Seanad Éireann - Volume 184 - 26 October, 2006

Regional Aid Maps.

  Mr. Browne: Yesterday, The Irish Times mentioned the reclassification of the country in terms of EU funding from 2007 until 2013. It appears to be good news that counties Carlow and Kilkenny have been included in the area which is being classified as an economic development region and will continue to qualify for regional aid. This is based on factors other than the unemployment criteria as specified by the EU Commission.

I have been blue in the face lately with the impression being given, especially in Dublin, that everything is perfect in Carlow and Kilkenny. My colleagues from the west, including the Acting Chairman, often give the impression that in the west everything is terrible and the rest of the country is flying high.

I have repeatedly raised this point and I thank the CSO for giving us extremely detailed information on its website. The CSO information gives a fair and accurate picture. Even last August, I issued a statement pointing out that in terms of disposable income Carlow-Kilkenny was the poorest constituency, not only in Leinster but across the entire south east, and fell well beneath the national average of disposable income. Kilkenny’s income was a mere 88.1% of the national average, while Carlow’s was only marginally better, at 88.5%. In terms of total income in 2003, the most recent year for which figures are available, both counties faired appallingly badly, with residents in Carlow earning on average of €19,575 and residents in Kilkenny earning on average €19,396. In the entire country, counties Kerry and Roscommon were the only two counties with lower incomes. It put the lie to the myth that counties Carlow and Kilkenny were flourishing.

This was also reinforced, even earlier in 2004, by a statement I issued based also on disposable incomes, where Carlow was the poorest county in the State outside of the so-called BMW region. At the time, I mentioned that the unemployment figures were rising in the county, which was an unusual trend in comparison to the rest of the country.

It appears, as far as I can make out, that the Government has finally taken stock of the situation concerning counties Carlow and Kilkenny and has included them in the category for economic development. I want the Minister to clarify that for me and also to explain what we can expect as a result of the new classification.

  Mr. B. Lenihan: I thank the Senator for raising this matter, to which I am [1963]replying on behalf of the Minister for Enterprise, Trade and Employment. In December, 2005 the European Commission adopted new regional aid guidelines for the period 2007-13. The guidelines govern the areas in which member states may grant regional aid, more commonly known as investment aid. Investment aid is intended to promote the economic development of certain disadvantaged areas within the European Union in order to redress regional disparities. In Ireland, regional aid is typically granted in the form of capital and employment grants for new companies and expansion projects. The guidelines specify rules for the selection of regions which are eligible for regional aid and define the maximum permitted levels of this aid. In line with EU cohesion policy, and European Council requests for less and better targeted state aid, the new guidelines refocus regional aid on the most deprived regions of the enlarged Union.

Under Ireland’s current regional aid map, which defines the areas where regional aid may be granted until the end of 2006, all parts of the country currently qualify for some level of aid. Given Ireland’s economic performance since the current map was approved by the European Commission in 1999, it was to be expected that our scope to designate areas for regional aid between 2007 and 2013 would be significantly reduced. Nevertheless, Ireland has secured entitlement under the new guidelines to maintain regional aid qualification for areas accounting for 50% of the country’s population for the period 2007-13. In designating areas within the permitted threshold of 50% of the population, Ireland had to observe a strict EU requirement that the areas selected be relatively more in need of economic development. The Border, midlands and west region automatically qualified for designation on the basis that, in relative terms, it is the least developed region of Ireland. The BMW region is currently entitled to the highest investment aid rates in Ireland at 40% for large companies, that is, those with 250 employees or more, and 55% for small and medium-sized enterprises. Between 2007 and 2010, the maximum aid rate permitted for large companies in the BMW region will be 30%. This will reduce to 15% between 2011 and 2013. For medium-sized firms, that is, between 50 and 249 employees, the aid rate will be 40% between 2007 and 2010 and 25% between 2011 and 2013. For small firms, that is, fewer than 50 employees, the rates will be 50% between 2007 to 2010 and 35% between 2011 and 2013. The aid rates available in the BMW region will, therefore, remain quite generous.

The south east sub-region, which comprises Counties Carlow, Kilkenny, Wexford, Waterford and south Tipperary, also automatically qualified for designation, on the basis of unemployment criteria specified in the regional aid guidelines. [1964] The unemployment rate in the sub-region between 2001 and 2003, at 117.9% of the national average, was greater than the 115% level required for designation. Accordingly, the south east will be entitled to investment aid rates of 10% for large firms, 20% for medium-sized firms and 30% for small firms between 2007 and 2013. The aid rate currently permitted in the south east sub-region is 20% for large firms and 30% for small and medium-sized enterprises. The main difference for the sub-region, therefore, is the reduction in the aid rate for large firms from 20% to 10%. However, the aid rates in the south east have been phasing out or reducing since 2000. Based on the European Commission’s initial proposals for regional aid between 2007 and 2013, only the BMW region would have continued to a designated area. In the negotiations with the European Commission, Ireland argued the case for retention of more designated areas and succeeded in having the south east designated throughout that period. Apart from the BMW region, the south east sub-region has achieved the best outcome, as it will be entitled to aid large companies throughout the period.

The remaining areas that will be designated will be the mid-west and south west sub-regions. While the aid rates in these regions will be similar to those in the south east, they will be permitted to aid large companies only during 2007 and 2008. Dublin and the mid-east sub-region will no longer be entitled to regional aid after 2006. In the selection of the areas to be designated between 2007 and 2013, I consulted the Southern and Eastern Regional Assembly, as within that region some areas would no longer qualify. The Assembly accepted the findings of an independent report, which it commissioned, from the National Institute for Spatial and Regional Analysis, at NUI Maynooth. The assembly’s proposals were included in the proposed regional aid map which Ireland submitted to the European Commission for approval.

While the Minister is satisfied that Ireland has achieved a very good outcome in its regional aid map, the role of such aid in attracting foreign investment should not be exaggerated. A variety of elements influence such significant decisions. Factors such as the availability of skilled labour, modern infrastructure and a flexible regulatory environment are of fundamental importance to potential investors. IDA Ireland is constantly innovating by adapting and changing the value proposition it offers its clients. This means exploring new areas and strategies, improving Ireland’s physical and digital infrastructure and investing in people through education and, in particular, research funding. IDA Ireland remains committed to regional development as a core part of its strategy and it is constantly working with relevant national and local partners to develop and build the infrastructure necessary to make [1965]regional locations attractive for international business.

Regardless of the regional aid map, all parts of Ireland will continue to enjoy potentially significant financial supports for research and development and training initiatives. They will also remain eligible for a range of non-financial supports. All such supports are designed to drive ongoing company growth by ensuring success in overseas markets, increased competitiveness and productivity and enhanced research and development and innovative capabilities. These factors will drive company success and, ultimately, will ensure overall job creation. All SMEs will also retain entitlement to investment aid at rates of 7.5% for medium-sized companies and 15% for small companies. These rates are expected to increase to 10% and 20%, respectively, in 2007 following review by the European Commission. In addition, De Minimis aid can be given for a wide range of eligible expenses and that will continue to be available. Although the availability of regional aid will reduce as Ireland continues to prosper, as we move into more and more sophisticated and knowledge and skill intensive areas of activity, in keeping with both the characteristics and aspirations of Ireland today, our industrial development agencies will retain the scope to use horizontal forms of support which are increasingly more important.