Address by the Tánaiste to Dáil Eireann on the 2009 Budget and Estimates

15^th October 2008

A Cheann Comhairle,

A Budget to build confidence

The events which we have witnessed over the last few weeks on the international money markets have been characterised by a loss of confidence in financial systems. The scale, depth and impact of this loss of confidence has been unprecedented in our lifetime.

Confronted with a challenge of such deep international proportions, the Government was faced with making difficult choices in the Budget announced yesterday by the Minister for Finance. However, the choices made were necessary to restore confidence in our economy at both national and international level by bringing stability and certainty to the public finances. They were also necessary to protect the most vulnerable in our society and to build a solid base to ensure we are well positioned to benefit when the economic cycle turns around. In this Budget, we have moved to send out a message that Ireland is still open for business, in spite of the current difficulties that are shared world-wide. We have also re-focused our spending within the resources available to us to deliver increases in priority areas, including social welfare, health and education.

Estimate for Department of Enterprise, Trade and Employment

My own Department and its agencies will play a key role in working through the current economic circumstances and in making sure that we are well positioned to reap the opportunities that will undoubtedly arise when the global situation improves. We will do this by continuing to work to attract foreign direct investment, by helping Irish businesses to develop and grow their exports, by continuing to prioritise investment in science, technology and innovation, and by providing supports to small businesses. We will also continue to invest in upskilling the labour force and ensure that adequate re-training and support services are available for those who have recently lost their jobs.

The allocation for my Department in the 2009 Estimates which were published yesterday amounts to €1.951 billion (gross). This includes €1.569 billion in Exchequer funding and just under €382 million from the National Training Fund. Like my Government colleagues, I am prioritising spending in a balanced and responsible way to ensure that the economy gets the best return for level of resources available.

Extra funding for Science and Technology

The Strategy for Science, Technology and Innovation was launched by the Government in 2006 as a long-term strategic initiative to underpin the future economic prosperity of this country. Capital funding for Science, Technology and Innovation programmes in my Department’s Estimate for 2009 will increase by €10.4 million, or 3.5%, compared to 2008. This will bring Capital investment in this area of my Department’s budget to €309.3 million, reflecting the importance of this priority for the Government. This level of support sends a clear signal to businesses based in Ireland that the Government is continuing to support their efforts to develop new products, to stay competitive and to win new markets.

The Strategy for Science, Technology and Innovation is still in its early days, but already we have seen the fruits of our investment in this area. For example:

• Some of the world’s leading edge companies have chosen Ireland as a base for their research activities. This reflects the reputation which Ireland has built as an emerging force in the area of research and development.
• 45 Research and Development investments were supported by the IDA in 2007, with an overall value of €2.5 billion.
• Total R&D spending across all sectors of the economy reached €2.33 billion in 2006.

It would be short-sighted in the extreme to halt this progress. Science and Innovation are the future growth areas on a world-wide scale. The rewards to industry for developing new and innovative products can be immense, with consequent rewards for the economy in terms of employment opportunities and investment.

Enterprise Ireland and Science Foundation Ireland will continue to work with industry and academia to further promote research, and to ensure that the commercial value of new technology and innovation is realised.

The enhancements to the tax credit scheme for Research and Development announced by the Minister for Finance yesterday are also a sign of the Government’s commitment in this area. The R&D tax credit which can be offset against a company’s corporation tax liability is being increased from 20% to 25% with effect from 1 January next year. This measure will further enhance our competitiveness as a location for new internationally-mobile research-related investment and will also encourage existing overseas and indigenous firms to add to or increase their level of research activity.

I also welcome the Minister’s announcement that the Commission on Taxation is to investigate options for incentivising the holding and development of intellectual property. This is an area that has become important globally in recent years and we need to ensure that our tax regime reflects this.

Continuing to attract Foreign Direct Investment

The IDA has been hugely successful in highlighting the opportunities which Ireland offers to leading edge multi-national companies down through the years. At present, there are over 1,000 IDA supported companies in Ireland, employing 136,000 people.

During 2007:

• Over 9,000 new jobs were created in IDA supported companies;
• 114 new investments were delivered, involving total future capital investment of over €2.3 billion; and
• IDA-supported companies yielded €3 billion in Corporation Tax receipts and contributed €16 billion in direct expenditure in the Irish economy.

Ireland continues to be an attractive location for services, high tech manufacturing and research and innovation activities. The IDA is now winning higher value FDI in new and emerging business areas such as internet and media business. In the first half of this year, the IDA announced 22 investments with a capital value of €916 million, and a potential to create 1,600 jobs. This compares favourably with figures for 2007.

An allocation of €137 million, including staff and administrative costs, has been provided to the IDA in my Department’s Estimate for 2009. This will enable the agency to continue its work in attracting companies to Ireland and to enhance its presence overseas. The Exchequer allocation will be supplemented by IDA’s own resource income from grant refunds, deposit interest and the rent and sale of properties.

Supporting Indigenous Enterprise

Enterprise Ireland will continue to support indigenous companies, with an allocation of €56.3 million from its Grants to Industry programme in 2009.

The fundamental objective for Enterprise Ireland in its 2008-2010 Strategy is to drive export growth in the challenging global environment. Success in overseas markets will generate wealth that will sustain prosperity and employment throughout all parts of this country.

There is no doubt that Irish enterprises face difficult challenges in the short to medium term. However, this makes it all the more important that Enterprise Ireland is in a position to provide all the assistance possible to companies to bolster competitiveness, focus investment and generate innovative solutions. Enterprise Ireland’s funding for grants to industry will remain virtually unchanged from 2008.

Supports for Small Business

It is also vitally important that we support small businesses at this time. Small and medium sized businesses account for over 97% of companies in Ireland and the sector employs in excess of 800,000 people. Supports for small business, through the County and City Enterprise Boards, will increase next year by almost €3 million, or 9%, to €34.8 million.

The CEBs have been particularly effective in their ability to respond to the needs of micro-enterprise at local level. Over the last 15 years, the CEBs have assisted almost 20,000 projects and helped to support the creation of 35,000 jobs.

The increased 2009 allocation for the CEBs recognises the need for access to practical business information and supports for small companies, and the importance of continuing to promote entrepreneurship at this time.

The tax relief measures announced by the Minister for Finance for new start-up companies will also help to grow small businesses and promote an entrepreneurial culture. Under the measures announced yesterday by the Minister, new start-up companies which commence trading in 2009 will be exempt from tax, including capital gains tax, in each of their first three years to the extent that their tax liability does not exceed €40,000.

Together with the consolidation of our low Corporate Tax base and capital allowances for certain energy-efficient equipment, this is a very good Budget for businesses of every size.

Funding for Labour Market programmes

In spite of the need to introduce a tough Budget, the Government has take care to protect those who are most vulnerable in our society. We recognise, in particular, the impact which unemployment has on individuals, their families and their communities. Above all, we must prevent the drift into long-term unemployment and avoid a return to the structural unemployment which we witnessed in the 1980s.

It is important that we continue to invest in our people, that we continue to upskill those in employment and that we provide support services and re-training for those who have lost their job.

Total investment for Labour Market programmes in my Department’s Estimate for 2009 will amount to €1.083 billion, or 56% of my total budget, including the National Training Fund contribution. Of this, €1.05 billion will be delivered through FAS. Within FAS’s budget:

• Funding for Community Employment and Job Initiative schemes will be increased by 2%, from €439 million to €450 million. This will enable FAS to continue to support a minimum of 22,500 participants on these programmes next year.
• Funding for FAS’s services to people with disabilities is also being increased by 2% on the projected 2008 outturn. A total of €77.7 million in FAS’s 2009 budget is ringfenced for specific employment and training programmes for people with disabilities. In addition, people with disabilities can avail of mainline FAS programmes and services.
• The allocation from the National Training Fund for training the unemployed has been increased by €9.5 million, or 5% in 2009, to €208.3 million. This allocation will, in particular, help workers who have recently lost their jobs, including redundant Apprentices, through training and re-skilling. Every effort will be made to help those Apprentices who have been let go by their employers to complete their training or to be re-trained for alternative and emerging opportunities.

While Labour Market programmes have been refocused to assist the unemployed, funding for upskilling those in employment in 2009 will still amount to €168.5 million and will be delivered primarily by FAS and Skillnets.

At the level of the workplace, the National Employment Rights Authority will continue to promote compliance with employment law and will carry out a programme of inspections to ensure that workers’ rights are being upheld. The allocation to the National Employment Rights Authority for 2009 is €9.7 million.

The Health and Safety Authority will promote, monitor and ensure compliance with workplace safety and has been allocated a budget of €23.7 million for next year.

Regulation and Enforcement

In addition to the priorities I have outlined above, my Department will continue to ensure that markets operate in a fair and regulated way for companies and for consumers. The international events of recent weeks have demonstrated how important it is to regulate sectors and the profound impact it can have on an economy and on society if they are left unchecked.

Within my Department’s remit:

• the Office of the Director of Corporate Enforcement will continue to address its twin objectives of encouraging compliance with company law and bringing to account those who breach their obligations.
• The Competition Authority and the Irish Auditing and Accounting Supervisory Authority will also continue their roles of promoting compliance with legislation in the areas of competition law and the accountancy profession respectively.

Merger of the Competition Authority and National Consumer Agency

Yesterday, I announced plans to merge the Competition Authority and the National Consumer Agency. Competition and consumer policies are highly complementary and share a common goal of enhancing consumer welfare. The merger of the Competition Authority and the National Consumer Agency will ensure improved co-ordination of these two policy areas.

The Competition Authority and the National Consumer Agency – and its predecessor, the Office of Consumer Affairs – have served the Irish public well for many years. They have protected consumers, they have ensured fairer competition for businesses and they have worked with professionalism and commitment in the interests of the public.

However, a single body overseeing the areas of competition and consumer protection will allow for a more consistent approach to policy implementation and resource allocation. The synergies resulting from bringing together the Competition Authority and the National Consumer Agency should improve services to the public and should result in a better return for the investment currently being made in two separate bodies.

Concluding comments

In conclusion, a Cheann Comhairle, the road ahead of us is still somewhat uncertain, given the world-wide scale of the current economic difficulties. However, with the prudent approach to spending announced yesterday, allied to the measures announced by the Minister for Finance to stimulate productive investment, this Government has demonstrated real leadership and has invested in building a confident future for us all.

ENDS\ETE1955