Committee Reports > List of Committees > Dáil > 1997 > Committee of Public Accounts > Report No. 02 - Value for Money Examinations

MIONTUAIRISC NA FINNEACHTA

(Minutes of Evidence)

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin, 13 Meitheamh 1996.

Thursday, 13 June 1996.

The Committee met at 11 a.m.

DEPUTY DENIS FOLEY IN THE CHAIR

Mr. John Purcell (Comptroller and Auditor General) called and examined.

Mr. Patrick Mullarkey (Secretary, Department of Finance) called and examined.

Mr. Jimmy Farrelly and Mr. Niall Callan (Department of the Environment representatives) called and examined.

Mr. Pat Mangan (Department of Transport, Energy & Communications representative) called and examined.

Mr. Michael McKenna (Department of Enterprise & Employment representative)called and examined.

Mr. Paul Bates (Department of Tourism & Trade representative) called and examined.

Mr. Carmel Keane, Mr. Jim Higgins and Mr. Tony Ryan (Department of Finance representatives) in attendance.

Mr. Seán Gorman (Department of Tourim & Trade representative) in attendance.

REPORT ON VALUE FOR MONEY EXAMINATION - REGIONAL DEVELOPMENT MEASURES

Public Session

Chairman: We can note the correspondence.

Deputy Ellis: We have received an unsatisfactory reply with regard to illegal fishing. We want to see their definite plans to put proper surveillance in place.

Chairman: We can ask them for that.

Deputy Ellis: Could we receive a regular report about the NRB report and the letter from Mr. Dermot McCarthy at the Department of the Taoiseach? It is terrible to think that a number of Departments do not at the moment employ any people with disabilities except for established civil servants. Perhaps we could ask the relevant Departments, which are the Department of Foreign Affairs, the Department of the Taoiseach and the Office of the Tánaiste to see if they could do something about taking up their quota of people with disabilities.

Chairman: We can take that up for you.

Deputy Finucane: I have a question on the statistics which were given us on the employment of people with disabilities in the public service. I was a little disappointed to see the Office of the Tánaiste, the Departmen of the Taoiseach and the Department of Foreign Affairs do not employ any persons with a disability. I support Deputy Ellis.

Chairman: I understand that these are not the figures for the civil service. We have asked for those figures.

Deputy Finucane: In regard to the Department of Health, total workforce is stated to be 65,126. Does that include all the health boards around the country?

Chairman: We have asked for a breakdown on those figures as well.

Deputy Finucane: Very good.

Deputy E. Byrne: That was the only query I had. I wanted a breakdown of the total workforce.

Chairman: We have asked for a detailed breakdown of those figures.

Before we proceed, I would like to take this opportunity to welcome Deputy Finucane back after his illness and wish him well.

REPORT ON VALUE FOR MONEY EXAMINATION - REGIONAL DEVELOPMENT

MEASURES

Mr. Patrick Mullarkey (Secretary, Department of Finance) called and examined

Mr. Mullarkey: I am accompanied by Ms Carmel Keane and Dr. Jim Higgins from the Department of Finance and Mr. Farrelly, Mr. Callan, Mr. Manly and Mr. Hopkins from the Department of the Environment. From the Department of Enterprise and Employment I am accompanied by Mr. McKenna and Mr. Donnegan. From the Department of Tourism and Trade I am accompanied by Mr. Paul Bates, Mr. Seán Gorman and Mr. Dick. O’Rafferty. From the Department of Transport, Energy and Communications I am accompanied by Mr. Mangan. He has not arrived yet but he is expected any minute.

Chairman: We will take this discussion of this report chapter by chapter, starting at chapter two.

Mr. Purcell: As we all know, the State benefits from very substantial transfers of resources from the EU which are intended to assist economic and social development. The report being considered by the Committee today deals with a range of programmes for investment in industry and productive infrastructure.

Spending under the programmes examined totalled £2.54 billion, which represents 33 per cent of all expenditure under the 1989-1993 Community Support Framework agreed between the Irish Government and the EU. A central aspect of that agreement was an increased emphasis on the evaluation of the effectiveness of EU-funded programmes in contributing to economic and social progress. Evaluation was intended to ensure that the best possible use was made of the money spent under the CSF and that lessons would be learned for future programmes. Much time and effort were invested in evaluation studies. My examination focused primarily on the usefulness of those studies in helping Departments maximise their achievements and identify obstacles in undertaking evaluations.

Before getting down to the programme level, it might be helpful to make a number of general comments. There is no doubt that the expenditure contributed to a significant and lasting increase in living standards in Ireland. At European level, Ireland is regarded as being among those countries which use the available funds to best effect. By and large the measures were well focused and, where set, output targets were generally achieved. That said, the study found that there were three areas where Departments fell short of what was required in relation to meaningful evaluation of the effectiveness of spending programmes. Firstly, some Departments did not set clear objectives and measurable targets. Secondly, Departments frequently failed to collect data on a regular basis to enable them analyse progress and assist in the generation of performance measures and thirdly spending programmes often began without the Departments establishing the baseline position they were trying to influence.

The Department of Finance stated that quantified objectives and indicators were not included in the 1989-1993 CSF, mainly because of time constraints. As a result, a number of evaluations carried out by consultants at public expense did not amount to reviews of effectiveness but concentrated largely on implementation and output statistics. The situation has been rectified in the 1994-1999 CSF where a set of specific, quantified objectives at macro and sectoral level were identified The baseline position together with a quantified forecast for 1999 has been established.

The report also identified shortcomings in individual programmes which emerged during the course of the study. A substantial part of the science and technology programme concentrated on supporting research in third level institutions with the intention of subsequently transferring the leading edge technology to industry. However, the capacity of firms to absorb new technology is related to the extent of in-house research and development investment in skills. It was not until 1993 that the level of direct support for research and development within firms was beefed up by the introduction of a new measure. Again in the science and technology area, some of the programmes in advanced technology were ineffective and did not represent value for money. I understand that proposals for significant changes to the structure and administration of the programmes are currently under examination.

With regard to the transport programme, in excess of £20 million was spent on capital works at regional airports. However, passenger numbers declined by nearly 50 per cent over the period of the programme. The evaluator in this case reckoned that the priorities should have included measures to promote traffic rather than further capital development. In the tourism programme, some elements of a private sector marketing measure which attracted a contribution of £16.5 million from national and EU funds were criticised as being ineffective by consultants who evaluated the scheme. In the water and sanitary services programme, there seemed to be a tendency for cost drift to occur between the design and completion of projects.

I also examined how efficiently the draw down of EU funding was handled in relation to pre-1989 projects and the 1989-1993 programmes. The study established that almost £51 million of the ERDF moneys allocated to pre-1989 projects was effectively lost when the earmarked projects, which were mainly on the industrial side, did not proceed or were scaled back. Alternative projects were not put forward in substitution in time to secure the available funding. There were also some delays in claiming, mostly in respect of the water and sanitary services. The Department of Finance pointed out that this kind of problem was largely eliminated when EU funding switched from a project to a programme basis under the Community Support Framework.

I have spoken at length but I felt it was necessary to do so in order that the Committee might get a feel for the content of the report. My chronicling of some of the shortcomings should be read in the context of the enormity of the task faced; by Departments and others in implementing the programmes. Much good work was done, often in the face of considerable difficulties. However, lessons have been learned which are being applied to current spending programmes. I hope that this report contributed in some way to that process.

Chairman: Does Mr. Mullarkey wish to make a brief introductory statement?

Mr. Mullarkey: Much of the report is helpful and we will deal with any points which Members wish to raise. The entire area of enlarged structural funds at EU level has led to a very rapidly evolving situation with which the Commission and the recipient countries have been obliged to deal. In the first phase of this major enlargement of structural funds, the emphasis of the Commission and recipient countries has focused on establishing a programme of effective expenditure and drawing down of funds.

In the second phase, partly due to pressure from donor countries, the Commission increased its demands for more sophisticated and quantified evaluation. It has been pushing the evaluation approach into areas where it was not previously used at national or international level. The third phase again involved a response to the concerns of donor countries. The Commission has put increasing emphasis on more intensified administration and control of fund expenditure.

Ireland has sought to be in the forefront of all stages in terms of the effect of spending and drawing down of money. I appreciate the Comptroller and Auditor General’s comments in that regard. Ireland is also concerned with responding to the concerns of the Commission and the Union in terms of improved evaluation and more intensive monitoring and administration of funds. I am not suggesting that everything was perfect all along the line. This country, no more than any other, is not infallible. However, as the Comptroller and Auditor General stated, the overall picture must be borne in mind. Ireland is very highly regarded in Brussels with regard to its drawing down and use of structural funds. It is also highly regarded for being in the van in terms of responding to pressure from the Commission for enhanced evaluation techniques and administration of funds.

If Ireland did not have a good record, I am confident that we would not have received such favourable treatment in terms of the allocation of funds under the present and previous CSF.

Chairman: For the benefit of Deputy Upton, we intend to begin with chapter 2 - Transport.

Deputy E. Byrne: What about chapter 1?

Chairman: We will begin with chapter 2 because chapter 1 is merely an introduction.

Deputy E. Byrne: I have some questions about chapter 1.

Chairman: Okay. I have one question for Mr. Mullarkey before we move on. In relation to the pre-1989 projects, the amount of £51 million, which looks likely to be decommitted out of a total ERDF allocation of £775 million for the period 1975-1988, represents over 6 per cent. Is Mr. Mullarkey not concerned about this level of loss of EU funding? Why was there inefficiency in substituting new projects for those which did not proceed?

Mr. Mullarkey: I agree that in an ideal world one would have liked to have avoided those decommitments. It is important to bear in mind that there had been a regular facility of decommitment and recommitment of funds until the latter part of 1988.

At that stage arising from a change in Community legislation, the facility for de-commitment was withdrawn. Up to that point we had run a successful programme of de-commitment and recommitment and had succeeded in recommitting £45 million. At that point there was a legal issue as to when the cut-off for inability to recommit arose. £12 million of potential recommitments were known at that stage but the rest of them were not known until very much later. The £12 million that was known in 1988 related to industrial projects - I will explain that in a moment. The next amount referred to, the de-commitments up to the point when the report was written, was £23 million and those were also industrial projects. Of the balance of about £15 million, about £12 million related to industrial projects. £2.7 million related to water and sanitary services schemes and there was miscellaneous expenditure of £500,000.

As to the industrial projects, it was Government policy in the late 1980s to give priority to productive investment. The bulk of projects which had funds committed to them at that time were recent projects and were regarded by the industrial promotion agencies at that time and for some time afterwards as projects which were still live and which were going to go ahead on the scale originally envisaged. There was a mixture of reasons for de-commitments on industrial projects. To a limited extent, it was a question of projects not proceeding when they had been approved for industrial grants and corresponding ERDF funding had been settled and committed. For the most part the projects went ahead but either particular phases of them did not take place - in other words, they were smaller in scale than originally envisaged and therefore attracted lesser structural funds moneys - or they came in under budget and therefore the qualifying expenditure to which the percentage related again attracted less funds. In a limited number of cases, the industrial projects went ahead on full scale but because they did not live up to their job targets the industrial grant and associated ERDF moneys had to be scaled down. Those de-commitments have only materialised and come on stream progressively over the period from 1988 until now. There are some de-commitments which are still expected but have not fully materialised as yet.

Perhaps Mr. McKenna from the Department of Enterprise and Employment wishes to add to that.

Mr. McKenna: There is nothing unusual from an industrial development viewpoint in projects not materialising in full in the context of what might be approved by the industrial development agencies in a given year. In the nature of things you might expect an overall development and coming to term rate of 75 to 80 per cent of projects which would be approved by the development agencies. To my mind the only way this could have been avoided — apart from what happened, which was to move to a programmed system of reimbursement — would have been if the agencies had been required to be so rigorous in their assessment of projects as to be absolutely certain that every one would go ahead in full. If the Department and the agencies adopted that policy it would have had the effect not just of slowing down industrial development but bringing it to a grinding halt.

Chairman: Mr. Mullarkey, do I take it that at this stage £51 million has been lost between 1975 and 1988 in ERDF funding?

Mr. Mullarkey: One can only put it in those critical terms, if I may call them that, if one is satisfied about two things — first, that it was wrong policy in 1988 and previous years to give priority to productive manufacturing investment and second and at least as important, notwithstanding the difficult budgetary situation at that time, the Government would have been in a position to borrow and should have borrowed the extra money which would have been required to undertake public projects on a co-financing basis with the moneys which otherwise could have been allocated to them. In other words, ERDF funding was only available on a 50 per cent basis and if one suggests that it should have been diverted to other public sector projects, one would have to assume that the Government of the day, in the budgetary circumstances of those times, would have been able to contemplate increasing its borrowing in order to co-finance public sector projects.

Chairman: The point I am making is that out of a total allocation of £775 million between 1975 and 1988, is it now certain that we have lost £51 million?

Mr. Mullarkey: It is pretty certain, yes.

Chairman: That is fine.

Deputy Finucane: I have a question on transport under chapter 2. There are six regional airports —Donegal, Sligo, Galway, Waterford, Knock and Farranfore. The passenger numbers showed a progressive decline from almost 500,000 in 1990 to under 250,000 in 1993. Has that projection gone up since 1993? This relates to the other questions.

Mr. Mullarkey: I will leave that to Mr. Mangan.

Mr. Mangan: The answer is yes. In 1995 the figure was 355,000, so the trend since 1992 has been upwards again.

Deputy Finucane: Although the trend is up, does Mr. Mangan feel it will reach the 1990 level of almost 500,000 again?

Mr. Mangan: It is certainly working towards that. Two things are being done. First, an essential air services programme has been put in place for two of the airports and tenders are being examined for two others, which would provide for financial support for the provision of services through them. That requires EU approval and must go for tendering throughout the Community. We would expect that by the end of this year four of the airports would be subject to the essential air services programme, which would help increase traffic. Second, the Minister for Transport, Energy and Communications recently announced marketing support for the airports over the next number of years, involving an expenditure of £2.35 million, which will help to market the airports as destinations. Both those measures together will help the increase in traffic to continue — I would not care to predict where it will go.

Deputy Finucane: The point I am making is that it has been projected upwards and this relates to my follow-up question on marketing assistance. What types of marketing devices are being used?

Mr. Mangan: From our point of view, the Government’s provision is for funding support for the individual regional airport companies to carry out their own marketing as they see fit in their local circumstances. They will have to judge what marketing mechanism they should use to get traffic into their airports, whether to promote their market or provide support for tour operators to come into their areas. That is a judgment the companies themselves must make.

Deputy Finucane: In connection with the projected increase in regional airports and the marketing assistance given, does Mr. Mangan foresee any “robbing Peter to pay Paul” in that there could be a decline in established airports like Cork and Shannon?

I know growth increases at Dublin airport all the time. There is ultimately a limited market in this country and if too much is taken out of it will that be to the detriment of the other more established airports?

Mr. Mangan: No. There is scope for all the airports to grow. The State airports are performing strongly at the moment and the regional airports can grow through niche markets. Kerry Airport can grow through off-season tourism and it will not necessarily take from Shannon Airport. Weekend travel to Kerry in the off-season will be attractive if one can fly to Kerry, whereas a flight to Shannon or Cork would involve a further two or three hour trip and the weekend might not be attractive at all. There are niches which can grow the overall traffic.

Deputy Finucane: The external evaluators were critical, saying there was no need for a jet runway at Kerry Airport. Kerry Airport has expanded dramatically since May 1994. Do you think the external evaluators were wrong in their concept that a jet runway was not required? Developments would appear to contradict that.

Mr. Mangan: It is important to see the role of the external evaluator as raising hard questions about investment to be considered by the Commission and the Irish authorities. The Commission, the Irish authorities and other agencies represented on the monitoring committee for the peripherality programme considered those issues carefully but made a judgement that the provision of a jet runway at Kerry Airport, particularly because of its importance for tourism and the prospects of promoting charter traffic, was the right way to go.

There were particular constraints in operating into Kerry at that stage which had to be dealt with. The judgement was taken that the jet runway investment was right and I think that will be proved in the long term.

Deputy E. Byrne: The report states that one of the transport programme’s main objectives was to reduce transport costs for exporters. It was suggested they might be reduced by 25 per cent by 1995. Has this objective been met? Is there still a large differential between the costs for Irish exporters and those for other exporters in other EU member states?

Mr. Farrelly: An objective set in the peripherality programme was to reduce transport costs. Based on an estimate at the time it was considered that transport costs were 9 per cent of export costs - roughly twice the norm at the time. The Comptroller and Auditor General rightly pointed out in his report that the 9 per cent figure is questionable and was an overestimate at the time.

The figure of 9 per cent was the result of a limited study carried out at the time of the finalisation of the peripherality programme. Two studies have been carried out since, one by the ESRI and one by TCD and the University of Ulster. They considered the 9 per cent figure to be too high and they came up with figures as low as 3 to 4 per cent.

The ESRI report clearly noted at the time that its data was necessarily tentative on the basis that there was a small sample size and a poor sample response. The other report which was some time after the publication of the peripherality programme concluded that transport costs to more distant market locations put firms in Northern Ireland and the Republic at a disadvantage to firms located on mainland Europe and the UK.

It is significant that the overall conclusion is that transport costs here are higher than those in the UK and mainland Europe. This is accepted by everybody. We accept the 9 per cent figure was too high. Equally, we have through the technical assistance programme of the peripherality programme of the time and continued into the present transport programme, launched detailed analyses and studies to try to get a handle on this. An ongoing project on the recommendation of Jennings consultants is being carried out for us by An Córas Tráchtála as agent.

We cannot say if the objective of reducing the costs by 25 per cent has been achieved. The Comptroller and Auditor General has pointed out that we need better measurement tools for subsequent programmes. We have done that for the current programme in that the overall target set is to move from 35 per cent of the four main corridors which were regarded as being to and adequate standard at the beginning of 1993, to 53 per cent by the end of 1999. While it is not the purpose of today’s discussion it is relevant to point out that at the end of the two years of the current programme we have carried out an assessment to see how those targets are being delivered upon. The conclusion is quite positive in that we are substantially on the way to delivering on our targets. We have also carried out detailed studies in relation to transit time. We set as a target that we would deliver 204 minutes of a time saving on the four main corridors.

The target as set in the operational programme turned out to be difficult to monitor and quantify and on that basis we have come to a new emphasis in the current programme. I would emphasise that the peripherality programme delivered on essential major road infrastructure and that has meant time and cost savings for transporting goods. The conclusion of all consultants is that we have a distinct transport cost disadvantage relative to the UK and mainland Europe.

Deputy E. Byrne: Given our peripheral and island status, will transport costs always be higher?

Mr. Farrelly: Yes.

Deputy E. Byrne: Is it ever envisaged that there could be an equalisation of transport costs for all European countries?

Mr. Farrelly: It is difficult to see a stage where there would be a totally level playing field. The objective has to be to continue to improve to the extent that one makes one’s position more competitive. We have been supported by the EU in launching a detailed analysis on transport costs. This is the study recommended by Jennings being carried out by An Córas Tráchtata. We have figures for eight quarters and we will continue that for another 12 months. It is difficult terrain. Our track record with the EU is good; we are regarded as one of the better performers in this area. Yet, while they have encouraged us to go into this, it is difficult to get a handle on it.

Clearly we are disadvantaged in relation to transport costs. The objective is to reduce those costs in different ways. Investment in roads and infrastructure is only one element of transport costs. An increase in the price of fuel or vehicles is an equally major factor.

Deputy E. Byrne: I want to return briefly to two questions on transport. One relates to mainline rail.

Chairman: May I make a suggestion? Because your replies are being taken up with a lot of dialogue, can the replies be brief, otherwise we will not get through?

Deputy E. Byrne: As regards mainline rail, certain measures were taken on the Dublin-Belfast, Dublin-Cork and Dublin-Waterford routes. That was more for speed and commuter comfort. Can the official, Mr. Mangan, confirm that the money spent on upgrading these lines has met targets for increased speed, continuity of service and timetables? In his opinion has it been a successful project?

As regards port development, particularly Dún Laoghaire, can Mr. Mangan give me his insight into whether we were successful or otherwise in developing the port of Dún Laoghaire vis-á-vis the hydrofoil or jetfoil type of transportation? A strong case is being made that such systems are not appropriate to the Irish Sea. There have been highly publicised cancellations of the most recent jet-foil which has run into problems. Other systems were tried in the past but were aborted. Do you have a view on the success or failure of the Dún Laoghaire project?

Mr. Mangan: I can comment on mainline rail but not on the marine issues. On mainline rail, the investment in the Belfast, Cork and Waterford lines is ongoing so we will not see the full benefit of that investment under the current programme. Specific targets for each of those lines have been set out in the current programme covering 1994-1999. For example, when the full investment has taken place on the Dublin-Belfast line we expect a reduction in travel time of the order of 20 minutes, leaving a planned journey time of about one hour and 35 minutes. On the Waterford line the reduction will be about 25 minutes bringing it down to one hour and 50 minutes. In the case or Cork, the reduction is 15 minutes bringing the maximum journey time down to two hours and 15 minutes.

That is taking account of the investment that took place at the end of the last programme which was only approved in the last year and a half of the Operational Programme for Peripherality. That investment has continued into the current Programme.

Apart from time savings, there are other benefits from the current investment. For example, the 30 new locomotives now in place have enabled old locomotives to be retired. That has already improved the reliability of services quite substantially because the older ones were more susceptible to breakdown. It has also reduced maintenance costs because we are dealing with a younger locomotive fleet.

Signalling improvements are also bringing about benefits in terms of reliability of services. The replacement of track is also bringing about increased reliability and comfort for passengers as well as increased safety. That translates into growth in passenger figures using the mainline rail network which is encouraging. As investment continues so will that growth.

Deputy E. Byrne: And the question about the port and the hydrofoil.

Mr. Mullarkey: There is no one here from the Department of the Marine. I will get the Deputy a note in answer to his query about the hydrofoil.

Deputy Upton: I presume the question of establishing a tunnel under the channel between Ireland and the UK was considered and was ruled out for cost reasons. Can you give us an indication of the cost of that project? Is it totally impossible?

Mr. Mangan: Anecdotally, I think it is. No great research has been done but there are two factors against it. The distance involved is substantially longer than the Channel Tunnel and the traffic would be substantially less. We have seen some of the financial difficulties the Channel Tunnel has gone through. So if that tunnel is at the margins of viability there is no possibility of a fixed link from Ireland to the UK.

Deputy Upton: But on a theoretical basis would it not seem a direct way of cutting down costs and journey times? Is it not worth investigating it seriously?

Mr. Mangan: None of us has given any great consideration to it, but when you look at the cost of the Channel Tunnel it would virtually absorb our national budget for a few years.

Deputy Upton: I was thinking in terms of the aid coming from Europe. Was a case not made that this should be considered?

Mr. Mangan: The cost of building the Channel Tunnel alone would absorb our full EU aid allocation for the entire 1994-1999 period.

Deputy Upton: We have been good at making special cases in Europe, and we take a great pride in our capacity in this area. I wonder why such a case was not made.

Mr. Mullarkey: We were aware of demands on the limited funds available. Mr. Mangan is the expert in this area. You would be into a huge cost/benefit analysis which would have to be based on experience like the much smaller Euro Tunnel project which, notwithstanding the much heavier traffic one would expect there, has yet to demonstrate its economic viability.

Deputy Upton: As regards the proportion of the total expenditure on roads, which was approximately 70 per cent, to what extent were you concerned about pollution? Why did it pan out at a very high 70 per cent of the total in comparison, for example, to developing the rail system? I pose the question in the context of carbon taxes being on the horizon and probably becoming a reality in 15 or 20 years time.

Mr. Farrelly: Detailed environmental analyses of road projects are carried out before they can proceed. These include environmental impact statements and public inquiries. The environmental factors are carefully balanced and taken into account. A high percentage of investment went into roads under that programme. Taking freight and passenger carriage together, it is true that roads account for around 96 per cent of the total, so roads are a dominant feature in the overall economy.

At the beginning of the 1993 operational programme, we only regarded 35 per cent of our main corridors as being up to an adequate standard. By the end of the present programme in 1999 that figure will only have increased to 53 per cent. There are huge investment needs to meet the overall demands of the economy to back up economic development.

The overall conclusions by all the expert groups that examined this, including the Moriarty Report, was that road investment was critical, essential and economically worthwhile. But the economic question is the major concern and all road projects are subject to the most detailed economic analysis.

There has been a substantial switch in the proportion of money invested in roads compared to public transport under the current operational programme on transport, 1994-1999.

Deputy Upton: When you talk about the economics of transport being a critical deciding factor, that is fair enough and I do not have the data to argue the point with you, but what timescale are you talking about? In the context of limited fossil fuels being available to sustain transportation, in the event of carbon taxation arising-I gather that it is on the horizon, although I am open to correction - is there not a case to be made for much greater investment in the rail system, if the time scale in which these things are being considered is expanded?

Mr. Farrelly: The demands of industry, business, tourism and agriculture are there today and we must meet them today. A move to rail in the Irish economy, where 90 per cent to 96 per cent of produce is carried on roads, will be gradual and the impact will be marginal. Therefore, we must plan on the basis that major transport needs will be met by the roads system. Public transport also needs the road system for buses and CIE freight operations. There has been a recognition of the Deputy’s point because there has been a switch from roads investment to public transport in the current programme.

Deputy Hogan: Can you give the statistics for passenger numbers for the regional airports since 1993?

Mr. Mangan: In 1993 the number was 236,000, in 1994 it was 294,000 and in 1995 it was 355,000.

Deputy Hogan: An improvement has taken place. The Gulf War and the recessions in the US and the UK were the principal reasons for the downturn in activity in passenger numbers at the regional airports. What is the position of the essential air services programme with regard to the routes that have not been connected?

Mr. Mangan: Tenders are being evaluated at present and we hope to have a decision on it shortly. There is a two month delay period after the tenders have been received during which time they are evaluated. We hope to make a decision soon and we are confident we will be able to award tenders this time.

Deputy Hogan: Are you satisfied that the money spent on regional airports is value for money? Would we have got better value if it had been spent in other ways to ensure access for people to this country? We have State airports in Cork, Shannon and Dublin. We also have a considerable number of regional airports and I am critical of them, even though there is one in Waterford which is in my region. I would never dream of using it although I live only about 35 miles from it. I would be in Dublin by car faster because Waterford is inaccessible by road for Kilkenny people. The siting of the regional airports-----

Deputy Upton: An airport for Kilkenny might be a good idea.

Deputy Hogan: We do not need one and there is no point in wasting more money on regional airports. People should not expect to have a regional airport located in their backyard and we should take that into account at policy level before we start taking business from existing State owned airports. If the ceasefire is restored and the peace talks continue, there probably will be tremendous growth in tourist numbers. However, when the decisions on regional airports were made, I doubted that an airport should be developed in the south-east region where, at the time, the demand for one was not great. It would be a status symbol rather than good value for money.

Chairman: Deputy Deasy would not like to hear that.

Deputy Hogan: He is well able to speak for himself. Kilkenny people have great difficulty travelling to see Deputy Deasy’s constituents in Waterford city and getting to their employment there. Major developments are taking place in Waterford port but we have difficulty getting our goods there because of the bad roads. How much work on commercial sea ports development is being co-ordinated with the National Roads Authority to ensure co-ordination of both areas of transport activity and access to these ports under the programmes? A great deal of money has been spent on the programmes.

Mr. Farrelly: There is close co-ordination and consideration of these factors. In the case of the new port in Waterford, an elaborate new road structure has been built into it. There has been substantial improvement of the Waterford to New Ross road.

You are referring to the road between Kilkenny and Waterford. I cannot speak authoritatively for the NRA but there are plans to improve that road and those schemes are about to be implemented. The high level bridge is always a factor in Waterford and that is being looked at by consultants at present. It is a question of priorities. There are limited funds and unlimited demands and it comes down to the art of the possible. Kilkenny people will believe that more money might have been invested. However, one can see what has happened to the road from Dublin to Kilkenny. The time it now takes to drive from Dublin to Kilkenny has been considerably reduced as a result of the Kilcullen by-pass and substantial improvement in the road south of Kilcullen. You are concentrating on the road from Kilkenny to Waterford. I am aware that there are NRA plans to improve immediate access to Waterford.

Mr. Mangan: At the time the decisions were taken to invest in regional airports the airports were growing very strongly. Between 1987 and 1989 traffic grew from 100,000 to over 400,000. When the decisions were taken there was strong growth and the airlines believed there was a great role for regional airports.

Unfortunately, when the investment was taking place the Gulf War and the recessions in the UK and the US impacted on the airports very strongly. Another factor was the introduction of low fares on the Dublin/London route which meant that people changed their travel patterns and opted to travel to Dublin and avail of the cheap flights which were not available from the regional airports. The low price add on fares - whereby the airline companies might charge £10 to travel from one of the regional airports to Dublin and on to the UK - did not prove sustainable in the long-term.

Nevertheless, when we talk to the industrial development agencies or the tourism development agencies they are strongly of the opinion that the regional airports perform an important function. While it might be argued legitimately that there are too many airports for the small size of the country, we have a dispersed population much of which is located on the western seaboard which has accessibility problems in any case. The long-term prospects for the regional airports are good. There is scope in the tourism and other sectors to develop traffic and the essential air services programme and marketing grants will help in that regard.

Deputy Hogan: The State subsidises CIE to the tune of £105 million per annum. What are the main problem areas in which the subsidy is spent? Is the rail sector the principal beneficiary? What steps are being taken to reduce the subsidy, in view of the fact that we are obliged to come to terms with competition under EU directives?

Mr. Mangan: There is another thing I should say about the regional airports. An important factor in the investment decisions was the fact that the regional airports were also putting up their own money. Half of the money was coming from Brussels and the rest was coming from private investors, people who put their money where their mouths were.

The bulk of the State subvention paid to CIE goes to support the rail system and that it not unusual in an international context. The Minister for Transport, Energy and Communications has announced a change in policy whereby he will move from a simple lump sum subsidy every year to a series of public transport contracts. That will put the payment of subvention for non-commercial services on a contractual basis. The State will buy a service and will be quite clear as to the quantity and quality of that service. There are advantages for the Government in that regard as it will know what it is getting for the taxpayers’ money. On the other hand, there are advantages for CIE in that it has a greater medium term certainty about the flow of funds.

The CIE group is going through a major review of its cost base at the moment, to reduce costs as far as possible and to increase the efficiency of its operations. However, I do not think we should expect major reductions in State subvention for public transport services as they are a feature of public transport throughout Europe. Our approach to public transport contracts is consistent with the EU Directives which place an emphasis on transparency and avoidance of cross subsidisation, so it is quite clear where the money is going and for what purposes it is being used.

Deputy B. O’Keeffe: The total allocation for transport was £861 million, the bulk of which, £668 million, was spent on roads. Perhaps that allocation was based on a false premise, in that it is now accepted the evaluation mechanisms which were used were not accurate. While we may have physically achieved our targets in terms of roads, we have no evaluation at the end of the programme of what else we achieved in economic terms. Therefore, was the allocation based on a poor premise?

Mr. Farrelly: No, I do not think so. All of the expert advice at the time related to the returns to the economy from investment in the road network system. The investment made over the course of the programme clearly brought about substantial improvements which reduced transport times and costs. As I indicated, we moved in the more recent programme to setting clear targets which quantify results in terms of the percentage of the network which has been improved and the time saved. We did not set those targets in the earlier programme. In 1988 very radical changes were made, as a result of EC initiatives in 1987, where we moved to a multi modal programme system of presenting proposals.

In retrospect, I accept absolutely that the figure of 9 per cent was wrong. However, the balance as far as Ireland is concerned is still totally wrong. The best estimate we have today, which was produced recently by the EU, is of a transport cost of 2.8 per cent over Europe. Studies of our transport costs are totally inconclusive. Despite a third year of analysis, we still do not have a handle on it. The reality is that we are talking in the order of 3 to 4 per cent.

The Hermes model was used to assess the overall investment under the programme. The conclusion was that the investment would bring about a permanent increase in GNP of 0.4 per cent and a permanent increase of full time employment of 9,000 by the year 2000. An increase in GNP of almost 0.5 per cent may seem insignificant, but it is quite substantial when one looks at the size of our GNP. We are satisfied there has been a substantial and worthwhile return.

Deputy B. O’Keeffe: Those who work in the road transport business say that while we may be reducing road times, many of the EU directives are adding substantially to their costs, and that their cost factors will remain the same because of some of those directives.

We decided on a marketing strategy for the regional airports. According to the figures for 1993-95 which Mr. Mangan has just provided us with, there has been a significant improvement in the number of passengers. However, at what cost has that happened and how was that marketing budget spent? For example, why was a fare subsidy introduced for the regional airport in Kerry where the fare from Farranfore to Dublin is £49, when a return flight from Cork to Dublin is £89? Is that not a daft marketing strategy?

Cork international airport has a very strong beef about the fact that Shannon, Cork, Waterford and Kerry airports are vying with each other in the European market and are all eating into the same niche. There seems to be no effort made to co-ordinate the activities. Why are three State companies competing in the same market? Overlapping and cost cutting are occurring, with significant inducements being given.

Mr. Mangan: There is undoubtedly an issue there which must be addressed. However, private and European money has been invested in our regional airports and we must get the best value from them. They are private companies which have to make their own marketing and other judgments. It is important for each airport to identify its own niche and, as you suggest, avoid competing in the same market. Kerry is seen as being very strong in the tourism market, for example, which might not be so important to some of the other airports. It is a fact of life that they exist and investments have been made in them. It is a question of ensuring we get the best value for those investments, while avoiding having them compete in the same market and trying to find niches where they can increase their throughput of passengers.

Deputy B. O’Keeffe: I have been speaking about this for three years and, with respect, I get the same pat answer every year that there should be some co-ordination. However, the co-ordination just does not occur. When will somebody sit down and say to the people involved that it is a waste of public money for four airports to go into the same territory and try to steal business from each other? I can cite instances where Shannon Airport has taken business from Cork Airport by providing inducements. That is economically daft and the sooner we tackle it the better.

Chairman: I am sorry for interrupting the Deputy but I must ask him to conclude as his time is up.

Deputy B. O’Keeffe: I have made my point about that issue which badly needs to be addressed. Finally, according to the report, passenger numbers exceed the level projected following the upgrading of the rail service to Connolly station. However, the Arrow train service has fallen short of target. As I understood it, the Arrow train service was put in place to prevent as many cars as possible from coming into Dublin. Has it fallen short of target because of inadequate marketing of the service? What has been done to make it much more attractive for car owners to take the Arrow train to Dublin rather than driving into the overcrowded city streets?

Mr. Mangan: The main problem in relation to the Arrow is that the performance particularly of the two inner suburban stations at Clondalkin and Cherry Orchard has been disappointing against what was projected. The throughputs at those stations are quite a bit lower than we would have expected. This is due to a number of factors. There are high levels of unemployment in those areas. There is also a reluctance to interchange twice for short journeys because the service is terminated at Heuston and the people have to transfer to a bus. There are good competing bus services and they are opting to travel directly by bus rather than use the Arrow. In the outer suburban areas such as Kildare, Newbridge and Sallins, the performance has been better and is improving. The figure was 1,360 passengers a day in 1995 and it is currently running at 1,600 a day. It is gradually increasing and Irish Rail is promoting the service. It has expanded the service recently. The early morning services are extended as far as Portlaoise and Portarlington, and on the other line as far as Carlow. They pick up on other suburban services. One of the issues is the fact it was not possible to link the service directly into the city centre. The original proposal in the Operational Programme was to provide a link through the Phoenix Park tunnel onto Connolly Station and possibly onto Pearse Station. The economics of that did not produce a viable project. The external evaluator for the Programme and the European Commission were not prepared to invest in it on that basis. We ended up with an Arrow service that terminated in Heuston with people transferring onto feeder bus services to the city centre. It is not as attractive a service as it might have been. It was not possible to get EU funding for the larger project. The Dublin Transportation Initiative recommended specifically that the policy of a possible direct link to the city centre should be kept under review. That might improve the service as well. Irish Rail is working hard to get extra passengers on the service. The indications are that it is growing slowly — more slowly than we would have wished but nevertheless growing.

Deputy Hogan: The repot states in Chapter Three that the Programmes in Advanced Technology (PATs), were more driven by the universities than by industrial demand. Could the delegation comment on this matter? Perhaps we could also get some indication of what stage the Government decision, made some time ago in relation to a new science and technology centre in the Dublin area, is at. Is there a progress report on its development plans?

Mr. McKenna: In relation to the comment that the PATs were more university driven, the fact of the matter is that the PATs are a coordinated effort between the universities and the facilities in the universities, with the funds provided by the EU, to attempt to deliver advanced technology to industry. The report also comments on the fact that the PATs are not achieving their targets and are still over-dependent on Exchequer funds in terms of the PATs policy statement aspirations. We see the targets we have set for the self-funding by the PATs as being an attempt to counteract the automatic over-emphasis or the tendency in the PATs to be over-dependent on the universities. They are based in the universities and are staffed by academics. From our point of view, the PATs policy statement specifically has that self-funding target, precisely to try to force the PATs to get out and earn industry income.

In relation to the Dublin science park initiative, the Minister for Commerce, Science and Technology, Mr. Rabbitte, is still in discussion with the universities in terms of trying to find a viable proposition that would be acceptable to the universities with a particular level of funding from the Exchequer.

Deputy Hogan: Do I take it from the last reply in relation to the ongoing discussions between Minister Rabbitte and the universities, that there is resistance in the universities to agree to the proposal that has been put up by the Government in siting this new park? There seems to have been ongoing discussions for a period of time.

Mr. McKenna: It would be fair to say we have not reached a satisfactory conclusion to the discussions in respect of all parties.

Deputy Hogan: Can you give us an indication when you are likely to reach some conclusion?

Mr. McKenna: I would love to be able to, Deputy.

Deputy Hogan: Thank you for your answer — it says a lot. There was some overlapping between the software PATs objectives and with other PATs. Why did that take place and was anything done to prevent it?

Mr. McKenna: There was some criticism in relation to the software PAT. The only additional comment I could make at this stage is that people generally regard the software PAT as quite successful and internationally, other countries are looking at it with a view to emulating it. I am not particularly briefed on the precise point, can I come back to the Deputy in writing?

Deputy B. O’Keeffe: There was a criticism levelled by a former chairman of Eolas in respect of the level of funding available for R&D, particularly to the universities. Does Mr. Mc.Kenna have any comment on that? Could he also indicate the kind of liaison between industry and the universities and RTC’s. I read that UCC were generating in excess of £20 million this year in R&D. A lot of that would be European funding. There does not seem to be the level of co-operation between industry and universities. Is there any attempt in the Department of Enterprise and Employment to merge industry into R&D undertaken, particularly in the universities? In terms of measures of achievement, how do we record it? We have all heard of money being spent on R&D on particular projects. What has been the percentage outflow of what would be viable products?

Mr. McKenna: In relation to criticism of the amount of R&D awarded to the universities, we come back to large demands with limited resources. We also come back to the point made by the Comptroller and Auditor General that previously there was a criticism that there was not enough R&D being given to industry and that it was not sufficiently industry relevant. We have addressed that issue in the later and latter spending. Obviously, some people, who would not have had as much as they wanted, might claim they are now being neglected. We do not think so. We have addressed one concern and by definition, that reorientation leaves others looking at us.

In relation to liaison between the universities and RTC and industry, I have to say liaison between universities and industry is, in essence, a matter directly for themselves in a formal sense. In the past we have assisted the establishment of industry liaison officers in the universities, precisely to ensure greater interaction between them. Equally, from our point of view. representing industry, we have our own liaison with the heads of Irish universities. Our agency, Forbairt, who we also see as creating that industry-university link-up have intensive contacts with the universities at chief executive level.

With regard to the amount of research contracts earned by universities - UCC was recently cited for the fact that it had recently earned so much, which is an extremely significant development - the PATs we have referred to are a mechanisms whereby research is meant to be carried out on behalf of industry. We want them to look for that research.

With regard to the Measure I assistance, whereby we devote approximately £20 million per year to encourage industry to undertake R&D research, we have a specific provision which requires applicants for Measure I assistance to certify that they are satisfied - it must satisfy a vetting committee - the type of assistance they seek, be it for new equipment, new activities or skills, does not already exist in the universities. I am determined to ensure that we do not have duplicated and wasteful expenditure of industry undertaking research and new activities where the universities already have the capability to do it.

In terms of measures of achievement, an international effort is trying to come up with S&T indicators. Approximately six to eight international conferences are taking place on this subject. I decided not to bring with me a very large volume the EU has just produced on this topic. We have a detailed list of performance indicators which are applied to the S&T spending under the latest OP, and which have been approved by a recent monitoring committee which I chaired last March. We can let the Deputy have a copy of them.

Deputy B. O’Keeffe: Returning to the business of sourcing and multi-national companies coming to Ireland, especially the requirement in many instances to source specific products and materials from outside the country, what interaction is there between IDA Ireland, yourselves, the universities and industry in terms of liaising and indicating exactly what is being sourced outside? What efforts are being made in terms of R&D to have those items manufactured in this country? We have been talking about this for ten to 15 years, yet a fair amount of materials are sourced outside the State. There is a perception that far more of it could be manufactured here with the practical application of R&D.

Mr. McKenna: It is an extremely important question and has been on the table for some time. The Minister for Enterprise and Employment, Deputy Richard Bruton, is very interested in the issue. It will be addressed substantively in an enterprise strategy that he hopes to produce in the near future. In practical terms, Forbairt would be formally responsible for the national linkage programme in terms; of promoting Irish industry and getting it to have access to those foreign contracts. By definition, it must liaise closely with IDA Ireland.

The primary interest of IDA Ireland is to get the project. It will not lose a project by insisting that a certain portion of this, that or the other is sourced in Ireland. However, an automatic ingredient in its assessment of the project are the Irish economy expenditures that are included in terms of cost benefit calculations. There is, therefore, an automatic tendency on the part of the executives, the project and promoters to maximise this.

In terms of what we are doing as an overt programme to increase this as opposed to automatic stabilisers or promoters, the national linkage programme is fairly intensive. It is operating on a regional basis. It started approximately 18 months ago in the west of Ireland and has been gradually extended throughout the country. It recently moved to Dublin. I am not sure if it has extended to Cork yet.

One must be conscious of the ability of the Irish contractors to meet the quality and standards of the overseas industry. They may subscribe to what is a nice aspiration but they will stay with people until they are sure the local alternative is genuine.

Deputy E. Byrne: Everybody knows that Ireland is a great country in which to invest. We see the black hole and the repatriation of profits taken back to American parent companies. It has been clearly indicated that, politically, we should not be happy with the lack of R&D that goes on in these plants. If the budget in that period was £208 million across these programmes, is there a demand from multi national corporations to undertake R&D, or do they establish their plants here with a view to maintaining all R&D with the parent company at home? If this is happening is there a role for IDA Ireland to twist arms in the future? The repatriated profits are substantial. Would it not be a major coup if the company is convinced that part of them could be kept here for R&D purposes?

Mr. McKenna: There is certainly a demand. I am well aware of the industrial policy concern there has been in the past regarding the lack of R&D that takes place on the part of multi nationals on the basis that, because of our 10 per cent tax rate, it makes more sense to undertake R&D in other high tax locations. Our problem with regard to the Measure I facility, the R&D facility, is to ensure that the large appetite overseas industries would have to access that programme does not mean that indigenous industries suffer. There is a substantial demand on the part of IDA Ireland clients for that Measure I programme and in that sense it has been extremely successful.

In terms of R&D activity, while we cannot measure the success of it yet, the introduction of a specific tax incentive and the 1995 budget for R&D activity will prove extremely relevant. There is a demand.

Deputy E. Byrne: Multi-national companies want to undertake R&D in high tax economies. Ironically, the 10 per cent tax base here acts as disincentive to R&D.

Mr. McKenna: It has been long recognised that if a regime encourages industry to locate here from a tax point of view, one of the downsides is that it has not created an attractive location for R&D to take place.

Mr. Mullarkey: The problem with R&D expenditure is that if one has taxable profits at 10 per cent, R&D deductions are only worth 10 per cent in terms of tax savings. This has been addressed in the 1995 budget where one quadruples, from the point of view of deductibility for tax purposes, one’s R&D expenditure. This means that one is getting a tax reduction at the rate of 40 per cent. This should be a significant incentive.

Mr. McKenna: This would be more equivalent to the tax rates they would pay in other locations.

Deputy E. Byrne: When will we see the benefit of this budgetary decision?

Mr. McKenna: The Finance Bill introducing this was passed in May 1995. I could not give an answer at present. We obtained something that was sought after and we will be looking closely to monitor its effectiveness. We think it is extremely important and it goes hand in hand with the Measure I direct grant assistance which has been extremely successful.

Deputy Upton: Irish science has had a chequered history over the last ten or 20 years - with the National Science Council and the big build-up to the National Board for Science and Technology. Then there was a period where we murdered science — rubbing it out and rubbishing it. This led to articles in Nature, which said Ireland turned its back on science. People who might not be familiar with these things should understand, that is the type of background we have been through.

How much money is being spent through these programmes, to explain the role of science and technology to the general public, administrators and people involved in the political process? Is there agreement that such expenditure would be desirable?

Mr. McKenna: I will not comment on the chequered history or the Nature comment. In the last couple of years if we had been accused of turning our back on S&T, we have now turned back again. Because of the recognition of the importance of science and technology, we have, as the Deputy knows, implemented a review by the Science, Technology and Innovation Advisory Council (STIAC). I would expect the government will shortly consider their response to the Tierney STIAC Report. Included in that was a comment on the importance of getting across, not just to administrators and politicians, but to the general public an awareness of the importance of S&T to Irish economic and social life. The Government very quickly accepted that among a number of other activities that were effectively endorsed in a special allocation in this year’s budget. The Minister is currently considering proposals from Forfás in relation to the creation of a special awareness campaign which would include the Deputy’s precise point about administrators, with a specific budget to do the same. It is extremely important that is done because the difference between science and technology expenditure and industry grants by the IDA or roads and ports expenditure is that, of its nature, the benefits of S&T expenditure cannot be seen in the short-term. It is a medium to long-term expenditure which has an almost invisible benefit for the Irish economy. We have to get the importance and the true nature of that across to the electorate, the legislature and the administrators.

Deputy Upton: I wish the Minister of State for Commerce, Science and Technology well in that gigantic task. I would not for a minute underestimate his enormous communication skills. I fear that this issue extends the limit of his capacity. I do wish him well and I have confidence in his capacity in these matters.

Chairman: That will be recorded:

Deputy Upton: Let us hope it does not appear on leaflets during one of the elections. Can I ask Mr. McKenna about the item on the Culliton Report which suggested multinational companies should locate their head offices and some of their R&D capacity in Ireland. To what extent are these funds being used to promote that as a part of regional development?

Mr. McKenna: The location of multinational head offices and R&D in Ireland has been a long-term aspiration. It is part of the negotiating, or developmental, mandate that the IDA would have. In terms of the packages the IDA might offer, or the justification it would offer to its own grant approving or executive boards, obviously the amount of activity in terms of head office or R&D is extremely relevant in terms of justifying the project and the type of package. I could not offer a comment on the extent to which that has been successful to date, because I am discussing S&T. In relation to what I said earlier on Measure I and the R&D activity and programme, the objective is precisely to encourage people to locate their R&D activities here. One of the concerns we have now is that we do not allow that to happen in a way that is prejudicial to the needs of indigenous industry and their R&D needs which might be said to be greater than those of the MNE’s.

Deputy Upton: In relation to indigenous industry and R&D, to what extent is that influenced by the size and nature of most indigenous Irish industry?

Mr. McKenna: By definition, and I think this is behind the Deputy’s question, it is influenced to a large extent by their size. Indigenous industry, in comparison with overseas industry, is very small. Size and lack of managerial and technical resources means indigenous industry has a more limited capacity to engage in R&D. The challenge for us and for the development agencies is to try and overcome that constraint. If it is not overcome, those small industries who will always be at that relative disadvantage, will not be able to make the leap to the greater size we need to ensure that indigenous industry will be a major part of our industrial development.

Deputy Upton: One of the logical sequels to this is that a serious effort be made to consolidate Irish industry. It has to get bigger if it is to be successful and have a successful R&D wing.

Mr. McKenna: I agree entirely with the Deputy. That will be a major feature in the enterprise strategy which the Minister will be bringing out shortly.

Chairman: We will now move on to Chapter 4 - Tourism. In August 1995, £7.2 million had not been claimed from the EU under the Tourism Operational Programme, 1994-1999. The six-monthly progress had lapsed. Still the situation continued and the number of staff were insufficient to administer a programme of that size and complexity. Why was this situation allowed to slip into arrears? Why did the Department of Tourism and Trade adopt such a lacklustre approach to the drawing down of EU funds? Are the reports and claims now up to date?

Mr. Bates: The final progress report under the Operational Programme has been completed. It was completed last February. It is now with the Commission. The claim for outstanding payments under the programme is now also with the Commission. It has been completed and it has been submitted to them. The amount outstanding represents only 5 per cent-of the total grant expenditure under the programme. Although it may seem like quite a long time, it must be remembered that in relation to the Operational Programme which covered the period of 1989 to 1993, expenditure incurred during 1994 was also covered, in respect of projects committed before the end of the 1993 period. There was a whole pattern of expenditure during 1994. Material in relation to that expenditure did not come in to the Department until well into 1995. That information had to be verified and checked. That explains, to some extent, the delay that took place.

Chairman: How much in total is involved under the Tourism and Operational Programme, 1994-1999? Do you think your staffing levels in this area are adequate?

Mr. Bates: The total amount of grant expenditure was £170 million but the actual expenditure involved under the programme was £383 million.

Deputy Hogan: There has been a considerable amount of debate about the huge increase in numbers coming to Ireland arising principally from the peace process. What planning is the Department undertaking in the light of the new political circumstances, assuming the peace process continues, bombs do not go off and the guns remain silent? Some people say we have not planned sufficiently for this in terms of facilities and infrastructure. There is even an indication; that there could be overcrowding in terms of tourism numbers in certain parts of the country, which is a major change from recent times. Will you comment on those statements by people in the industry and communities?

Mr. Bates: The Deputy is correct in that the numbers have been increasing substantially. Tourist numbers have doubled in the past ten years. The figure is now 4.3 million. There is still considerable capacity to deal with those numbers. I do not believe we have reached the saturation stage where we are a mass tourist destination.

From a policy point of view, under the last and this Operational Programme we have been trying to address issues like seasonality. The problem is not that too many people are coming, but that they are coming at the same time - in the high season. We are trying to put in place policies designed to spread out the season to ensure new business. For example, the short break or city break business which has developed in Dublin in recent years. That has a much broader spread and it does not necessarily peak in the high season. We are also trying to put in place physical facilities that have an all weather dimension which means hotels can stay open for longer periods and encourage people to come in the off season. We are conscious of the need to spread visitors over the period and throughout the country.

If one looks at the figures which emerge from the Operational Programmes, one will see a good spread of investment throughout the country. Some areas which had not been doing too well from tourism in the past are now coming into the frame. Through a combination of spreading the season and the visitors, we can deal adequately with the numbers issue.

Deputy Hogan: A couple of years ago, the former Minister for Tourism and Trade, Deputy McCreevy, indicated that the future for regional tourism organisations was not great. Will you comment on their effectiveness? I believe they have not been that effective in terms of selling the regions. The concentration of resources and marketing assistance for tourism has principally been in the areas around the location of the headquarters of the regional tourism organisations. I would call their effectiveness into question. You have a proposal to tap into the new conference business which is available internationally in terms of national conference centre in the RDS. Do you envisage that there will be scope for additional facilities to be made available in the regions on a smaller scale to extract some of that business?

Mr. Bates: The regional tourism organisations report directly to Bord Fáilte; the Department is not that directly involved. The regional tourism organisations have had to deal with a situation where there has been a large influx in visitors. They have a difficult task in terms of dealing with increased numbers. They have made moves to become more commercial in their approach in terms of the facilities and operations they offer. They are generating more income from commercial activities than perhaps they did in the past. They have been able to do that, partially as a result of the increase in numbers. Given the substantial/growth in tourism which has taken place, the regional tourism organisations are probably doing a reasonable job.

There are two elements to the conference business. There are the large conferences attended by 2,000 people or more, which would be the subject of the proposal in the current operational programme for a national conference centre. There is also another element of conference business, that is, smaller conferences. Under the operational programme which we are talking about, a large number of smaller conference projects, mostly attaching to hotels, were supported. We have seen a substantial increase in that type of conference business which is being spread around the country as a result of an increase in facilities in many areas.

Deputy Hogan: The study indicates that a lot of employment would have been generated without any grant assistance under the operational programme. You probably have a problem in terms of the duplication of schemes. Have you studied that problem in the report? Do you have any proposals as regards how you can get over this?

Mr. Bates: This is a problem which straddles not only tourism, but industrial policy. It is a bit like advertising in that only half of it works, but we do not know which half. In terms of the present operational programme, we have a different assessment procedure where we have independent management boards which are looking at all grant applications. We brought in expertise from the private sector to supplement the expertise available in State bodies and the Department. As part of the assessment process, those independent boards have to make a judgment as to whether financial assistance is necessary for the project to go ahead, which is a difficult task. They look at various financial projections over the life of the project but it is really their call and their judgment as to what extent the grant is necessary for the project to go ahead. That is the best thing we can do.

Deputy E. Byrne: I agree there has been a phenomenal growth in tourism, particularly in the capital city. Have you discovered the attraction of or the recent interest in Dublin which is the third most popular capital city in Europe for short weekend breaks?

Mr. Bates: It is obviously a combination of factors. One of the factors which was touched on earlier is the question of access. Access to Dublin and its cost are very good. There is a growing trend in tourism for short breaks, particularly city breaks. I believe Dublin has benefited enormously from that trend. There is also a fashion element. I am concerned when people talk about the growth in tourism in Dublin - although long may it continue - because there is a fashion element, varying from things like U2 to the Eurovision Song Contest. Dublin is perceived, particularly by young people, as being a very fashionable place to go. As the Deputy said, a lot of the studies show it is in the top three or four places which people wish to visit.

Deputy E. Byrne: Between Exchequer and EU funding, less than £200 million was injected into the county as a result of the programme. I listened to the “Gay Byrne Show” this morning which dealt with the Aran Islands. At what stage must we ensure that tourist numbers do not reach unacceptable levels? When will the markets for the islands and the capital become saturated? As a citizen of Dublin I applaud the attraction of so many tourists to the city, but this has a a negative affect on individual citizens who must make advance bookings to eat in restaurants, etc. However, they are glad to put up with such inconvenience in order that the economy might benefit from tourism. Has consideration been given to events in other competitor markets throughout Europe in this regard? There can be a negative effect if large numbers of tourists saturate the market at particular times.

Mr. Bates: This is a similar question to that posed by Deputy Hogan. We are concerned about this matter but, from a national perspective, we are short of reaching the optimum number of tourists that could be accommodated in Ireland.

As I stated earlier, we are trying to direct our policies toward dealing with issues such as increasing the yield in relation to the kind of tourists we want to attract. Obviously, there is an emphasis in terms of attracting a higher yield tourist. This was one of the issues raised in the context of the Comptroller and Auditor General’s comments in relation to this programme. He stated that the visitor numbers did not reach projected targets. It makes sense, on the basis that we achieved the Revenue projections which was a very good thing. This meant that we were obtaining a higher yield from those visiting Ireland. It is through a combination of focusing on higher yield business and broadening the season and the regional aspect of tourism that we can deal with the issue of possible saturation. However, I believe we are some way short of that eventuality.

Deputy E. Byrne: I agree that much money has been invested in golf courses. I do not play golf but it obviously attracts high spending tourists. Is it for this reason that money was not invested in establishing caravan parks?

Mr. Bates: The Deputy is probably aware that we have been trying to establish a caravan facility in Dublin. Some months ago a major project was approved and there is a site on the Naas Road where it is proposed to put in place a new caravan centre. We are interested in this aspect of the tourist business. It was identified as a deficiency that a proper caravan or camping site was not available in Dublin. I understand that this will be addressed by the proposal which was approved some months ago for such a facility on the Naas Road.

Deputy E. Byrne: Paragraph 4.28 of the report states:

The examination found the post implementation monitoring of projects by Bord Fáílte was not adequate and its payment approval procedures were criticised in an independent study of the private sector marketing measure.

Why were the board’s payment approval procedures criticised? Were irregularities discovered in the payment of funds?

Mr. Bates: I believe this involved the marketing element of the previous programme. The Comptroller and Auditor General’s officials considered that programme and were not satisfied with certain aspects of it. I do not think there was any question of misappropriation of funds; the staff of the Office of the Comptroller and Auditor General were not satisfied with the procedures in place in terms of the vouching of marketing expenditure and the provision of invoices. In response to that criticism, those issues have been addressed under the new operational programme. Bord Fáilte insists on invoices or auditors certificates in relation to marketing expenditure under the current operational programme. In addition, there is a system in place whereby an independent marketing board considers all marketing applications. These measures take on board the criticism in the report that Bord Fáilte was dealing with that area itself. It was suggested that it would be better to broaden the assessment process.

Deputy E. Byrne: Whatever about reaching saturation point in certain tourist centres, are we facing a potential burn-out situation in that it is difficult to attract young people into employment within the tourism industry? This theory is linked to a perceived lack of career structures and unsocial working hours. Will growth be stunted if this is not addressed? Is it intended to improve this area?

Mr. Bates: This issue was raised by the Minister on a number of recent occasions and he discussed it with the Irish Hotels Federation. We believe that the industry can do much to improve the image of tourism and take steps to make employment in the industry more attractive. The Irish Hotels Federation, for example, is addressing that issue because there could be a potential problem with attracting people to work in the industry. The issue is being addressed.

Chairman: We will now deal with chapter 5 - Small and Medium Industry.

Deputy Hogan: The net number of jobs created, 1,500, under the programme was quite low. What is the reason for this? There was also some criticism of the evaluation of the programme and the fact that the officials involved could not gauge what value for money was obtained from individual measures and actions taken. Business innovation centres were established in each region in the past number of years. Is there any indication as to how successful they have been in promoting small and medium sized businesses in their areas?

Mr. McKenna: There is no denying that net job creation was very low during the period in question. I do not believe that small and medium sized industry was unique in that regard. It would have applied to manufacturing industry in general. For a number of years, the position was been relatively static. The only comfort we could take was that, while it had an overall unchanged level of employment, the Irish manufacturing industry was actually doing significantly better, in comparative terms, than its counterparts in Europe and the OECD.

On a technical point, the net job creation was not a target as part of that particular OP. It will certainly be a target next time around. The fact is that we were not sufficiently rigorous or demanding of ourselves. We had targets in terms of gross job creation. In the current OP we have definite targets in respect of net job creation. There are drawbacks and dangers in terms of people focusing on rescue situations which may lead to a higher cost per job and undesirable implications. However, it is a more meaningful measure overall.

In terms of the evaluation procedures within the Department, the Comptroller and Auditor General referred to the fact that the evaluation unit was only established in 1993. We may have been somewhat late in getting it up and running. However, it has been extremely active in the interim. I have a list of studies carried out by the unit which I can make available to Members. In order to make the evaluation process more relevant and active within the Department, it has been brought into the Enterprise Programmes Division, for which I have responsibility. In that hackneyed phrase, this ensures that we take ownership of the results.

There has been a favourable review of the business innovation centres. I do not have a copy of the report with me, but that is the factual situation. I will not say it is an unqualified positive, but overall it is very positive.

Deputy Hogan: Will Mr. McKenna comment on the success or otherwise of the county enterprise boards since they were established?

In view of the numerous complicated programmes available for small and medium size industry and that the net level of job creation has not been that good, is there not a case for looking at ways, other than the existing regime of measures, in which industry can be helped? This could include targeting resources in the financial area rather than in the various schemes which are available. The number of quangos established over the last number of years, and the amount of administration involved in them, is disturbing. Is it that additional European resources are being drawn down due to those schemes? If not, is there a way the number can be reduced and the resources better targeted in order to achieve a better result?

Mr. McKenna: The county enterprise boards are a source of constant debate. To my mind they are a response at local level to a perception that the national agencies were withdrawing from that level of development, that the agencies, at the policy encouragement of the Department of Industry and Commerce as it then was, were getting into a situation where they were being more selective and looking at companies that had more growth potential. We did not realise we were creating a lacuna which the county enterprise boards have successfully met. In terms of number of projects, feasibility studies and employment creation they have been extremely successful. It is too early in the day to establish how meaningful and sustainable the jobs created under this initiative will be, but, three years down the line from their start up, we feel they are doing very well.

It would be impossible to deny the implication of the Deputy’s comment about the complexity and number of programmes. Whenever a Minister for Enterprise and Employment appears before the Dáil, Seanad, Select Committee or Committee of Public Accounts, he is lectured ad nauseam about the 90 programmes which exist. We cannot deny they exist; if one tots them up they are there. People know why all of them exist and they come from different directions. One is the direction to which the Deputy adverted. He asked if EU funds are motivating the creation of all these activities. If one looks at area partnerships, Leader and county enterprise boards, they derive from particular strands of EU activity and take advantage of opportunities which exist.

The Deputy’s other point was whether we should consider other ways in terms of fiscal and financial mechanisms. In relation to the small business area, that is precisely what we have done under the small business OP. The SBEL’s, as it then was, and the access to finance scheme in its second phase have been devoted to directing a large amount of money to ensuring that small business can access low cost finance. Improvements have been made at the fiscal level also in recent budgets.

Deputy Hogan: It is an indictment of the strategy of the Department of Enterprise and Employment and successive Governments that we must establish county strategy groups to co-ordinate the activities of all the quangos. I do not know how the Department of Finance allows any Department to continue along that road in terms of cost effectiveness.

Mr. McKenna: I admitted there may be 90 such programmes but the Deputy cannot expect me to indict Government policy.

Deputy Hogan: Mr. McKenna is not expected to do that. However, does he agree the county strategy groups is a clear indication that something needs to be done in order to rationalise many of the 90 agencies to which he alluded?

Mr. McKenna: From our point of view, the county strategy groups are an attempt to do something.

Chairman: We will move on to chapter 6, marketing.

Deputy Hogan: We will pass on that matter.

Chairman: We will move on then to chapter 7, water and sanitary services.

Deputy E. Byrne: A phenomenal sum of £222 million has been injected into the water and sewage programme. Many people in Dublin are suspicious; if all this money has been spent and extra capacity is available, why are we in the middle of a water crisis before the summer has even arrived? Will the relevant departmental official explain the position? If all the money has gone towards enhanced water supplies, why has the system in Dublin deteriorated?

Mr. Callan: We have been addressing the very urgent question of Dublin’s water requirements through the medium of an ambitious consultancy study which ran for some 18 months and was published earlier this year. The consultants were jointly Compagnie Générate des Eaux, a renowned French company, and its Irish partners, M.C. O’Sullivan. The Department directly commissioned this study, which had Cohesion Fund support, to give it better strategic direction in terms of the major investments which we know are incumbent on us in the years ahead in relation to water services in Dublin.

The study results, as the Deputy is aware, were interesting. In a sense they indicated that we needed to change the policy approach: that it is not necessarily the case that we should go on building more and more capacity or adopting high profile engineering solutions, although these will still be required. However, its major recommendation was that we should concentrate more intensive than up to now on improving water conservation in the Dublin area. It identified that almost 46 per cent of water in the Dublin area is lost through the system. About 5 per cent of this is in household situations but the major share of it, over 40 per cent, is through the public authority system.

In terms of this value for money discussion, it would be greatly more cost effective to tackle this loss intensively to bring it down over a five year period to a figure of about 20 per cent than to continue investment in major new projects designed to deliver more water capacity. This is the major strategic message we got from the report and we are acting on it in consort with the Dublin local authorities. However, there has not been an absence of investment in the water supply situation in Dublin in recent years. Contract 1(b) of Ballymore Eustace was completed some years ago and brought major expansion in capacity. A major scheme is ongoing in Dun Laoghaire at a cost of almost £30 million and there is a major augmentation of the Leixlip treatment works, which is run by Fingal County Council. This is serving the north side of the county and also, happily, taking care of increased water requirements of the major Intel plant nearby.

There are also very heavy demands facing us in the Dublin region in terms of waste water treatment and again it links in with the recommendation in the Comptroller and Auditor-General’s report. We have asked Dublin Corporation to run with a designed build option in the case of that particular major project which is due for completion within this decade.

Deputy E. Byrne: Would you agree in respect of the 1989-93 programme that, perhaps, it was misdirected and badly targeted? If we knew we were losing 45 per cent of our water supply through the existing pipe network what was the point in building further reservoirs if the reservoir capacity was going to lose that much of the supply automatically as it entered the pipe network? Would you tend to think that we might have got it wrong?

Mr. Callan: The recent report clarified the extent of the loss and showed that it was greater than had been estimated by anybody up to this point. There is not gain saying that. It may not have been happening in 1989 but it is happening now. The 1989 - 1993 programme was nationally based but, in some important aspects, projects were focused in Dublin. It would be too severe an indictment of the overall programme to say that we got it wrong in this respect.

There were some measures directed at water management in Dublin and other areas - in improving the measurement or telemetry system and there were the beginnings of water conservation projects in a number of areas financed under this programme. We have to accept that this is now a new strategic emphasis, but one which we are determined to run with.

Deputy E. Byrne: How could you explain that as recently as this year your consultants were able to pinpoint the 45 per cent loss? Could you confirm that further EU funding was sought for reservoirs and was rejected by the EU on the basis of the total water loss?

Mr. Callan: That is not quite the case. It was an initiative of the then Minister for the Environment to commission the strategic study on Dublin water. As I recall, the study would have been commissioned in 1994. We had no difficulty in persuading the Cohesion Fund Directorate in the European Commission that this was a good idea, but the idea was sourced in Ireland and it was one with which the Cohesion Fund Directorate readily agreed. In water management it is axiomatic that you must look at conservation aspects as well as other aspects of the service and the need to increase production capacity. There are costs attached to everything. There is a cost to stopping water losses in the city. We are going to agree a programme with Dublin Corporation which we anticipate will involve at least £30 million. It is a question of value for money. We are more secure now in the knowledge that it will represent greater value for money to move ahead in this way than to invest in contract 1 (c) of Ballymore-Eustace which we are content to leave for a number of years on the basis that there is greater value for money in proceeding with the water conservation development.

Deputy E. Byrne: We note from the report that difficulties were encountered gauging the impact of the projects and the Department of the Environment had to abandon its initial attempts in this respect in 1992. There is a review of projects included in the programme indicating various deficiencies like a tendency for a cross drift to occur between design, tender and completion stages. Have all the measures that were indicated as weaknesses of the system been corrected for the future?

Mr. Callan: We take many of the lessons of this report on board as far as we can. There is one aspect of the chapter which I would like to clarify and it is already heavily qualified in the Comptroller and Auditor-General’s text. There are certain physical indicators given which were sourced by the UCD Environmental Institute in cooperation with the Department. The outturn in terms of physical indicators from the programme is considerably less than the targets which were set and developed by the UCD Environmental Institute. It is important to clarify that those targets were developed in relation to an overall anticipated programme of investment in water and sanitary services which would have involved 196 schemes on an indicative list and which would have cost £490 million.

The outturn of the programme, as the Deputy has said, is £220 million and the physical indicators which are listed relate to a programme of this expenditure size, not to a programme of £490 million. The judgment of the succeeding operational programme for 1994-1999 on environmental services is that the physical and financial targets of the 1989-93 programme were satisfactorily met. However, we agree with the Comptroller and Auditor-General and the European Commission that the economic evaluation of this programme is particularly difficult. The ESRI have stated that it is difficult to get an economic handle on infrastructure per se.. It is even more difficult to do so in relation to environmental infrastructures where values are difficult to assign.

Most water services projects are now run through the Cohesion Fund rather than through the 1994-99 programme and, in the context of Cohesion Fund requirements, we need to support projects with either cost benefit analysis or an equivalent technique of economic evaluation. We have been working with the Commission to devise more suitable indicators and techniques to show the value of the kind of projects that we are dealing with here and to give us a handle on how to compare them and with other types of infrastructure. We have run another study since the ex-ante evaluation was done for the 1989-93 programme and we are in discussion with the Commission on this. There is no off the shelf technique of economic evaluation for projects of this kind. If there was, I could say ironically that I am sure the Commission would be the first to impose it upon us because it is their money, but there is no such thing.

In the UK under the stimulus of a much more commercial environment in the water industry than is enjoyed commonly around the European Union, they are still breaking ground in this area. They are still trying to develop measurement techniques whereby you can really say this is value for money in the water area and that is not. As Mr. Mullarkey said at the outset, we, along with the Commission, are trying to develop the most progressive and leading evaluation techniques we can in this area.

Deputy Hogan: The report indicates that a review of the projects which were included in the programme indicated a number of deficiencies, and they are listed in the report. One of them, to which Deputy Byrne referred, is the overrun in costs associated with the programme under the heading “miscellaneous costs”. For many contracts there was a substantial increase under the “miscellaneous” heading. Does the Department request a breakdown of these costs? Why would there be such an overrun on many projects listed in the programme?

Reference was made to the final accounts for two projects in particular. Have they been obtained yet? Were the contracts still within budget when the final accounts were obtained?

There has been considerable controversy in local authorities in recent times over the location of various sewage treatment plants. What level of consultation does the Department have with local authorities or communities about the provision of new infrastructure, particularly with regard to sewage? I am aware of one or two controversies, not necessarily those which have had a high profile recently. Notwithstanding the need to keep within reasonable budgetary targets, is there a better way to meet the wishes of communities where there is a need - often in a green area - to install a sewage treatment plant?

Another location might exist which might be slightly more expensive but which would meet the community’s wishes. What is the level of consultation in such cases?

Mr. Callan: The question of cost drift was mentioned by the Comptroller and Auditor General and by Deputy Byrne, to whom I apologise as I will address that matter now. Without wishing to be complacent, one must expect some level of cost increase in the sort of civil engineering contracts we use in the water services area because, first, price variation clauses are the norm; and second, in this area in particular the contract figure for some of the services embraced within the contract can be somewhat nominal in that they are subject to re-measurement depending on various circumstances, such as ground conditions or the length of pipe needed. It is not possible to measure every element of the contract in advance and many things are subject to re-measurement and price variation during the contract. That is a technical point.

We could avoids this through the use of fixed price contracts but then the fixed prices which would be quoted would be dearer in the first place. There is scope for argument about whether you can bring fixed price contracts into this area but the price variation method has been traditional. Indeed, there is a review of the building industry at present where this kind of issue may well be debated further. Up to now, it has been reckoned more advantageous on the whole to use a system which has inbuilt price variability.

As a general comment, Eurostat comparative figures show civil engineering costs in Ireland to be among the cheapest in the EU. That is not necessarily a vindication of the particular projects before us but it means that using these kinds of contract arrangements does not necessarily entail paying more than would be paid in other countries for services or infrastructure.

The final reports on the two projects the Deputy mentioned have been obtained. As far as I recall, they do not show significant overruns but I will clarify that matter for the Committee.

The Deputy raised a relevant issue in the difficulty which has been experienced by a number of local authorities in gaining public and political acceptance for the siting of new water infrastructure, particularly treatment works and the like. This is undoubtedly a cause for concern given that under both EU and national law we are committed to a programme of developing these facilities, not just this year and next year but up to the year 2005. Obviously, the Department is concerned that it has run into considerable difficulties in gaining public acceptance for a number of these schemes.

The environmental impact assessment system applies in full under Irish legislation to all these cases. I agree with the Deputy’s implicit point that the challenge to us all is to make that system work more effectively so that it will engage the confidence of the public, and of people who feel they may be affected, and allow us to show that these facilities are in the public interest and will give Ireland a better environment in the end.

Chairman: Mr. Mullarkey has dealt with Chapter 8 this morning. Are there any questions?

Deputy Hogan: There is only one question. The sum of £23 million is decommitted due to project failures. How many projects failed?

Mr. Mullarkey: The £23 million to which the Deputy referred relates to a wide range of industrial projects. These were industrial projects for which IDA-type grants had been approved and which would have attracted ERDF funding. About 30 projects failed in the sense that they did not get off the ground, but the bulk of the money in that area relates rather to projects which were implemented only on a smaller scale than originally envisaged or which, in the event, came in under budget. These were projects that did not start up in the first place. These were projects which were implemented on a smaller scale, therefore, qualified for a smaller grant and, in turn, smaller ERDF funding. These were projects which qualified for a smaller grant than originally anticipated because they did not fulfil their job requirements in full. Qualifying for a smaller grant implied that the proportionate ERDF funding was also smaller. That is the type of issue involved there.

Chairman: Deputy Byrne wishes to raise a question on Chapter 1.

Deputy Byrne: We did not deal with Chapter 1 in the introduction and overview. Between 1989-93 the State drew down £2.2 billion in EU funds. It targeted five areas which are listed here. Sadly, many areas were not brilliantly successful although one could speak about the success of tourism, industrial growth, etc.

One of the main aims for the funds drawn down was to combat long-term unemployment. Where did you go wrong because long-term unemployment increased rather than decreased? Do you think the next programme will make sufficient inroads into this terrible social problem?

Mr. Mullarkey: I agree that no one can be complacent or happy about long-term unemployment. However, during the last programme, and particularly in the past three or four years, we got a much better rate of employment growth than in the EU generally. While employment was relatively static in the period 1990-93, it was falling in the EU. Without being complacent, our employment growth has been better than in the EU generally. A number of infrastructural investments in 1990-93 in tourism, roads and in water and sanitary services are enabling us to cope with the greater rate of growth in the past few years. Many of these are long-term investments.

The Deputy might ask why our unemployment problem is the way it is. I do not have to recite the demographic problems we have. One has tried through the EDF and other schemes in the past few budgets to target the long-term unemployed. One must be concerned that more has not been achieved. Perhaps part of the problem is that because we have so many qualified young people coming on the market relative to other countries it makes it harder for the long-term unemployed to get back into the workforce. We must make an effort to increase the attractions there. The efforts of successive Governments to target this area in recent years have been clear. As senior civil servants, we will do our best to encourage and to contribute to that. We will also consider any good ideas from any other quarter.

Chairman: I congratulate Mr. John Purcell, the Comptroller and Auditor General, on this excellent report on the value for money examination of regional development measures. The Committee welcomes this examination into the effectiveness of the evaluation of spending programmes under the regional development measures. The importance and benefit of these programmes to the Irish economy cannot be overemphasised. It is vital that adequate structures are in place to make the best use of this funding and that EU funds are drawn down in a timely and efficient manner. Departments have a clear responsibility to spend public resources in the most effective way possible. This Committee strongly recommends that all Departments set and monitor appropriate targets for all spending programmes, whether EU funded or not. Departments should also ensure that the effectiveness of their spending is systematically evaluated so that lessons can be learned for the future. I thank Mr. Mullarkey and the representatives for their forthright answers to the various questions raised.

Mr. Mullarkey: We express our appreciation of the Committee’s work and the contribution the Comptroller and Auditor General’s reports has made in highlighting certain areas for improvement.

The witness withdrew.

THE COMMITTEE ADJOURNED.