7 July 2005 Edition
Billions blown on jobs creation
BY ROBBIE SMYTH
Mary Harney (right) with Bertie Ahern - leader of PDs and former Minister of Trade and Employment
More people are working in the 26 Counties than ever before. With increasing tax revenues the government has unprecedented funds to spend and invest in job creation, but how well is that money being spent, do we need to spend money at all and most importantly are the coalition's economic policies the right ones for creating jobs in the emerging high tech knowledge economy?
Three studies published by the ESRI with analyses from economists at the institute and in academia seriously question the efficiency and effectiveness of successive Irish governments' economic policies.
On top of this there have been reports from the Revenue Commissioners and the IDA that give new information on the inconsistencies in the performance of the 26-County economy.
TAX REVENUES UP
Tax revenues are up, the Irish Government has never had so much money, and in the first six months of 2005 the Revenue Commissioners took in €17.239 billion, €320 million ahead of target.
Much of the increase is driven by consumer spending and doesn't actually come from business profits or income tax. However there are more people working in the Irish economy than any other time since independence. The total labour force stood in June at 1,908,300 people, up 72,400 on the previous 12 months.
It means that the 26-County economy is currently generating over 1,300 new jobs every week so the government's job creation and economic development policies must be working well. It is the highest level of employment growth since the pre 911 and foot and mouth shocks hit the Irish economy in 2001.
197 IDA JOBS
The IDA Ireland annual report sheds a different light on this performance though. Their figures do register the bounce back in employment growth this year with the economic development agency registering their first net gain in jobs for three years.
The IDA created 10,825 new jobs in 2004 up from 9,576 in 2003. There were though 10,628 jobs lost in the year meaning that the net gain in IDA jobs for 2004 was 197. This cost the tax payer €83.2 million in funding.
Enterprise Ireland also launched their annual report last week. It showed new jobs created of 11,898, which was a net decline in employment of 1,317. Enterprise Ireland take some solace that the amount of jobs lost in their client companies was less in 2004 than 2003, but as in the case of the IDA these new jobs meant that Enterprise Ireland spent millions of taxpayers money, they gave over €75 million in grants, the cost of running the agency itself came to €226 million.
So it seems that to create new jobs in the economy it costs millions in some cases and none in others, so is this efficient spending of taxpayers' money?
€5.5 BILLION SPENT ON JOBS
An article in the latest economic and social review by Helena Lenihan, Mark Hart and Stephen Roger addresses this issue.
They found that approximately €5.5 billion has been spent on direct assistance to firms by the IDA, Enterprise Ireland, Shannon Development and Udaras in the years 1980 to 2003.
The three also found that evaluation of this spending has rarely moved beyond ensuring the money was spent as planned rather than how effective were the investments made.
This comes as no surprise, Sinn Féin's Enterprise and Employment spokesperson Arthur Morgan asked a Dail question in November 2002 as to whether any audit had been done of the 19 employment task forces created since 1997 by the Fianna Fáil/Progressive Democrat Government. The task forces were formed in each case after massive job losses were announced in particular areas like Fruit of the Loom in Donegal.
Sinn Féin were told that no evaluation had been done and as the spending was acike Science Foundation Ireland the return to the economy so far was disappointing.
A survey of 184 high-technology businesses found that 68% rarely or never have contact with either third level institutions or state development agencies like Science Foundation Ireland. So in many cases the firms are innovating and developing without any state aid or contact with third level colleges.
On the issue of networks and clusters the authors found that firms interact regularly internationally but there is very little local contact in Ireland.
BACK TO THE DRAWING BOARD
The net result of these reports shows a pressing need to re evaluate how and why the government spends money in the economy. It is disappointing that just after a year since the publication of the Enterprise Strategy Group's report titled Ahead of the Curve Ireland's place in the Global economy we have to go back to the drawing board and ask the most basic of questions about how to formulate economic policy in Ireland.
The last question is whether the coalition government are ready to face up to this policy breakdown and return to the drawing board.
The economy in figures
€17.239 billion ..... Tax revenue for the first six months of 2005
1,908,300 ............ Number of people at work in the 26 Counties
72,400 ................. Number of new jobs created in the 12 months to the end of March 2005, and average of over 1,300 a week
10,825 ................. Amount of new jobs created by the IDA in 2004 up from 9,576 in 2003. 10,628 - Jobs lost in 2004 meaning that the net gain in IDA jobs for 2004 was 197. €83.2 million — Cost of creating the IDA jobs
11,898 ................. Amount of jobs created by Enterprise Ireland
€75 million ........... Enterprise Ireland funding given to firms in 2004
€226 million ......... Cost of running Enterprise Ireland in 2004
€5.5 billion ........... Spending on direct assistance to firms by the IDA, Enterprise Ireland, Shannon Development and Udaras in the years 1980 to 2003.
€599 million ......... Science Foundation Ireland funding for 2003
68% ..................... Percentage of firms who rarely or never have contact with government agencies or third level institutions