initiatives must be prioritised to enhance the skills of those in employment and increase the employability of those who are unemployed. An emphasis on both is essential if productivity improvement is to be achieved. We must also incentivise individuals, perhaps by way of tax reliefs, who invest in their own upskilling and education. Many working people in low paying jobs would love to learn new skills at night but cannot afford the fees and we must examine ways to encourage this. We must incentivise enterprise to invest in training and development, an area where Irish industry falls well below international best practice. One of the recommendations of the Global Irish Economic Forum at Farmleigh House, was to invest at least 3% of GDP annually in research and development, a recommendation which should be pursued vigorously by the Government. There must be a focus on innovation at all levels of our economy, a point to which the Minister referred several times in her speech.
We should also put a greater emphasis on innovation through all stages of our education system, a point I have raised at the Joint Committee on Education and Science. I believe innovative thinking can be taught. We should examine the possibility of putting innovation modules throughout the education system including first, second third and fourth level sectors. Another recommendation from the Farmleigh forum was to implement the innovation fund announced in the document, Building Ireland's Smart Economy, and this should be prioritised. We must prioritise infrastructural investment to support enterprise and for its immediate employment potential. It is essential to examine the capital programme to establish what can deliver jobs in the shortest possible time and to examine the infrastructure deficit, which must be addressed as well. This includes such issues as broadband, energy, roads and schools. Co-ordination of such activities must be strived for at all times to achieve savings where possible. There is a need for world class as opposed to the third world levels of broadband that many citizens enjoy. There are rural parts of Dublin not 15 miles from here where a broadband service is not available. I was contacted by a constituent who informed me he is trying to work from home. He has serious business ideas and he is set up but he lives in an area where he cannot get broadband, which is scandalous in this day and age and the matter must be addressed.
The Minister referred to credit flow. Credit flow from banks to viable business is essential if we are to achieve our potential for recovery. The Government must take full advantage of the stakes it now holds in the banks to ensure this takes place. We must improve public service delivery through a major reform agenda. Although the Government may have set back this potential, possibly irreversibly, in the negotiations before Christmas, the unions showed a willingness to address this issue in the right context. It is now up to the Government to recover the trust of the unions and I wish it well in this regard.
Skills shortages in our economy were highlighted in the competitiveness report, including in the food and drink sector, where process efficiency and commercialisation capability have been identified; in the medical technology sector, where there is a shortage of skills in regulation and quality control; in the chemicals and pharmaceutical sector, where skill sets are seen as being possibly too narrow; in the ICT, information and communications technology, sector, where it seems there is a lack of skilled graduates; in the financial services sector, where higher specialisation and skills in innovation are seen as lacking; in the environmental sector, where skills related to new technologies are seen to be lacking; and in internationally traded services, where generic skills, humanities and social science skills and hybrid technical business skills are seen to be lacking. I was astonished that such skills shortages could be lacking in Ireland today, some of which would appear to be basic. There is a serious gap which must be tackled urgently by the Government in terms of encouragement in this area.
Productivity improvements can be brought about through education, training, incentivising technology and addressing capacity issues and issues of scale to which I have referred previously. Quality improvement and a focus on doing a job right first time is important as well. Many companies spend too much time re-doing and re-working, which adds to the costs of business. There should be a continued focus on this area of quality improvement in Irish industry. A continuous improvement culture will deliver continuous improvements in productivity. Every process must be examined and waste must be eliminated from our enterprises.
There are many fine, experienced people who are experts in these areas but who are now unemployed. Such people have received thousands of euro worth of training from multinational companies over several decades. Certain people who have worked for ten, 20 or 30 years with multinational companies are now unemployed. There is potential to be tapped in this area and the possibility should be considered. There should be a strategy to identify such people who may be receiving social welfare payments for doing nothing. How can we creatively use such people? They could be used by Departments and public bodies in activities such as process mapping, as part of a transformation and service improvement initiative that has been discussed previously. I have spoken to some such people and they are interested in making a contribution. This could be remarkably cost effective in comparison to the option of using consultants, the option of choice for Departments in the recent good times and a very costly option indeed. The Minister should consider exploring the opportunities this would present.
The culture at enterprise level in Irish industry has changed for the good but at too slow a pace. Management and workers must work together and must not be engaged in combat if the potential of the enterprise is to be realised. There is a role for trade unions in providing leadership in this regard. I recognise there is a commitment at the top in the main unions in Ireland but that must trickle down to enterprise level.
State support for productivity initiatives such as world class management, excellence through people and gain-sharing initiatives may be useful in this regard and may assist in driving productivity gains as well. A partnership approach is essential but very often there is a lack of trust which must be addressed. This support used to be available to manufacturing companies but I am unsure to what extent it is still available. Such support makes a difference but it must be results-driven and funded and care must be taken that resources are not squandered. This can take place easily if the correct controls are not in place. The cost of doing business in Ireland, especially the costs of energy, waste and professional services must be brought down. Energy costs in Ireland are too high. This is the message we hear from a variety of business interests who have made submissions to the Joint Committee on Enterprise, Trade and Employment, of which I am a member. This must be addressed urgently if we are to recover competitiveness.
The report states there are positive signs in respect of the costs of doing business here but few examples are given. One such example is that rental costs are reducing but we need more. Local authority charges have a major impact and they are a major factor for businesses throughout the country. In this regard I congratulate Fingal County Council, the local authority that covers my area and which is Labour Party controlled, for the double digit percentage reductions introduced this year to assist business. This should be mirrored throughout the country.
I refer to pay levels, a matter to which the Minister adverted. The competitiveness report acknowledges there is an adjustment underway in pay levels. Unlike previous competitiveness reports from Forfás and the National Competitiveness Council, it is notable that this report does not call for a reduction in income levels throughout the economy. There is no call for a cut in the minimum wage. Many employer bodies and people on the political right in Ireland have been engaging in a campaign to reduce the minimum wage rate in recent times. This is a campaign to which the Labour Party is inextricably opposed. The challenge for Ireland in respect of wage costs is to focus on the other elements that contribute to productivity, not on wage rates. The NCC has made its recommendations and many other recommendations emerged from the Farmleigh summit. The Government is not short of advice. It is now time to facilitate, encourage and implement it.
I welcome the Tánaiste to the House for this timely and necessary debate on employment and competitiveness, recognising the other demands on her time. Issues of employment and unemployment are the most serious issues of economic concern this year. In a very short time we have gone from a situation of full employment to unacceptably high levels of unemployment. While these have not been and are unlikely to reach the levels feared, they are still far too high. It is to be hoped that as they peak some time this year we can start the process of reinstating the high numbers in our workforce to match the peak of more than 2 million some years ago. At present some 1.8 million people are in the workforce. Within a 12-month period there has been a considerable turnover among the 430,000 who are unemployed. For example, in 2009 150,000 of those who came on to the unemployment register found alternative employment within the year. That indicates some healthy signs within our present economy and shows where it is heading in the medium term.
To to bring about the economic recovery and subsequent increased employment levels, the first thing this Government had to do was get public finances back in check. The 2010 budget and the Finance Bill which will be published in the coming weeks are intended to achieve that. When we reach peak unemployment this year we will be able to start the return to previous levels of employment on the basis of policies already being implemented. Chief among those is that we cannot go back to the employment policy that existed from the start of the past decade until 2007 and the change in economic circumstances. For example, the number of people who were engaged in construction is not something we will see in a new economy that will employ people differently. The emphasis must be on re-skilling and new skilling and on focusing our education system to ensure appropriate skills are given to the people entering into the workforce and re-skilling those currently in the workforce or those who need to re-enter it.
There are other positive signs. The fact that our exports are doing well, that we have a positive balance of payments and the contribution being made by multinational companies are all signs of hope. Others, including the Tánaiste, addressed the recent report of the National Competitiveness Council. However, I would not put forward the negative slant that was put on it by many of the Opposition speakers in the debate so far. In my view, this report is largely optimistic. It does not pull punches in saying where we need to improve but in general terms states we are going in the right direction and can correct what needs to be corrected quite easily if appropriate decisions are made. The report discusses the positive nature of our exports and the fact that our competitiveness has improved. One of the effects of the Celtic tiger economy was that we achieved wage levels that, in comparison with those of our competitor economies, can no longer be justified, especially in the aftermath of an international recession. This means that for people on high wages difficult decisions must be made and lower wages accepted in the short term so that our economy can grow and become more competitive.
Another criticism has been made regarding the Government's policy on job creation and reversing unemployment trends, namely, there is no Government policy. When one considers the Tánaiste's speech, that is obviously untrue. A number of policy documents and polices are being implemented by the Government that identify the type and number of jobs that can be achieved in the next decade. Actions to support the smart economy, purely in terms of infrastructure, envisage 30,000 jobs being created over this period. There is a concrete proposal for an international content service centre that will support the development of 1,000 digital content companies. This would produce a hoped-for 10,000 jobs in that period. My party has been subject to much derision regarding our contribution to economic policy and its success but the green enterprise group-----
The green enterprise group has identified 80,000 jobs and the knowledge society task force has identified 30,000 to be created in the next decade. Some 15,000 of those jobs have already been created. The biggest contribution in new jobs has come about through green economy jobs. The Senator might not be prepared to acknowledge that but it is the fact in respect of labour market policies in this country and I am proud it is happening.
The overall number of jobs to be created through the green and smart economies over the next decade is 127,000. The throwing out of figures can be fatuous in debates like this. I note that Fine Gael's policy document speaks about 100,000 jobs being created. Nobody seems to talk about 67 or 463 jobs being created in any particular period-----
It is somewhat fatuous to talk about exact numbers of jobs. However, the reality is the direction in which employment policies are going. If I may, I shall encapsulate that in terms of how we can do the little things, which is something I heard in Senator Ryan's contribution. This applies even in areas such as public procurement. The idea of green procurement, which is in the renewed programme for Government, is that if we buy smartly, locally and using the maximum number of inputs that are created and used in this country, we will maximise employment potential. The Government is in the best position to do that, as are local government and State agencies. Ultimately, it is about how we use whatever spending power we have. It is a much diminished spending power so we must ensure we use it as wisely as possible to maximise the employment potential I believe exists in this country. The policies that are in place are the policies to tackle. When levels of unemployment peak this year we will manage to achieve more sustainable levels of employment in the immediate future.
I welcome the Minister of State, Deputy Calleary, to the House. I am sorry my friend, Senator Boyle, is leaving because he is right. We can throw out figures about jobs and proposals. The reality is that up to 2008 we enjoyed a period of increasing competitiveness. Why then, between 2001 and 2008, were we 20% above the eurozone average in our consumer prices? Were our costs too high, affecting labour costs? I agree with Senator Ryan. I do not believe we should look at the minimum wage and cut it. The people who are on the minimum wage are on the breadline as it is. They are struggling.
Critical to our recovery as a nation is that we restore our competitiveness. That cannot be a slogan or a catchcall. It must be implemented by Government now rather than later. In requiring action, we need to look at our cost base. I love phraseology such as Senator Boyle mentioned - "to do business" or being "open to business". If, as a country, we are serious about being open for business, about wanting to attract foreign direct investment and using Ireland as a benchmark or model for good employment, we need to see real action. What happened in the aviation industry this week does not help. The Government's collapse of social partnership before the budget also does not help. I repeat what I have said previously and again this morning on the Order of Business, never in the history of the State has social partnership been needed more. However, social partnership must also have a new pillar. It must include Members of the Houses of the Oireachtas who, in the case of the Opposition and Seanad Éireann, have been sidelined. I appeal to union leaders and the Government to sit down again to talks and to work together to protect, retain and create jobs.
We need a vision and leadership. People speak about hope but the Tánaiste's remarks, some of which I agree with, contained little vision. Jobs and unemployment are the greatest source of worry for thousands of couples and individuals in our society today. As Senator Cannon correctly said, people who are worried about the future or who are out of work are looking for hope and inspiration. Senator Callely's remarks about Senator Cannon were disingenuous. He should apologise to Senator Cannon for them. Senator Cannon, in a fine address, painted a clear, cogent picture of the reality in Ireland today. He is not tainted by being a member of the Government or with blinkered vision. He tells it as it is, and I commend him for that. He is right. Our current position is the consequence of Government policy and inaction. It would suit Members on the opposite side of the House, who are not present, to forget about the past and air-brush it, much as they did for a long time with Charles Haughey. Fianna Fáil is good at air-brushing when it suits. Its policies have put us in this mess, and we must learn from that. Any good business carries out spot analyses. That is what the Government must do.
I welcome Senator Boyle's comments about the Green Party input into Government and the creation of 15,000 new jobs in the green economy. However, it is time the Green Party stopped being the mudguard or the stabilisers on the Government bicycle and became the saddle or gears. It should drive the Government rather than be the back seat passenger.
I welcome the reduction in prices. Unfortunately, however, some of the Government controlled or regulated prices remain high. I refer to electricity prices, road tolls, bus and train fares and other Government charges. What has the Government said to the regulators and semi-State bodies about reducing costs and fares for the taxpayer? Senator Cannon correctly said that protection and retention of jobs must be the priority.
Senator Ryan spoke about Fingal County Council. My local authority in Cork city froze the commercial rate. What can local authorities do now? The Minister for the Environment, Heritage and Local Government, Deputy Gormley, and the Minister for Transport, Deputy Dempsey, say that as Fine Gael or the Labour Party have control of local authorities, they can do as they wish. They cannot. The Government allocates a certain amount of money to local authorities but that funding has been cut. When charges are frozen and there is a reduction in the money to provide a service, what will happen? There will be a reduction in services for people. There is a need to re-examine the model of funding for local authorities and how the authorities can generate income.
Many of my friends are involved in small and medium enterprises. They seek working capital but in many cases they receive little or no help from the banks and, in some cases, the Revenue Commissioners. The banks must start assisting job creation and retention. In every city and town one will see properties for sale, to let or lying idle. Retailers are in serious trouble. The property bubble is over. Exports were replaced as the key growth promoter by the twin engines of the construction industry and consumer spending, which are now at an end. I agree with Senator Boyle that we can never return to a situation where the construction industry is the only saving grace in the economy or where there is a property bubble in the housing sector. That was a false situation and has led us to the current position.
I hope there will be a focus on job creation, that there will be a reduction in the cost of energy and that local authorities will be assisted, given that many of them have frozen or reduced commercial rates. We need an innovative jobs programme. We have a great, extraordinarily well educated, young workforce. Thankfully, we have invested in research and development, and I commend the Government to an extent in this regard. I agree with what the Tánaiste said about that. We have done many things that are right but I wonder if we have learned from the bad decisions, so we can move forward to create employment. That is the task.
Fine Gael has put forward, in its NewERA document, an innovative policy to create employment. It has been well received by people such as the economist, Mr. Jim Power. It is time the Government put forward a plan for job creation, which has not yet happened. I hope there will also be a renewal of social partnership.
I welcome the Minister of State, my county colleague. He is a regular visitor to this Chamber and is always worth hearing. I also compliment the Tánaiste on her wide-ranging speech. It gave a comprehensive outline of what has been achieved in very difficult circumstances.
I welcome the contributions from Opposition Members. They highlighted certain actions they believe should be taken but they also gave recognition to what has been achieved by the Government in very trying times. The levels of employment and unemployment have been outlined. It is disappointing that unemployment has gone so high but it is impressive that the figures have stabilised and, indeed, are on a downward trend, which is welcome. Hopefully, this trend will continue. I have little doubt that it will, due to the policies being put in place by the Tánaiste and the Government.
I received some material from the IDA which shows that it is still contributing significantly to the economy. It is still recognised as a body that has the trust of many companies. Client companies contribute significantly to the economy and account for €110 billion in exports, or 70% of our total exports. That is welcome. In 2009, a total of 125 direct investments were secured, of which almost 70% were from existing IDA clients. We should not underestimate this as it shows that this country's record of tax incentives and so forth is recognised by these companies. A total of 49% of the investments was from the research and development sector. The number of new companies investing in Ireland for the first time was 11% more than in 2008. That is welcome. That is the aspect we should consider instead of always pointing out the negative things that have happened, which may continue for some time.
FÁS has run some good programmes and is doing quite a lot of work but because of recent events in FÁS it might now want to begin a new period of regulation and implementation of rules, some of which may be too strict. I have raised with the Minister here on a number of occasions the issue of young men and women doing apprenticeships with companies that have now folded. They were in the final phase of getting their papers in order but they could not complete that process. If they had continued for another 20 weeks between attending college and working with the company they would have that piece of paper which would entitle them to do that. I ask the Minister to contact FÁS and get something done about cases like that. He should apply the new rules for young people coming into the process but it is unfair to the young people who have done three and a half years of a four year course only to find that the parent company they were with has folded and they cannot do the last phase of their work. I know the Minister will take that in hand and try to get the matter rectified.
Much has been said earlier about energy costs and a reduction in rates, both of which have taken place to a substantial degree in the past year. The price of gas and electricity has come down, which should help the people providing employment. There has been a reduction in rates also. In my county there was a 2% reduction, which appears to be happening throughout the country. It is all very well to say there has been a cut in the payment to county councils or local authorities but we must also remember that the cost of everything has come down. Value for money is the new phrase. What happened in the boom years cannot continue. We now must get value for money and there are opportunities for that, whether in terms of roads projects or whatever. Costs have come down and we must factor that in and not always say that money is not coming from central Government.
An aspect of life in the west and other parts of Ireland concerns small retailers. There is much talk about the minimum wage. I would not like to see a cut in the minimum wage. There should not be a thought of doing that. I watched a television programme during the week which showed people who had been working for up to 20 years in retail companies who were still on the minimum wage. If there was no minimum wage one wonders what they would be earning. I do not want to hear any more talk about reducing the minimum wage.
I want to refer to small businesses in local towns. When some young people leave school they go straight into the retail sector, whether hardware shops, clothes shops or whatever. They work in those businesses for a number of years. A phrase often used in my part of the country - I do not know if it is used in other areas - is that one is never at a shop boy's funeral. When they were good they always ended up buying their own business in another town.
There is a way of getting around this problem, which I ask the Minister to examine, namely, that these people would take up an apprenticeship at €5 or €5.50 for the first year, which would be increased in the second year and they would then be on the minimum wage by the third year. That would create a good deal of employment for those young people while giving them the experience they need. I welcome the Minister of State to the House and ask him to consider those suggestions.
Cuirim fáilte roimh an Aire Stáit. Thanks to Senator Carty I will take home the phrase that one was never at a shop boy's funeral, and add that to the list of seanfhocail and phrases from a particular time and place in Ireland, which say so much.
Ireland is now facing one of the most challenging periods in its history. The global credit crunch, the collapse of the property bubble, the near collapse of our own banks, and the dramatic fall in the value of the currencies of our trading partners has created a perfect economic storm which has tested the competence of Government and the confidence of business.
Challenging times test leadership, and as Warren Buffett famously remarked, "When the tide goes out you get to see who has been swimming naked". The sad and embarrassing fact is that quite a number of our senior Ministers in recent years had been swimming in the nip, claiming economic competence but failing to display it. It is not a pretty sight but, more importantly, the failures of Government have contributed to the massive growth in unemployment and to creating a climate of fear for many young families who are unsure from where the next pay cheque or mortgage payment will come.
I fully agree with the view of the ESRI that we can blame 50% of our economic woes on the changed international economic environment. Even if had we been ruled by rulers with the wisdom of Solomon and the vision of Joseph we would still be facing challenging times. The truth, however, is that the unwise profligate policies of previous Administrations have contributed greatly to the challenges we now face. Had those Governments kept their eye on the ball we would now be in a far stronger position to face the storm we find ourselves in, with the resources to pump prime a return to growth rather than savagely cutting public spending at a time when we should by rights be increasing it.
Some time ago the economist and commentator, Marc Coleman, penned an analysis piece in which he said that the oldest economic advice on record had been given by Joseph to Pharaoh. Joseph, interpreting the Pharaoh's dream, recommended that Pharaoh store the grain from the years of plenty for use in the years of famine. However, I fear that the Fianna Fáil-Progressive Democrats Governments never read the Bible for in the years of plenty they increased Government spending, helping to turn a boom into an unsustainable bubble and leaving us with no resources with which to face the years of scarcity.
The increase in the cost of Government was one of the key driving factors in Ireland's loss of competitiveness. When we use the term "loss of competitiveness" there is a tendency in some quarters to see what has happened almost as an accident. We are led to believe Ireland lost competitiveness in the same way I lost one of my socks last week. It seems nobody was to blame, but the fact is that we did not just lose competitiveness. We threw it away.
In a recent report Forfás, the Government's industrial policy unit, demonstrated that it was 25% cheaper to operate a retail business in Belfast than in Dublin. That is a staggering differential to have as between ourselves and a neighbouring jurisdiction. It means that firms from the Republic have to be 25% cheaper just to compete on an equal basis. How did that position come about?
I fully accept that Ireland had a long boom and that during a boom, prices and costs will rise, but that is only part of the story. Detailed analysis by Jim Power of the drivers of inflation in Ireland has shown that the real drivers of inflation were in Government charges or the costs of goods and services regulated by Government. Between 2000 and 2006, the consumer price index rose by 27.5% but food prices rose by just 16.2%, well below the overall rate of inflation.
What was driving Ireland's high rate of inflation? Between January 2000 and October 2007, the cost of water supply, refuse and miscellaneous rose by a staggering 255%. Between 2002 and 2008, local authority rates increased by 42%, and I note what Senator Carty said about the recent downward direction of rates but that overall rise of 42% is staggering. Between 2002 and 2008, electricity prices rose by 85%. Ireland went from having one of the lowest costs of electricity for business users to having one of the highest. In saying this, I recognise the comments that have just been made to the effect that there has recently been a decrease in costs. However, I am merely outlining the facts. The reality is that the Government took its eye off the ball and Irish business and, more importantly, Irish workers are paying for this.
We are where we are, however, and there is no point crying over spilt milk. Mere wishing will not solve our problems. While I have condemned the Government for policy failures, it is only correct that I should commend it when it takes the correct course of action. In that context, I strongly support it in its attempts to position Ireland as a leader in the smart economy. I also commend the Department of Enterprise, Trade and Employment on its decision to convene the task force on the green economy.
Jargon is often a means of concealing the truth. It is used by eager but not particularly well informed spin doctors seeking to push the latest fad on an unsuspecting public. However, there are times when jargon describes something real and valuable. An example is the term "smart economy". The smart economy is real, not merely a piece of empty political rhetoric or part of the spin cycle. It describes something which is real and of critical importance to all our futures. It is shorthand for an economy which makes full use of information technology and communications to drive innovation, research and development in a world where economic growth must be environmentally sustainable.
Regardless of whether one buys into global warming, there is no doubt that the carbon age is passing. The advent of peak oil and the emergence of the new economic superpowers, namely, China, India and Brazil, mean that we are operating in an environment where sustainability is at a premium. The latter will give rise to a real opportunity for Irish firms. I fully agree with the Tánaiste's recent comment to the effect that the green economy has the potential to create 80,000 jobs. In that context, I urge the rapid implementation of the findings of the task force of the green economy. As the Tánaiste previously stated:
We have had significant success in sectors such as food, ICT, pharmaceuticals and biotechnology to date. The adoption and targeting of the environmental goods and services sector now allows us to capitalise and build on our existing skills base to capture for Ireland part of the global growth in this sector.
I firmly believe clean and green technology will be one of the key drivers of innovation in the high-tech sector for years to come and that it represents a major opportunity for the sector in Ireland. I also urge the Government to act swiftly to implement the green proposals relating to the IFSC in order to position the latter as a base for global green funds and carbon trading. The skills, capabilities and contacts are in place; all we need are very minor changes to the tax code which would be cost-neutral in nature and a major sales campaign to sell Dublin as a location for these funds.
If we are to seize any of the opportunities to which I refer, we must also build a really strong, world-class research and development capability in Ireland. Most people, including many politicians, believe Ireland's investment in research and development merely involves putting money into new product ideas. However, it has much more to do with building human capacity and capabilities. The recent Irish Research Council for Science, Engineering & Technology, IRCSET, conference on "Innovation fuelling the smart society" demonstrated not only the potential of the smart economy for researchers, it also highlighted some of the fantastic research talent in the country. There are more than 800 young researchers being funded by the IRCSET, many of whom are absolutely world class and their talents will help to secure all of our economic futures. I strongly endorse Government expenditure in education and the development of Ireland's brains trust. I suspect that we will get a far greater return from our investment in these young people than from our investment in NAMA.
I also strongly urge the Government to implement the findings of the most recent competitiveness report. While its past actions may have undermined Ireland's competitiveness, it must take action to restore it. All the vision and research in the world will not create jobs in Ireland if costs here are totally out of sync with those of our competitors. In the short term we need to slash business costs, particularly those relating to small business interests. The best thing we could do to help small business would be cut rates by 50% in order to protect existing jobs. We must restore competitiveness in order that there will be a strong and stable platform for renewed growth. This will assist us in seizing the opportunities presented by the smart economy.
Mar achoimre ar an méid atá ráite, ba mhaith liom a rá gur fíor gur chaitheamar amú é ar phointe áirithe leis na Rialtais roimhe seo, go háirithe i dtaobh na costais a bhain le seirbhísí an Stáit, seirbhísí mar leictreachas agus uisce. Ba léir gur sa réimse sin a chuaigh na costais thar cuimse. Mar cúiteamh anois, caithfimid díriú isteach ar ghach a bhaineann le caomhnú na timpeallachta agus caithfimid dul chun cinn a dhéanamh le seirbhísí agus cúrsaí a bhaineann le feabhsú na timpeallachta a fhorbairt agus a chur ar fáil, le gur féidir linn leas a bhaint as na hacmhainní atá againn. Freisin, caithfimid cloí leis an infheistíocht, mar atá déanta. Caithfimid infheistíocht a dhéanamh i ndaoine óga, daoine le scileanna ar leith a bhaineann le cúrsaí eolaíochta, le gur féidir linn teacht as an ghéarchéim ina bhfuilimid.
I take the opportunity to wish the Minister for Finance a speedy recovery. Following an understandably difficult start to his term of office, he swiftly and bravely rose to the challenge facing him and has provided the type of real leadership necessary to reassure international investors. He also shown courage to take very tough decisions. He has, in fact, set the standard for his colleagues in the Government. I hope the latter will also rise to the challenges we all face. I wish the Minister well in his personal battle. I believe I can assure him that he is in the prayers of all Irish people and that they offer him their best wishes. I have no doubt he will bring the same great courage to his current battle that he has shown in the service of the State and its people. I look forward to his return to full health and wish him all the best at this time. Ba mhaith liom buíochas a ghabháil leis.
I welcome the Minister of State, Deputy Calleary. I had some dealings with him in respect of a number of people who wished to set up business projects. He was most helpful to those involved and gave them the confidence to proceed with their ventures. I was extremely impressed by what he did and thank him for becoming involved.
It is great to make statements on business interests of all sizes. On their own, statements are of no value to anyone. However, they do help to create awareness. The best and most practical way to discover what is happening is to meet people involved in business. I have done this during the past few months. One of the individuals with whom I had discussions runs a shop, petrol station and café. I know the man in question and he informed me how his business was doing. As a result of what has happened in the construction industry, the level of his business has decreased. In recent years approximately 30% of his business came from construction workers who used to purchase rolls, etc., from his shop each morning. This trade has disappeared. He received a letter from his local authority which indicated that his rates were being increased by 30%, while his insurance costs rose by 15%. He was faced, therefore, with a situation where two increases had been imposed upon him by those from whom he obtained services at a time when the flow of cash into his business had decreased. He indicated that the road outside his premises had been in a dreadful state for the past nine months - as a result of the appearance of a number of potholes - and that the local authority would not repair it. This provided me with some idea about how difficult it was for this man and others like him to remain in business. He approached the banks for a loan but was informed that they could not understand why he would need a loan, particularly as his was a cash business which should, therefore, provide him with a flow of cash. This indicated to me that the banks did not even understand what being in business entailed. It was interesting that the individual in question was up-front in indicating the nature of his problems to me.
I was also in contact with another individual who has a plumbing business and employs six people. Unfortunately, this man contracted motor neurone disease and was obliged to let his business go because, as a result of the fact that his children are young, there was no one to take it over. He could not obtain assistance and I discovered that he and others like him were not entitled to any form of payment from any source. I persuaded him to approach his community welfare officer, from whom he is now in receipt of some money. My point is that if one's business collapses, one cannot obtain assistance from anyone. I will not discuss the matter in detail but there are others who get everything they seek, including houses, virtually for nothing.
Small businesses do not receive adequate support or encouragement. Many of them are closing because they are asking what is the point. In general the overheads have increased and the number of customers has reduced. That is a problem we need to address. Earlier Senator Carty referred to energy cost reductions. While that is true, those reductions have not been sufficient to keep a business afloat.
I spoke to a man last week who got a small job in a factory in my area. He told me that he did not think he would stay in the job because he would get more from the dole. I pointed out to him that he does not get it from the dole but from his neighbour, from me and from everybody else. That is a widespread mentality that we need to address. I make a contrast between people who make an effort to build up a business and people who avail of every opportunity to get money from the State. They claim that society has let them down and is not looking after them. There is no such thing as society looking after people. In society all men and women are accountable and responsible for themselves, and should also look after their neighbours. The concept of society having to look after individuals is a myth that we need to eliminate.
I will give an example of how people making a genuine effort in business are being hampered. NERA officers go around inspecting hotels at night. Last week an hotelier, who is also a member of the Vintners Federation of Ireland, made the point to me that he employs local secondary-school students aged under 16. It gives them a bit of independence and a few bob. They need to be let off work at 10 p.m. He then needs to bring in someone else for an hour or two if the hotel has a dinner dance or whatever - it does not always run to schedule. This is a very awkward situation. He told me that NERA inspectors came into his hotel at 9.30 p.m. one night in the middle of a function looking for books and asking about people. They took up about an hour of his time. This is going on wholesale. It has been talked about for quite some time, but I do not know what is being done about it. We are overregulated in unnecessary areas. I would redeploy people engaged in that type of nonsense to do something worthwhile to help people and not to go around hampering people in business.
There is also duplication with local authority services. Local authority officials come to restaurants and pubs to inspect grease traps. The restaurateur or publican then needs to hire a private person to do the same thing and remove it. It should be sufficient for the private service supplier to issue a certificate and pass it to the local authority. These are some of the things that put major constraints on people in business, some of whom have been in business for many years. Many small businesses that have been established over two generations are now gone because not enough is being done.
Senator Mullen earlier referred to the Minister for Finance, Deputy Brian Lenihan. I wish the Minister well. I admire his qualities. I met the Minister recently to discuss local authority rates. The rates are based on valuations from 2005 when property values were at their highest. As we know the Valuation Office sets the rate and passes it on to the local authorities and it is not done by the local authorities themselves, which is a crazy situation. The Minister was doing something about it.
Those are the problems. With all those overheads it is very difficult to survive in small business. I learned that from going around and asking people how they were getting on. Every time I meet people in business I ask them how things are going for them. It is the only way to find out. We could talk in here morning, noon and night about it, but one will never know anything without going out into the arena oneself.
I welcome the Minister of State. I congratulate him on his performance in the past 12 months, which has been a very difficult time for the Government and the country. What was required politically was straight talk, honest analysis of the problem and a willingness to prescribe the tough medicine that we all know is required. A small number of Ministers, including the Minister of State, Deputy Calleary, were willing to be honest and straight with the people, who recognise the scale of the crisis and are willing to be part of the solution provided there is leadership from Government. We need more Ministers who are willing to come forward, as the Minister of State has done in numerous media outlets, to call a spade a spade and outline the facts of the very difficult economic plight in the country and hopefully work towards a solution. I wish him well in his endeavours in that regard.
A very interesting by-election took place in the state of Massachusetts this week. It was regarded as a major surprise that the Republican candidate won. However, all the analysis since the election clearly shows that as far as the people in that state and in every other state in the United States and every other country across the globe are concerned, jobs must be put at the top of the agenda. That was the lesson from the US election during the week. It is all about jobs and that must be the focus of our policy over the next 12 months. We would all have to concede that the December budget, which hopefully will help to bring the country's finances into somewhat better shape, was necessary. It should lay a foundation for job creation and we must keep job creation at the top of the political agenda.
I was interested in the commonsense analysis of the previous speaker, Senator Brady, and his recounting of his discussions with small local businesspeople. He was correct in the comments he made about the difficulties faced by self-employed people when their businesses fall into difficulty. I spoke to one of those people approximately a fortnight ago. This was a gentleman who had worked in the construction industry. Up to a number of years ago he had employed up to 40 people. He paid their taxes and PRSI fully. Everything was in proper order. Unfortunately the economic cycle turned and his business has disappeared down the tube. He is unable to get any help whatsoever from the State. He has two children in third level education. They cannot get a higher education grant because he simply cannot afford to have an accountant to complete the necessary bookkeeping exercises to complete that higher education grant application, which is very sad.
All his former employees, who are not in a position to obtain work, are in receipt of job seeker's benefit to which they are entitled and their families are in receipt of higher education grants etc. However, here is this person who employed 40 people and whose contribution to this economy in the past five to ten years is worth millions. Now he is the man in difficulty and no help is available. The Department of Social and Family Affairs needs to review the issue of classification of social insurance for self-employed people. To the best of my knowledge the only entitlement arising from social insurance contributions made by self-employed persons are to old-age and widow's pensions. A self-employed person whose business collapses is not entitled to job seeker's benefit, illness benefit or disability benefit. That matter needs to be reviewed. We need to build a new generation of entrepreneurs. We need to entice people into self-employment. If they can employ themselves and hopefully somebody else, that is very good news for the economy.
One hears reports from time to time about how self-employed people do not pay taxes etc. Self-employed people have built up the country and employed hundreds of thousands of people. They have more than paid their way in the vast majority of cases and we need to review the terms and conditions of how social insurance applies to such people because we need to provide a safety net for those people when they fall into difficulty. I would like if the Minister of State could ask the Department of Social and Family Affairs to look at that. In passing, I could hardly believe my ears to learn of a decision by the Minister of that Department, Deputy Mary Hanafin, in relation to self-employed persons who had been allowed to make retrospective PRSI payments and were then to be paid contributory State pensions. It affected a couple of hundred people, such as farmers' spouses, and yet last week the Minister took a decision not only to cancel the scheme but to look for the money back. This was a project which the late esteemed Minister, former Deputy Séamus Brennan, had worked very hard to put in place, and then his successor abolished the whole scheme. It is a debate for another day, but certainly I found this to be a very disappointing decision.
In terms of competitiveness, this society must recognise that all of us literally lost the run of ourselves over the past decade or so. There was a marvellous positive side to the Celtic tiger economy and the boom years, but the negatives meant that people ignored the costs, bills were paid without a second thought and value for money as a central aspect of economic activity disappeared. We have to return to a value for money economy. Colleagues on all sides have spoken about energy, telephone and insurance costs. By European standards we are paying top dollar and cannot compete unless those costs are challenged. A degree of progress has been made from an energy costs perspective, but we have a long way to go.
Another issue we need to tackle is professional fees. We all know and are friendly with accountants, doctors and dentists in particular. When the fees charged by such professionals in Ireland are compared with those of their counterparts in other European countries, they are way over the average. I am not sure what the solution is. I recall having to visit a doctor in a small town in Italy, about 18 months ago and paying a fee of €20 along with a prescription fee of around €5. In Ireland the fees would have been €70 for the doctor and probably €25 or €30 for the medicines. How can there be such varying cost levels across the same continent? We are competing for jobs and investment with those countries and we need to look seriously at the whole level of professional fees. There appears to be an inability to ensure there are sufficient doctors, dentists and other professionals available to generate competition. In any event, the present cost base must be looked at.
Social partnership and the many benefits that stem from it were referred to by a number of colleagues. It is important the social partners are engaged in dialogue and debate and we take on board their concerns and worries. However, any light to emerge at the end of the tunnel in recent months has stemmed from the Government making decisions. It was a question of recognising that the job of Government is to govern, listen, consult and decide on the action to be taken. We need more of such decisive Government actions over the next 12 months. I hope the social partners will work with the Minister of State and consult the Government. However, it is vital the Government continues to take the tough decisions necessary to turn the economy around and, from the perspective of this debate, to tackle seriously the costs and some of the sacred cows that have emerged, thus again making Ireland a competitive place in which to set up business.
Dara Calleary (Minister of State with special responsibility for Public Service Transformation and Labour Affairs, Department of Enterprise, Trade and Employment; Mayo, Fianna Fail)
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I thank the Members of the Seanad for taking the time to discuss this vital question. I have taken a good deal of note of the discussions, especially in the past hour. As Members are aware, the purpose of the exercise is to discuss the measures the Government has introduced to protect existing employment, assist those who have lost their jobs and improve Ireland's economic competitiveness. Earlier the Tánaiste took the House through the Government's key policy initiatives in these important areas, when I again listened with interest to the inputs of Senators.
I welcome the views of both Houses of the Oireachtas as I firmly believe that by discussing how to address these issues properly, we can best plot the course that will take us out of these difficult economic times. Ireland is one of the world's smallest and most open economies. As such, our economic fortunes are inextricably linked to the performance of the world economy. While over recent decades we have witnessed a remarkable transformation, it must be acknowledged that this was driven not only by domestic policies but also by the strength of the global economy.
We are all aware that the entire global economy is in a period of sustained and unprecedented challenge. Virtually every economy in the developed world is struggling to cope with the global economic storm which is being exacerbated by credit constraints and prolonged by a decline in consumer and investor confidence. One need only look at the experience of our fellow Europeans and the significant increase in average unemployment in the eurozone, which rose to 10% in November 2009. As Senator Bradford has just mentioned, we have also witnessed the continuing struggle to improve the unemployment situation in the USA, which has had ramifications again this week.
Given the openness of the Irish economy, it was inevitable that we were always going to be adversely affected by the global economic downturn. However, it is equally true that our economic performance has been exacerbated by structural difficulties within the economy as well as by the loss of competitiveness we have experienced vis-À-vis our competitors in recent years. The Government is determined to do everything in its power to ensure the economy returns to growth and that it is based on a more sustainable footing in the future. To do this we first have to stabilise the current economic situation and in this regard we have introduced a range of measures to lay the foundation for a return to prosperity. The Government has repeatedly proven itself capable of taking the necessary steps to safeguard the economy. Over the past 14 months we have taken difficult and painful decisions that would have been unthinkable three years ago. We took these decisions because they needed to be made in the long-term economic interests of the State. Other countries in a similar difficult position to Ireland have struggled to show the same degree of flexibility and maturity that the Irish people have displayed in facing up to their economic crisis.
While I acknowledge that these decisions have been difficult to accept, I believe they will facilitate Ireland's return to economic growth and place it in a strong position to benefit from any improvement in the world economy. As has been stated, the measures introduced by Government have been recognised by the OECD and a range of other international bodies as being significant in addressing the challenges we face.
We must continue to pursue appropriate policies to position the economy to benefit from such global recovery when it emerges. We need to remove the uncertainty within the economy and restore the confidence of businesses and individuals, such as the people Senators Carty and Brady referred to earlier. As Senator Bradford indicated, we have adopted three difficult and very painful budgets aimed at restoring the State's finances and this process will continue until we have succeeded.
We need to adopt measures that will enable the economy and our enterprises to sustain that recovery. I am acutely aware of the distress the economic downturn is having on individuals, families and businesses. The negative consequences of that downturn, particularly where jobs are lost, cannot be overstated. Our priority has been and will continue to be, to respond to the specific problems. I am committed to supporting enterprise and job creation and providing the necessary activation measures, training and upskilling programmes, with a renewed focus on targeted delivery. We are not simply doing the same with less. We are doing things in a more focused manner and targeting our spend on productive thoughtful investment that will have a clear return for the Exchequer and the economy.
Today's discussion should be seen in that context. Our present high unemployment rates reflect the reality that in the past we lost our competitive edge in certain areas of the economy. In order for us significantly to address our unemployment rates we need to improve our competitiveness, which will in turn see an increase in employment creation thereby bringing down unemployment.
The Tánaiste spoke earlier about measures the Government has introduced to stimulate export growth, as this sector will be the key driver of our economic performance in the short to medium term. We have already witnessed increases in our export levels and these will only increase once the world economy is fully on the path to recovery.
We have also introduced the employment subsidy scheme and the enterprise stabilisation fund. Those initiatives are designed to provide financial support to enterprises in these difficult times. The employment subsidy scheme is designed to assist vulnerable but viable enterprises in retaining employees they may otherwise have been forced to make redundant, by providing a subsidy to them. Applications to the second call, which closed on 23 December 2009, are currently being assessed. It is expected that the scheme will support approximately 80,000 jobs, both directly and indirectly.
In addition to providing such support directly to enterprises, the Government remains committed to investing significantly in research and development and the continued development of our economy into a knowledge-based one. This will enable us to move up the value chain, but more importantly it will result in higher skilled jobs and will increase the demand for highly skilled individuals.
This brings me to our greatest natural asset – our labour force. For years we have had a labour force that is both flexible and highly skilled. Successive Governments have invested significantly in the education and training of Ireland's labour force and as a nation we have benefited considerably from that investment. Despite the difficult financial circumstances, this Government continues to recognise the need to invest in the skills and competency development of our entire labour force. This investment will ensure that we possess the skills to meet the needs of our increasingly knowledge-intensive economy.
Given the rise in unemployment, the Government has redeployed substantial resources towards the training and education of those who find themselves out of work. For instance, this year my Department will invest €781 million in the provision of FÁS training and work experience activation places for the unemployed. This additional investment has enabled FÁS to expand its capacity for the unemployed substantially and it will provide approximately 147,000 training and work experience places this year. Compared to the 66,000 places which were provided in 2008, one can clearly see the scale of the increase in my Department's provision.
The bulk of this additional provision has been due to the increase in training places for the unemployed. FÁS now provides modular-based training so participants can pick which modules they most require to improve their skills and ultimately increase their employability, whilst maintaining a close link to the labour market. In addition, we are responding to the new unemployed by delivering training courses in innovative formats such as on-line, blended learning and night courses. In this way we will enable more people to access the services of FÁS in addition to the traditional classroom approach.
Given current circumstances, it is vital that training courses being provided by FÁS meet the current and projected skills needs of enterprises. That is why FÁS takes into account the conclusions and recommendations of our expert group on future skills needs. The latter body advises the Government on future skills needs of the economy, in the design of its portfolio of training programmes for the unemployed.
The current difficulties being experienced by FÁS are being addressed by a number of Oireachtas committees. I am pleased to inform the House that this afternoon the Tánaiste will announce a new board for the FÁS agency, which will direct its new approach to the delivery of courses.
The substantial increase in education and training provision, which is a direct response to the economic crisis, is also a key in achieving the objectives of the national skills strategy, which is to upskill 500,000 people by at least one level on the national framework of qualifications. The additional provision now being provided will enable more individuals to progress up that national framework in accordance with the national skills strategy.
In addition to these initiatives, we have introduced a number of new programmes designed to assist the unemployed. For instance, the work placement programme provides 2,000 individuals with an opportunity to stay close to the labour market while they are unemployed. Participants on the programme gain work experience for a period of up to nine months while retaining their social welfare entitlements.
The Government has announced a new labour market activation fund of €20 million for which we will issue calls later this year. This fund will be targeted at certain cohorts of the unemployed, including the low skilled, under 35s and those suffering from what is termed structural unemployment. It will be used to support innovative proposals to provide these individuals with training that is designed specifically to assist participants in securing employment. My Department has responsibility for the fund and will shortly issue a call for proposals from all sectors of society.
The increase in training provision, work experience opportunities and the call for these innovative proposals are all designed to provide an enhanced offering of support to all of the unemployed. Through these measures individuals who are unemployed can improve their skills and competencies, thereby assisting them in securing employment as soon as possible.
Over the past three budgets we have shown a willingness to take difficult and in many cases painful decisions that are in the interest of the entire country. This Government will continue to manage the economy in a manner that is sensible, responsible and appropriate to ensure our return to prosperity. I am confident that the decisions we have taken, and will continue to take, will restore the public finances, stabilise our banking system, provide training opportunities to the unemployed and further improve the competitiveness of the economy. They will ultimately place Ireland firmly on the road to recovery.
Senators raised a number of specific issues, which I will follow up with them. These matters included social benefits for the self-employed, which were referred to in particular by Senators Bradford, Carty and Brady.