THE WAY FORWARD  NATIONAL ECONOMIC PLAN 1983-1987  Fianna Fail, laid before the House inOctober 1982  THE WAY FORWARD  F O r E w O r D  The plan outlined in this document is a programme for national recovery. It's objective is simply the future welfare of the Irish people.  The plan shows what we must do to overcome our present difficulties and get back into a sound position in which progress and improvement are again possible.  This plan has been prepared with great care and with the aid of the best advice available. All relevant facts and  figures have been assembled;all the calculations carefully made. It is firmly grounded on realistic assessments and attainable goals.  It is the only way forward.  All that remains now is for the Irish people in their wisdom to accept and to rally behind it with optimism, courage and determination.  If they do, and I am confident they will, its success is assured.  CHARLES J. HAUGHEY  Taoiseach  CHAPTER I THE CHOICE WE FACE  1. The Irish nation faces a grave and historic test. In order to ensure the long-term future of our economy certain measures and decisions must be taken now. Timely and well-considered action is needed to protect our economic welfare and security.  2. Many of these measures will have to be corrective. Without them, we would be unable to continue to borrow to the extent needed and would have difficulty in servicing our increasing public debt, maintaining the present value of our currency and continuing to import without restriction. This would result in massive unemployment, undermine our social welfare system and essential public services and lead inevitably to a major decline in living standards of long duration. Such a course of events would threaten the economic and social stability of our society.  3. Our economic potential, however, is great and our capacity to avert the unwelcome consequences, which now threaten us, is clear. We must be prepared, therefore, to accept that our national income depends on our ability to produce and sell goods and services which are competitive in price and quality with those of other nations. To stimulate growth, we must give priority to productive investment over consumption. We must decide that the numbers employed in the public service, their pay bill and public expenditure generally cannot continue to grow on the basis of ever-greater taxation and borrowing in an economy at our present level of output.  4. The facts of economic life in the modern world are simple and inescapable. We cannot achieve better standards of living by merely deciding that we deserve them and must have them. Nor can we achieve them by awarding ourselves more money without the backing of new wealth and production. We must earn our living by our ability to sell enough abroad to pay for all the goods we want to import for production, processing or consumption. Public services cannot be provided on the basis of what is desirable. They must be based on what can be paid for by taxation.  5. The Government consider that the measures necessary to overcome our economic difficulties and, at the same time, to realise our economic potential should be combined in a National Economic Plan covering the years 1983-1987. Our problems cannot be overcome and our potential cannot be realised overnight. We need to know, therefore, what sort of effort we must make and how much time we need to overcome our present difficulties. We must have before us a comprehensive statement not only of the costs to be endured but also of the benefits to be gained from a courageous and realistic programme of economic and fiscal policy pursued over a period of years by the entire nation with determination and resolve. The basic strategy of the Plan now being put forward will progressively create a modern economy capable of providing employment for our rapidlygrowing labour force, an expanding and more competitive productive sector, the possibility of reduced personal taxation and more efficient and economic public services.  OTHER COUNTRIES ARE FACING THE SAME CHOICE  1. Our problems are not unique. After two decades of exceptional economic growth and, in many countries, full employment, countries everywhere are faced with the need for severe adjustment and unpalatable corrective action to offset the effects of the worst and most prolonged recession to hit the world economy since the nineteen thirties.  2. The defensive measures taken by other countries up to this period in the recession have been much the same as our own. Taxation and borrowing were increased so as to finance greater government expenditure, to maintain demand, and to finance balance of payments deficits. Otherwise, demand would have been lower and unemployment would have been greater. But in spite of these measures which could only last temporarily, the countries of the developed world are, almost without exception, still in profound economic difficulties. It has not been possible to maintain demand sufficiently to prevent unemployment growing. There are now 11 million persons unemployed in the European Community as compared with 5 million in 1977. The intimidating outlook is for continued increases in unemployment as countries give the necessary priority to cutting back on their high levels of borrowing and to lowering prices and interest rates.  OUR SPECIAL DIFFICULTIES AND OPPORTUNITIES  1. We have special difficulties in adjusting our economy without causing excessive cutbacks in demand and output. Our population is growing at about four times and our labour force at about twice the European Community average. This measures our need for greater investment and for more new jobs at a time when we must curtail borrowing and correct our large and unsustainable balance of payments deficit.  2. Many of the international economic trends are, however, now for the first time in three years beginning to offer us the prospect of increased exports to replace the internal demand we were forced to create temporarily at the height of the recession by internal and external deficit financing. Compared with a fall of over 1.5% last year, EEC imports are forecast to increase by 2.5% in real terms in 1982 and by about 3% in 1983. In the United Kingdom, our largest export market, the volume of manufactured imports, which was static in 1981, is expected to expand by 7.5% in 1982 and by 5% in 1983. International inflationary pressures are moderating. Our imports, which increased in price by nearly 21% in the first seven months of 1981, increased by just over 8% in the corresponding period in 1982. The international trend in interest rates is downward from the unprecedentedly high levels of recent years.  3. Against this slowly improving international background, our economic strategy during the recession, in common with other countries, of deficit financing to sustain demand and employment, can now be modified progressively to remedy deep-seated defects in our economic structure.  4. Our economy suffers from a number of serious defects which will worsen unless we avail of the improving international outlook to remedy them:  - we are losing jobs faster than we are creating them due to our increasing inability to sell competitively at home and abroad all the goods and services we can produce;  - we have lost a substantial and growing share of the home market to imported products;  - our higher inflation and interest rates are raising our production and operating costs faster than in other competing countries;  - our unit labour costs in manufacturing industry have been rising faster than those of our EMS narrow-band partners in the European Community;  - because we are consuming more than we produce, we have been running large deficits in our account with other countries. Such large deficits cannot continue without affecting our trade and the value of our currency. We must return to paying our way in the world;  - our level of borrowing for public expenditure, including for current expenditure to finance public services, is unsustainably high and must be progressively curtailed;  -we still have serious regional imbalances in economic and social growth and opportunity which diminish total output and reduce the efficiency of our economy.  OUR POTENTIAL FOR ECONOMIC AND SOCIAL DEVELOPMENT  1. Our capacity to overcome our economic difficulties and create a more productive, more competitive and better-structured economy is clear. To do so, we must unite in national will, resolve and action as we have so often done in the past in the face of adversity and challenge.  2. We possess a powerful array of both existing and potential economic and social resources which, properly mobilised and organised, in a framework of sound public finances and prudent economic decisions by all sectors of the community, will enable us t correct the defects in our economy which now threaten our economic and social progress.  3. These resources and their capabilities are shown by:  - our achievement in creating, outside the public services, over 100,000 new jobs in 1979, 1980 and 1981 in spite of the recession. Though these new jobs were offset by loss of existing jobs due to a decline in demand and competitiveness, the fact that they could be brought into being demonstrates our economic capacity to generate new jobs;  - our young population with their high and increasing level of education and technological skill created by a greatly expanded and improved educational, technological and vocational training system throughout the country;  - the adaptability and capacity for productivity of our work force;  - our proven capacity to attract from overseas, to establish domestically ourselves, and to operate, modern high-technology industry, marketing its products throughout the world;  - the training and skills of our farmers and the potential of our farms to achieve much greater output;  - our developed and efficient commercial, financial and profession services sector;  - our comprehensive and impartial system of public administration  - the steady progress being made in improving our economic infrastructure as a result of the high investment policies pursued by the Government;  - our natural resources in minerals, oil, gas and marine resources, yet not fully assessed or exploited;  our membership of the European Economic Community of 260 million persons.  1. We should have confidence in the potential of our resources to raise the level and productivity of our economic performance, not only to the extent needed to solve our immediate needs, but also to attain the higher living standards prevailing in the European Community. We currently produce only half the average output per person of the European Community. We can reduce the gap, like other small economies have done, by producing and selling more goods and services abroad and by supplying a greater share of our own needs from home production.  2. We must face realistically and overcome resolutely the challenge to our economic and social future which the defects in our economy create and which reduce our production and our competitive capacity There is no other way forward. We cannot substitute employment in the competitive production of goods and services by employment in the public services based on increased taxation and borrowing. We cannot continue to spend more than we produce. If we fail as a nation to make the right fundamental economic decisions now and carry them through over a period of years, we will have economic and social stagnation. For our young people, such a society would represent failure and disillusion.  3. The fundamental strategy and measures contained in this Plan will enable us, over the period to 1987, to make the necessary adjustment to the new challenging conditions facing all the Western democracies as they come slowly out of the long recession. The requirements for success are clear. The burdens to be borne are not excessive. The rewards to be gained are more than sufficient to justify the united national effort which the success of this National Economic Plan demands.  4. Our economy now stands decisively at the threshold of a new economic era. Selfish attitudes and the pursuit of sectional interests must give way to a more responsible approach which recognises our vital common interest in averting the economic and social dangers which threaten us. By uniting in action and resolve, we can seize the opportunities which this Economic Plan outlines to ensure a secure future for ourselves and our children.  CHAPTER II THE NEED FOR ACTION NOW  1. Existing basic trends in the economy cannot be allowed to continue without unwelcome consequences. Predominant among these trends are growth in public expenditure which cannot be matched by tax increases; a high balance of payments deficit financed temporarily by borrowing annually to maintain our foreign currency reserves; an uncompetitive growth in wages and incomes, and rates of inflation and interest which are well above the average European Community  2. The current budget deficit, if it were not corrected by increased taxation or by reduced expenditure, could rise to almost f3 billion or 13% of GNP by 1987. With a capital budget requiring Exchequer borrowing of 9% of GNP, the total Exchequer borrowing requirement, by 1987, could become f 5 billion or 22% of GNP. It is not open to us to borrow on that scale. Our national debt would have risen by 1987 to one-and-a-half times GNP. The cost of servicing that debt would amount to an annual sum substantially exceeding total income tax revenue. A large proportion of these debt payments would have to be paid abroad, draining the resources of the economy. The need to start a programme of action now to avert this outcome is unmistakable and unavoidable.  3. If the existing trend in wage incomes were to continue, it would cause a loss of competitiveness which would reduce our export capacity and increase import penetration of the home market. The unit wage costs of our manufactured goods have steadily lost competitiveness against our major trading partners. Our unit wage costs have been rising faster than in the EMS narrow-band countries: over six times faster in 1979, and over twice as fast in 1980 and in 1981. Exchange rate fluctuations and especially the appreciation of sterling since 1979, masked our loss in competitiveness, but in 1982, this will not occur because of the stabilisation of exchange rates in general and sterling in particular. Our unit wage costs in 1982 are expected to increase eight times faster than in the United Kingdom. This loss of wage cost competitiveness will not only lose jobs in existing industry but it could adversely affect the foreign investment in export industry which has been the major source of new jobs.  4. The combination of rising debt service and reduced competitivenes in foreign and domestic markets would ultimately widen the balance of payments deficit to over £3 billion or 14% of GNP by 1987. This is a deficit which could not be allowed to develop because of its effect on the value of our currency, on our rate of inflation and on our interest rates.  5. Unchecked, the adverse trends outlined would cause heavy loss of employment so that by 1987 unemployment would approach 300,000. Eventual inability to borrow would inevitably lead to further substantial job losses in the public sector.  6. Such a combination of events would clearly undermine our society and, therefore, cannot be contemplated even if some minority sectors of opinion will oppose the sensible and moderate measures and decisions necessary to avert these events. We need courage, determination and unity of purpose to reverse and correct the present trends. The Government are giving the firm leadership required. They have already initiated, and will continue to implement, the measures necessary to avert the grim consequences we face if we fail to take the sensible and prudent measures necessary. The Government are confident that the cooperation and consent of all responsible citizens will be forthcoming for the cumulatively beneficial course of action they outline in this Plan.  THE WAY FORWARD  1. The essential objectives of the Plan can be simply summarised:  - to halt and reverse the trend in unemployment so that, by the end of the Plan period, employment could be growing twice as fast as the labour force;  - by lowering inflation and interest rates and more moderate trends in incomes and taxation, to create a more cost-competitive economy which is the only basis on which we can expand output, increase employment and maintain existing jobs;  - to improve social equity in our society by reducing unemployment, making the taxation system more equitable, and ensuring that public services are provided in accordance with need;  - to create the kind of economy and society in which sufficient resources can be made available to protect the living standards of those who must rely on long-term social welfare benefits and in which fraud and abuse of the social welfare system are eliminated;  - in promoting the equity of taxation, to reduce over the period of the Plan, the burden of PAYE taxation which is excessively decreasing take-home pay, penalising enterprise and increasing inflation;  - to reduce Exchequer borrowing progressively to levels compatible with the long-term ability of the economy to borrow and repay;  - to effect this reduction essentially by eliminating the current budget deficit by 1986 through a combination of measures including eliminating wasteful and unjustifiable public expenditures, reducing the numbers employed in the public service and moderating the public pay bill, making working methods in the public services more efficient and charging those who can afford to pay for certain public services;  - to the extent that the over-riding requirement to reduce Exchequer borrowing allows, to increase public investment over the period of the Plan, and apply more rigorous investment criteria, so as to ensure the high investment which the development of a more productive and efficient economy requires;  - to create an economic environment conducive to private investment and to ensure that public aid to encourage private productive investment and innovation is more selective and linked to performance targets;  - to bring the balance of payments deficit under control by increased exports, more import substitution and abating the rate of increase in foreign debt service.  1. These are the objectives of the Plan. They are the basic requirements to create a more competitive, lower-priced economy in which employment can progressively increase, the grim upward trend in unemployment be reversed and the realisation of a more equitable and expanding economy ensured. The objectives of the Plan are essentially economic, though certain basic social objectives are included. The full working out and development of social policy as such in the new economic context created by the Plan will be the next major task of national policy to be undertaken.  2. The succeeding chapters contain the details of the practical policies and measures proposed by the Government to give effect to the objectives of the Plan.  CHAPTER III THE ECONOMIC FRAMEWORK  INTRODUCTION  1. Our economic and social development over the period 1983 to 1987 requires a new firm economic and fiscal framework which is the essential purpose of the Plan. This framework must be one based on the capacity of the economy to pay its way at home and abroad. It must be the containing framework within which all economic and social decisions must stay during the period of the Plan. The framework proposed is explained in detail in this Chapter.  INTERNATIONAL ENVIRONMENT  2. As a trading nation, with one of the highest ratios in the world between trade and total output, international developments in trade, prices, costs and exchange rates are fundamental to the management of our affairs. The trends within the European Community particularly influence our economic performance.  3. It is difficult to forecast with certainty international economic trends. For the purposes of the Plan, a number of key assumptions have been made based on the assessments of international agencies. If these in time turn out to be pessimistic, the results as far as our economy is concerned will be more favourable than the Plan envisages either in total gains or in earlier gains. On the other hand, if the international assumptions turn out in time to be optimistic in any way, this could diminish or delay the results envisaged in the Plan or impose on us more austere domestic decisions than those already envisaged. Some key assumptions are necessary to form a Plan and the ones adopted are based on the best advice available.  4. The following are the key international assumptions built into the economic framework of the Plan:  - an increase in the volume of our export markets of just over 4% a year;  - average growth in unit wage costs in our trading partners of about 7.5 % a year;  - an increase in import prices of 7.5% a year, including a fall in the relative price of oil;  - overall stability in the external value of the Irish Pound  - industrial export prices to grow in line with those of our trading partners;  - agricultural export prices to grow in line with the level of inflation in the European Community as a whole.  THE PUBLIC FINANCES  5. An essential part of the economic and fiscal framework of the Plan is restoration of balance between Exchequer receipts and current expenditure, the reduction of total Exchequer borrowing to manageable and economically justifiable levels and, to the extent that the borrowing constraint permits, the expansion of public capital expenditure to make the economy more productive and efficient.  CURRENT BUDGET DEFICIT  6. The current budget deficit will be phased out by 1986 in accordance with the path set out in Table 1. This will progressively reduce the growth in the public debt and in debt service, the balance of payments deficit, the burden of taxation, and the rate of inflation and interest. This fundamental correction in our fiscal balance is essential for our credit standing and to permit greater investment in the capacity, efficiency and equity of our economy.  TABLE I  CURRENT BUDGET DEFICIT as PERCENTAGE OF GNP  ---------------------------- 1982 1983 1984 1985 1986 7.5* 5.5 3.5 2 0 ----------------------------  *estimatedfor outturn.  7. Such a reduction in the current budget deficit cannot be achieved painlessly. Taxation is already extremely high at our level of output and income and priority in taxation must be given to greater equity. The measures to reduce the budget deficit must, therefore, fall on expenditure through, for example, reduced employment in the public service as a result of greater efficiency and economy, moderation in the growth of the public pay bill, cutting the non-pay budgets of the public service and transferring the cost of some services now paid for out of either taxation or borrowing to the users of those services.  8. This general policy has already been given effect to in the public expenditure reductions set out in the Government statement of 30 July 1982, in the proposals put to the Public Services Committee of the Irish Congress of Trade Unions on the pay matters covered by that statement and in the Estimates for 1983 that will be presented to the Dail in the coming session..  PUBLIC SERVICE PAY  7. The growth in public service pay will be curtailed in line with the restricted capacity of the Exchequer. Excluding carry-over effects from 1982, the Exchequer pay bill will have to be contained to an average growth rate of 5% a year to 1986 inclusive of general and special pay increases.  8. If we exclude the cost of debt service, pay represents one half of current Exchequer expenditure. The Exchequer pay bill has increased by 24% in 1981 and would have increased by an estimated 20% in 1982 (before the proposals announced by the Government in its statement of 30 July, 1982). WithoLt the measures taken in July 1982 and in determining the 1983 Estimates, and assuming a general increase approaching the 1982 level, it could have increased again by about 25% in 1983, including some £250 to £300 million for special increases alone. Such an increase would have been far beyond the capacity of the economy. The falling trend in inflation envisaged during the period of the Plan will facilitate the curtailment of the public pay bill. Within the limited funds available for increased pay, consideration will need to be given to ensuring that the greater proportionate benefits go to those most in need. The Government consider that National Pay Agreements which give across the board percentage increases followed by relativity awards are no longer tolerable in present circumstances.  9. Special pay increases have been a substantial factor in increasing the public pay bill in recent years and their potential cost poses a particular threat to achieving and maintaining a better balance in the public finances not only during the period of the Plan but in the longer term. The Exchequer pay bill in 1982 contains almost £400 million extra due to special pay increases in the previous three years alone. The proposed level of pay increases in the public sector contained in the Plan could consist partly of general pay increases and partly of special pay increases within the overall limit specified. But a basic economic question is to what extent the process of special pay claims based on relativities can continue if the economy is to achieve its full potential. There appears to be no end to this process as each settlement triggers off another until the process starts all over again. In addition, there are special pay claims linked to productivity and technological change. If these have to be paid for in increased wages, what is the extent of the net benefit to the economy? There is grave public disquiet also about the payment of special so-called "disturbance" sums for changing the location of employment nearly always to improved accommodation and sometimes by a very short distance. These issues are complex and involve the private sector as well as the public sector. Where special pay increases based on relativities have been terminated, there have been beneficial results for competitiveness and inflation. It is intended to explore with all interests the possibility of a Commission representative of Government, trade unions and employers to examine the entire question of special pay claims in the context of the long-term optimum development of our economy and employment.  10. The Government to date have not filled about 2,000 vacancies in the civil service and non-commercial semi-state bodies. Similar restrictions are also in effect in the Defence Forces and in the health sector. By 1986, it is proposed to reduce the numbers employed in the public service by 4,000 by cutting back on low priority or ineffective programmes and through greater efficiency in the provision of services.  NON-PAY EXPENDITURE  7. The measures initiated in the July 1982 non-pay expenditure cuts and in the 1983 Estimates will be continued to bring about a cumulative reduction of up to 5% in the volume of non-pay expenditure by 1986 as compared with 1982. To achieve this, it will be necessary to reduce the level of services by more than the equivalent of 5% of 1982 expenditure. This is because demographic or other trends would mean volume increases in expenditure on the assumption of no change in policies. The net reduction envisaged will be found either by restriction or cessation of programmes or by introducing new charges or increasing existing charges for public services.  8. At least one quarter of the savings will be achieved by way of new or increased charges over the period to 1986 and the effect of these on prices has been estimated to average about .5% a year to 1986.  9. Total transfer expenditure can grow by an annual average of only 8% in nominal terms over the period to 1986. The protection of the living standards of old age pensioners and other such recipients of long term social welfare benefits may well require restrictions on increases in other transfer expenditure.  10. The amount available for subsidies can grow by an annual average of only 4% in nominal terms between 1982 and 1986. This will require a detailed examination of the social equity, incidence and effectiveness of the different subsidies currently being provided through public expenditure.  11. While the necessary resources to deter and defeat crime and lawlessness will be maintained, a major improvement in effectiveness will be sought through the better employment of the large resources now being provided. Expansion of An Garda Siochana in 1983 is envisaged as an exception to the general reduction in numbers employed in the public service.  12. The Government will shortly introduce legislation and implement other measures to give effect to certain changes in the Social Welfare system to deter abuse and to reduce unjustified cost. These changes are as follows:  - to remove the present disincentive to work, flat-rate unemployment benefit for short-time workers will be limited to ensure that it will be related to a five day working week and pay related benefit for those workers will be withheld;  - for disability benefit purposes, the overall benefit ceiling will be reduced from 100% to 80% of reckonable weekly earnings;  - pay related benefit for those entitled will be reduced from the current level of 40% to 30% for the first six months and to 20% for the remaining nine months;  - the Government will rectify the anomaly whereby employees by a combination of tax refunds and social welfare benefits can receive more than when they are wholetime at work;  - closer liaison between the Department of Social Welfare and the National Manpower Service including the location of placement officers at the larger Social Welfare Employment Exchanges and the availability of placement officers as required in the smaller local offices. For this purpose, amalgamation of administrative responsibility for the placement and benefit payments functions is being examined so that priority in placement is given to those on the Live Register;  - registration with the National Manpower Service of all those under 25 years on the Live Register.  19. The very considerable expenditure now incurred by the local authorities and the Health Boards and the greatly increased numbers of professional and administrative staff employed by them warrant a rigorous examination of their structures and special measures to ensure the greatest possible efficiency and economy in the provision of services and to eliminate waste, duplication or overlapping. The Government, therefore, intend to establish, without delay, a special investigation team to go into the local authorities and the Health Boards to investigate their administration and finances with a view to ensuring the most efficient use of existing resources and providing full value for money to both the ratepayer and taxpayer.  PUBLIC CAPITAL EXPENDITURE  7. The progressive reduction in the budget deficit amounting to the withdrawal from expenditure of about £900m by 1986 would have an excessive deflationary effect on economic activity and especially on employment, if not modified by capital expenditure proposals. The Government believe that over the period of the Plan, public investment policies must be continued and expanded to increase our productive capacity to generate employment, improve our economic infrastructure and enlarge our social capital to meet the needs of our growing population.  8. Public capital programme expenditure by the Exchequer, therefore, will be increased substantially over the period of the Plan by an amount equal to 3% on average for the years 1983 to 1987. The Exchequer borrowing for capital purposes and the volume changes in public capital expenditure under the Plan are contained in Table 2. Public capital programme expenditure must be planned with careful regard to the strict limitation imposed by the capacity of the Exchequer to borrow. A further constraint on the amount of Exchequer funds which can be made available for new capital investment in the early years of the period of the Plan is the substantial amount which must be made available for the financial restructuring of semi-state bodies.As the current budget deficit falls, the volume of the public capital expenditure can grow provided the Exchequer borrowing requirement is kept within sustainable limits given the already high level of national debt. The current budget deficit for 1983 will still be considerable in spite of the reductions being made in current expenditure. For that reason, the Plan and the 1983 Estimates must reduce the public capital programme in 1983 by 3% in real terms so as to reduce overall Exchequer borrowing, as compared with 1982, to a level which signals our firm determination to bring it down over the period of the Plan to a level sustainable over the long-term. There is no option any longer to increase overall Exchequer borrowing; it must be steadily and firmly reduced. The best way to do this in the interests of the economy and employment is to reduce borrowing for current expenditure so as to leave scope for investment expenditure. Falling interest rates will concurrently help to stimulate greater investment by the private sector.  THE WAY FORWARD  NATIONAL ECONOMIC PLAN 1983-1987  Fianna Fail, laid before the House inOctober 1982  THE WAY FORWARD  F O r E w O r D  The plan outlined in this document is a programme for national recovery. It's objective is simply the future welfare of the Irish people.  The plan shows what we must do to overcome our present difficulties and get back into a sound position in which progress and improvement are again possible.  This plan has been prepared with great care and with the aid of the best advice available. All relevant facts and  figures have been assembled;all the calculations carefully made. It is firmly grounded on realistic assessments and attainable goals.  It is the only way forward.  All that remains now is for the Irish people in their wisdom to accept and to rally behind it with optimism, courage and determination.  If they do, and I am confident they will, its success is assured.  CHARLES J. HAUGHEY  Taoiseach  CHAPTER I THE CHOICE WE FACE  1. The Irish nation faces a grave and historic test. In order to ensure the long-term future of our economy certain measures and decisions must be taken now. Timely and well-considered action is needed to protect our economic welfare and security.  2. Many of these measures will have to be corrective. Without them, we would be unable to continue to borrow to the extent needed and would have difficulty in servicing our increasing public debt, maintaining the present value of our currency and continuing to import without restriction. This would result in massive unemployment, undermine our social welfare system and essential public services and lead inevitably to a major decline in living standards of long duration. Such a course of events would threaten the economic and social stability of our society.  3. Our economic potential, however, is great and our capacity to avert the unwelcome consequences, which now threaten us, is clear. We must be prepared, therefore, to accept that our national income depends on our ability to produce and sell goods and services which are competitive in price and quality with those of other nations. To stimulate growth, we must give priority to productive investment over consumption. We must decide that the numbers employed in the public service, their pay bill and public expenditure generally cannot continue to grow on the basis of ever-greater taxation and borrowing in an economy at our present level of output.  4. The facts of economic life in the modern world are simple and inescapable. We cannot achieve better standards of living by merely deciding that we deserve them and must have them. Nor can we achieve them by awarding ourselves more money without the backing of new wealth and production. We must earn our living by our ability to sell enough abroad to pay for all the goods we want to import for production, processing or consumption. Public services cannot be provided on the basis of what is desirable. They must be based on what can be paid for by taxation.  5. The Government consider that the measures necessary to overcome our economic difficulties and, at the same time, to realise our economic potential should be combined in a National Economic Plan covering the years 1983-1987. Our problems cannot be overcome and our potential cannot be realised overnight. We need to know, therefore, what sort of effort we must make and how much time we need to overcome our present difficulties. We must have before us a comprehensive statement not only of the costs to be endured but also of the benefits to be gained from a courageous and realistic programme of economic and fiscal policy pursued over a period of years by the entire nation with determination and resolve. The basic strategy of the Plan now being put forward will progressively create a modern economy capable of providing employment for our rapidlygrowing labour force, an expanding and more competitive productive sector, the possibility of reduced personal taxation and more efficient and economic public services.  OTHER COUNTRIES ARE FACING THE SAME CHOICE  1. Our problems are not unique. After two decades of exceptional economic growth and, in many countries, full employment, countries everywhere are faced with the need for severe adjustment and unpalatable corrective action to offset the effects of the worst and most prolonged recession to hit the world economy since the nineteen thirties.  2. The defensive measures taken by other countries up to this period in the recession have been much the same as our own. Taxation and borrowing were increased so as to finance greater government expenditure, to maintain demand, and to finance balance of payments deficits. Otherwise, demand would have been lower and unemployment would have been greater. But in spite of these measures which could only last temporarily, the countries of the developed world are, almost without exception, still in profound economic difficulties. It has not been possible to maintain demand sufficiently to prevent unemployment growing. There are now 11 million persons unemployed in the European Community as compared with 5 million in 1977. The intimidating outlook is for continued increases in unemployment as countries give the necessary priority to cutting back on their high levels of borrowing and to lowering prices and interest rates.  OUR SPECIAL DIFFICULTIES AND OPPORTUNITIES  1. We have special difficulties in adjusting our economy without causing excessive cutbacks in demand and output. Our population is growing at about four times and our labour force at about twice the European Community average. This measures our need for greater investment and for more new jobs at a time when we must curtail borrowing and correct our large and unsustainable balance of payments deficit.  2. Many of the international economic trends are, however, now for the first time in three years beginning to offer us the prospect of increased exports to replace the internal demand we were forced to create temporarily at the height of the recession by internal and external deficit financing. Compared with a fall of over 1.5% last year, EEC imports are forecast to increase by 2.5% in real terms in 1982 and by about 3% in 1983. In the United Kingdom, our largest export market, the volume of manufactured imports, which was static in 1981, is expected to expand by 7.5% in 1982 and by 5% in 1983. International inflationary pressures are moderating. Our imports, which increased in price by nearly 21% in the first seven months of 1981, increased by just over 8% in the corresponding period in 1982. The international trend in interest rates is downward from the unprecedentedly high levels of recent years.  3. Against this slowly improving international background, our economic strategy during the recession, in common with other countries, of deficit financing to sustain demand and employment, can now be modified progressively to remedy deep-seated defects in our economic structure.  4. Our economy suffers from a number of serious defects which will worsen unless we avail of the improving international outlook to remedy them:  - we are losing jobs faster than we are creating them due to our increasing inability to sell competitively at home and abroad all the goods and services we can produce;  - we have lost a substantial and growing share of the home market to imported products;  - our higher inflation and interest rates are raising our production and operating costs faster than in other competing countries;  - our unit labour costs in manufacturing industry have been rising faster than those of our EMS narrow-band partners in the European Community;  - because we are consuming more than we produce, we have been running large deficits in our account with other countries. Such large deficits cannot continue without affecting our trade and the value of our currency. We must return to paying our way in the world;  - our level of borrowing for public expenditure, including for current expenditure to finance public services, is unsustainably high and must be progressively curtailed;  -we still have serious regional imbalances in economic and social growth and opportunity which diminish total output and reduce the efficiency of our economy.  OUR POTENTIAL FOR ECONOMIC AND SOCIAL DEVELOPMENT  1. Our capacity to overcome our economic difficulties and create a more productive, more competitive and better-structured economy is clear. To do so, we must unite in national will, resolve and action as we have so often done in the past in the face of adversity and challenge.  2. We possess a powerful array of both existing and potential economic and social resources which, properly mobilised and organised, in a framework of sound public finances and prudent economic decisions by all sectors of the community, will enable us t correct the defects in our economy which now threaten our economic and social progress.  3. These resources and their capabilities are shown by:  - our achievement in creating, outside the public services, over 100,000 new jobs in 1979, 1980 and 1981 in spite of the recession. Though these new jobs were offset by loss of existing jobs due to a decline in demand and competitiveness, the fact that they could be brought into being demonstrates our economic capacity to generate new jobs;  - our young population with their high and increasing level of education and technological skill created by a greatly expanded and improved educational, technological and vocational training system throughout the country;  - the adaptability and capacity for productivity of our work force;  - our proven capacity to attract from overseas, to establish domestically ourselves, and to operate, modern high-technology industry, marketing its products throughout the world;  - the training and skills of our farmers and the potential of our farms to achieve much greater output;  - our developed and efficient commercial, financial and profession services sector;  - our comprehensive and impartial system of public administration  - the steady progress being made in improving our economic infrastructure as a result of the high investment policies pursued by the Government;  - our natural resources in minerals, oil, gas and marine resources, yet not fully assessed or exploited;  our membership of the European Economic Community of 260 million persons.  1. We should have confidence in the potential of our resources to raise the level and productivity of our economic performance, not only to the extent needed to solve our immediate needs, but also to attain the higher living standards prevailing in the European Community. We currently produce only half the average output per person of the European Community. We can reduce the gap, like other small economies have done, by producing and selling more goods and services abroad and by supplying a greater share of our own needs from home production.  2. We must face realistically and overcome resolutely the challenge to our economic and social future which the defects in our economy create and which reduce our production and our competitive capacity There is no other way forward. We cannot substitute employment in the competitive production of goods and services by employment in the public services based on increased taxation and borrowing. We cannot continue to spend more than we produce. If we fail as a nation to make the right fundamental economic decisions now and carry them through over a period of years, we will have economic and social stagnation. For our young people, such a society would represent failure and disillusion.  3. The fundamental strategy and measures contained in this Plan will enable us, over the period to 1987, to make the necessary adjustment to the new challenging conditions facing all the Western democracies as they come slowly out of the long recession. The requirements for success are clear. The burdens to be borne are not excessive. The rewards to be gained are more than sufficient to justify the united national effort which the success of this National Economic Plan demands.  4. Our economy now stands decisively at the threshold of a new economic era. Selfish attitudes and the pursuit of sectional interests must give way to a more responsible approach which recognises our vital common interest in averting the economic and social dangers which threaten us. By uniting in action and resolve, we can seize the opportunities which this Economic Plan outlines to ensure a secure future for ourselves and our children.  CHAPTER II THE NEED FOR ACTION NOW  1. Existing basic trends in the economy cannot be allowed to continue without unwelcome consequences. Predominant among these trends are growth in public expenditure which cannot be matched by tax increases; a high balance of payments deficit financed temporarily by borrowing annually to maintain our foreign currency reserves; an uncompetitive growth in wages and incomes, and rates of inflation and interest which are well above the average European Community  2. The current budget deficit, if it were not corrected by increased taxation or by reduced expenditure, could rise to almost f3 billion or 13% of GNP by 1987. With a capital budget requiring Exchequer borrowing of 9% of GNP, the total Exchequer borrowing requirement, by 1987, could become f 5 billion or 22% of GNP. It is not open to us to borrow on that scale. Our national debt would have risen by 1987 to one-and-a-half times GNP. The cost of servicing that debt would amount to an annual sum substantially exceeding total income tax revenue. A large proportion of these debt payments would have to be paid abroad, draining the resources of the economy. The need to start a programme of action now to avert this outcome is unmistakable and unavoidable.  3. If the existing trend in wage incomes were to continue, it would cause a loss of competitiveness which would reduce our export capacity and increase import penetration of the home market. The unit wage costs of our manufactured goods have steadily lost competitiveness against our major trading partners. Our unit wage costs have been rising faster than in the EMS narrow-band countries: over six times faster in 1979, and over twice as fast in 1980 and in 1981. Exchange rate fluctuations and especially the appreciation of sterling since 1979, masked our loss in competitiveness, but in 1982, this will not occur because of the stabilisation of exchange rates in general and sterling in particular. Our unit wage costs in 1982 are expected to increase eight times faster than in the United Kingdom. This loss of wage cost competitiveness will not only lose jobs in existing industry but it could adversely affect the foreign investment in export industry which has been the major source of new jobs.  4. The combination of rising debt service and reduced competitivenes in foreign and domestic markets would ultimately widen the balance of payments deficit to over £3 billion or 14% of GNP by 1987. This is a deficit which could not be allowed to develop because of its effect on the value of our currency, on our rate of inflation and on our interest rates.  5. Unchecked, the adverse trends outlined would cause heavy loss of employment so that by 1987 unemployment would approach 300,000. Eventual inability to borrow would inevitably lead to further substantial job losses in the public sector.  6. Such a combination of events would clearly undermine our society and, therefore, cannot be contemplated even if some minority sectors of opinion will oppose the sensible and moderate measures and decisions necessary to avert these events. We need courage, determination and unity of purpose to reverse and correct the present trends. The Government are giving the firm leadership required. They have already initiated, and will continue to implement, the measures necessary to avert the grim consequences we face if we fail to take the sensible and prudent measures necessary. The Government are confident that the cooperation and consent of all responsible citizens will be forthcoming for the cumulatively beneficial course of action they outline in this Plan.  7. The essential objectives of the Plan can be simply summarised:  - to halt and reverse the trend in unemployment so that, by the end of the Plan period, employment could be growing twice as fast as the labour force;  - by lowering inflation and interest rates and more moderate trends in incomes and taxation, to create a more cost-competitive economy which is the only basis on which we can expand output, increase employment and maintain existing jobs;  - to improve social equity in our society by reducing unemployment, making the taxation system more equitable, and ensuring that public services are provided in accordance with need;  - to create the kind of economy and society in which sufficient resources can be made available to protect the living standards of those who must rely on long-term social welfare benefits and in which fraud and abuse of the social welfare system are eliminated;  - in promoting the equity of taxation, to reduce over the period of the Plan, the burden of PAYE taxation which is excessively decreasing take-home pay, penalising enterprise and increasing inflation;  - to reduce Exchequer borrowing progressively to levels compatible with the long-term ability of the economy to borrow and repay;  - to effect this reduction essentially by eliminating the current budget deficit by 1986 through a combination of measures including eliminating wasteful and unjustifiable public expenditures, reducing the numbers employed in the public service and moderating the public pay bill, making working methods in the public services more efficient and charging those who can afford to pay for certain public services;  - to the extent that the over-riding requirement to reduce Exchequer borrowing allows, to increase public investment over the period of the Plan, and apply more rigorous investment criteria, so as to ensure the high investment which the development of a more productive and efficient economy requires;  - to create an economic environment conducive to private investment and to ensure that public aid to encourage private productive investment and innovation is more selective and linked to performance targets;  - to bring the balance of payments deficit under control by increased exports, more import substitution and abating the rate of increase in foreign debt service.  1. These are the objectives of the Plan. They are the basic requirements to create a more competitive, lower-priced economy in which employment can progressively increase, the grim upward trend in unemployment be reversed and the realisation of a more equitable and expanding economy ensured. The objectives of the Plan are essentially economic, though certain basic social objectives are included. The full working out and development of social policy as such in the new economic context created by the Plan will be the next major task of national policy to be undertaken.  2. The succeeding chapters contain the details of the practical policies and measures proposed by the Government to give effect to the objectives of the Plan.  CHAPTER III THE ECONOMIC FRAMEWORK  INTRODUCTION  1. Our economic and social development over the period 1983 to 1987 requires a new firm economic and fiscal framework which is the essential purpose of the Plan. This framework must be one based on the capacity of the economy to pay its way at home and abroad. It must be the containing framework within which all economic and social decisions must stay during the period of the Plan. The framework proposed is explained in detail in this Chapter.  INTERNATIONAL ENVIRONMENT  1. As a trading nation, with one of the highest ratios in the world between trade and total output, international developments in trade, prices, costs and exchange rates are fundamental to the management of our affairs. The trends within the European Community particularly influence our economic performance.  2. It is difficult to forecast with certainty international economic trends. For the purposes of the Plan, a number of key assumptions have been made based on the assessments of international agencies. If these in time turn out to be pessimistic, the results as far as our economy is concerned will be more favourable than the Plan envisages either in total gains or in earlier gains. On the other hand, if the international assumptions turn out in time to be optimistic in any way, this could diminish or delay the results envisaged in the Plan or impose on us more austere domestic decisions than those already envisaged. Some key assumptions are necessary to form a Plan and the ones adopted are based on the best advice available.  3. The following are the key international assumptions built into the economic framework of the Plan:  - an increase in the volume of our export markets of just over 4% a year;  - average growth in unit wage costs in our trading partners of about 7.5 % a year;  - an increase in import prices of 7.5% a year, including a fall in the relative price of oil;  - overall stability in the external value of the Irish Pound  - industrial export prices to grow in line with those of our trading partners;  - agricultural export prices to grow in line with the level of inflation in the European Community as a whole.  THE PUBLIC FINANCES  1. An essential part of the economic and fiscal framework of the Plan is restoration of balance between Exchequer receipts and current expenditure, the reduction of total Exchequer borrowing to manageable and economically justifiable levels and, to the extent that the borrowing constraint permits, the expansion of public capital expenditure to make the economy more productive and efficient.  CURRENT BUDGET DEFICIT  1. The current budget deficit will be phased out by 1986 in accordance with the path set out in Table 1. This will progressively reduce the growth in the public debt and in debt service, the balance of payments deficit, the burden of taxation, and the rate of inflation and interest. This fundamental correction in our fiscal balance is essential for our credit standing and to permit greater investment in the capacity, efficiency and equity of our economy.  TABLE I  CURRENT BUDGET DEFICIT AS PERCENTAGE OF GNP  ---------------------------- 1982 1983 1984 1985 1986 7.5* 5.5 3.5 2 0 ----------------------------  *estimatedfor outturn.  1. Such a reduction in the current budget deficit cannot be achieved painlessly. Taxation is already extremely high at our level of output and income and priority in taxation must be given to greater equity. The measures to reduce the budget deficit must, therefore, fall on expenditure through, for example, reduced employment in the public service as a result of greater efficiency and economy, moderation in the growth of the public pay bill, cutting the non-pay budgets of the public service and transferring the cost of some services now paid for out of either taxation or borrowing to the users of those services.  2. This general policy has already been given effect to in the public expenditure reductions set out in the Government statement of 30 July 1982, in the proposals put to the Public Services Committee of the Irish Congress of Trade Unions on the pay matters covered by that statement and in the Estimates for 1983 that will be presented to the Dail in the coming session..  PUBLIC SERVICE PAY  1. The growth in public service pay will be curtailed in line with the restricted capacity of the Exchequer. Excluding carry-over effects from 1982, the Exchequer pay bill will have to be contained to an average growth rate of 5% a year to 1986 inclusive of general and special pay increases.  2. If we exclude the cost of debt service, pay represents one half of current Exchequer expenditure. The Exchequer pay bill has increased by 24% in 1981 and would have increased by an estimated 20% in 1982 (before the proposals announced by the Government in its statement of 30 July, 1982). Without the measures taken in July 1982 and in determining the 1983 Estimates, and assuming a general increase approaching the 1982 level, it could have increased again by about 25% in 1983, including some £250 to £300 million for special increases alone. Such an increase would have been far beyond the capacity of the economy. The falling trend in inflation envisaged during the period of the Plan will facilitate the curtailment of the public pay bill. Within the limited funds available for increased pay, consideration will need to be given to ensuring that the greater proportionate benefits go to those most in need. The Government consider that National Pay Agreements which give across the board percentage increases followed by relativity awards are no longer tolerable in present circumstances.  3. Special pay increases have been a substantial factor in increasing the public pay bill in recent years and their potential cost poses a particular threat to achieving and maintaining a better balance in the public finances not only during the period of the Plan but in the longer term. The Exchequer pay bill in 1982 contains almost £400 million extra due to special pay increases in the previous three years alone. The proposed level of pay increases in the public sector contained in the Plan could consist partly of general pay increases and partly of special pay increases within the overall limit specified. But a basic economic question is to what extent the process of special pay claims based on relativities can continue if the economy is to achieve its full potential. There appears to be no end to this process as each settlement triggers off another until the process starts all over again. In addition, there are special pay claims linked to productivity and technological change. If these have to be paid for in increased wages, what is the extent of the net benefit to the economy? There is grave public disquiet also about the payment of special so-called "disturbance" sums for changing the location of employment nearly always to improved accommodation and sometimes by a very short distance. These issues are complex and involve the private sector as well as the public sector. Where special pay increases based on relativities have been terminated, there have been beneficial results for competitiveness and inflation. It is intended to explore with all interests the possibility of a Commission representative of Government, trade unions and employers to examine the entire question of special pay claims in the context of the long-term optimum development of our economy and employment.  4. The Government to date have not filled about 2,000 vacancies in the civil service and non-commercial semi-state bodies. Similar restrictions are also in effect in the Defence Forces and in the health sector. By 1986, it is proposed to reduce the numbers employed in the public service by 4,000 by cutting back on low priority or ineffective programmes and through greater efficiency in the provision of services.  NON-PAY EXPENDITURE  1. The measures initiated in the July 1982 non-pay expenditure cuts and in the 1983 Estimates will be continued to bring about a cumulative reduction of up to 5% in the volume of non-pay expenditure by 1986 as compared with 1982. To achieve this, it will be necessary to reduce the level of services by more than the equivalent of 5% of 1982 expenditure. This is because demographic or other trends would mean volume increases in expenditure on the assumption of no change in policies. The net reduction envisaged will be found either by restriction or cessation of programmes or by introducing new charges or increasing existing charges for public services.  2. At least one quarter of the savings will be achieved by way of new or increased charges over the period to 1986 and the effect of these on prices has been estimated to average about .5% a year to 1986.  3. Total transfer expenditure can grow by an annual average of only 8% in nominal terms over the period to 1986. The protection of the living standards of old age pensioners and other such recipients of long term social welfare benefits may well require restrictions on increases in other transfer expenditure.  4. The amount available for subsidies can grow by an annual average of only 4% in nominal terms between 1982 and 1986. This will require a detailed examination of the social equity, incidence and effectiveness of the different subsidies currently being provided through public expenditure.  5. While the necessary resources to deter and defeat crime and lawlessness will be maintained, a major improvement in effectiveness will be sought through the better employment of the large resources now being provided. Expansion of An Garda Siochana in 1983 is envisaged as an exception to the general reduction in numbers employed in the public service.  6. The Government will shortly introduce legislation and implement other measures to give effect to certain changes in the Social Welfare system to deter abuse and to reduce unjustified cost. These changes are as follows:  - to remove the present disincentive to work, flat-rate unemployment benefit for short-time workers will be limited to ensure that it will be related to a five day working week and pay related benefit for those workers will be withheld;  - for disability benefit purposes, the overall benefit ceiling will be reduced from 100% to 80% of reckonable weekly earnings;  - pay related benefit for those entitled will be reduced from the current level of 40% to 30% for the first six months and to 20% for the remaining nine months;  - the Government will rectify the anomaly whereby employees by a combination of tax refunds and social welfare benefits can receive more than when they are wholetime at work;  - closer liaison between the Department of Social Welfare and the National Manpower Service including the location of placement officers at the larger Social Welfare Employment Exchanges and the availability of placement officers as required in the smaller local offices. For this purpose, amalgamation of administrative responsibility for the placement and benefit payments functions is being examined so that priority in placement is given to those on the Live Register;  - registration with the National Manpower Service of all those under 25 years on the Live Register.  1. The very considerable expenditure now incurred by the local authorities and the Health Boards and the greatly increased numbers of professional and administrative staff employed by them warrant a rigorous examination of their structures and special measures to ensure the greatest possible efficiency and economy in the provision of services and to eliminate waste, duplication or overlapping. The Government, therefore, intend to establish, without delay, a special investigation team to go into the local authorities and the Health Boards to investigate their administration and finances with a view to ensuring the most efficient use of existing resources and providing full value for money to both the ratepayer and taxpayer.  PUBLIC CAPITAL EXPENDITURE  1. The progressive reduction in the budget deficit amounting to the withdrawal from expenditure of about £900m by 1986 would have an excessive deflationary effect on economic activity and especially on employment, if not modified by capital expenditure proposals. The Government believe that over the period of the Plan, public investment policies must be continued and expanded to increase our productive capacity to generate employment, improve our economic infrastructure and enlarge our social capital to meet the needs of our growing population.  2. Public capital programme expenditure by the Exchequer, therefore, will be increased substantially over the period of the Plan by an amount equal to 3% on average for the years 1983 to 1987. The Exchequer borrowing for capital purposes and the volume changes in public capital expenditure under the Plan are contained in Table 2. Public capital programme expenditure must be planned with careful regard to the strict limitation imposed by the capacity of the Exchequer to borrow. A further constraint on the amount of Exchequer funds which can be made available for new capital investment in the early years of the period of the Plan is the substantial amount which must be made available for the financial restructuring of semi-state bodies.As the current budget deficit falls, the volume of the public capital expenditure can grow provided the Exchequer borrowing requirement is kept within sustainable limits given the already high level of national debt. The current budget deficit for 1983 will still be considerable in spite of the reductions being made in current expenditure. For that reason, the Plan and the 1983 Estimates must reduce the public capital programme in 1983 by 3% in real terms so as to reduce overall Exchequer borrowing, as compared with 1982, to a level which signals our firm determination to bring it down over the period of the Plan to a level sustainable over the long-term. There is no option any longer to increase overall Exchequer borrowing; it must be steadily and firmly reduced. The best way to do this in the interests of the economy and employment is to reduce borrowing for current expenditure so as to leave scope for investment expenditure. Falling interest rates will concurrently help to stimulate greater investment by the private sector.  TABLE 2  CAPITAL BUDGET  1982 1983 1984 1985 1986 1987  Exchequer Borrowing  Requirement  for Capital purposes  as % of GNP 8.5 7.5 7.0 6.5 6.0 5.0  % volume change Public  Capital Programme - -3 +2 +3 +5 +8  1. Public investment under the Plan will be undertaken in accordance with the following set of principles:  - the highest priority will be for investment in the directly productive sectors and associated economic infrastructure;  - lower priority will have to be given, particularly in the early years of the Plan, to investments not directly related to productive output and which also increase the demand on Exchequer current resources;  - the cost/benefit return on the investment will be standard criteria for assessing priorities and implementing projects;  - all feasible opportunities for domestic production of goods and materials for the programme will be used;  - beyond that, opportunities for trade with Northern Ireland firms will be developed.  1. The period of the Plan will see changes in investment allocations according as particular programmes are completed and resources switched elsewhere. A proportion of the available resources under the Plan will be reserved to be allocated annually, in the light of the overall budgetary position, to meet special needs and unforeseen projects and developments in the productive and economic infrastructure programmes. Chapter IV contains further particulars of the investment criteria, priorities and sectoral allocations proposed.  EXCHEQUER BORROWING REQUIREMENT  1. The capacity of the Exchequer to continue to borrow and service its debt is a major constraint that the Plan observes. The combination of eliminating the current budget deficit by 1986 and prudently expanding the public capital programme over the period of the Plan will bring the Exchequer borrowing requirement progressively back to a level which the economy and the public finances can sustain. The proposed Exchequer borrowing requirement under the Plan is contained in Table 3.  TABLE 3  EXCHEQUER BORROWING REQUIREMENT AS PERCENTAGE OF GNP  1982 1983 1984 1985 1986 1987  16 13 10.5 8.5 6.0 5.0  TAXATION  1. The growth in the burden of taxation in recent years both on the average income-earner and on the economy has had adverse effects on the enterprise of the individual and on the competitiveness of the economy. The Plan, therefore, envisages reducing the total burden of taxation as a proportion of GNP and transferring the incidence from PAYE to other forms of taxation. The recommendations of the Commission on Taxation will be studied in the light of that objective.  2. The growth of PAYE/PRSI personal taxation in recent years to some 22% of wages and salaries outside agriculture has sharply reduced the benefit to the individual of his increased gross income as a result of pay settlements. It is estimated that between 1970 and 1981, the pre-tax real increase of almost 42% in incomes was reduced by half as a result of increased income taxation. The heavy burden of income taxation increases wage demands and inflation and reduces living standards. The phasing out of borrowing for current purposes and the realisation of sustainable economic growth will open the way to the reduction of this tax burden. The tax priorities are to reduce the growth of direct personal taxation for the PAYE category and to redistribute the burden of taxation from the lower paid. The reductions being made in public expenditure, including the curtailment of the public pay bill, will provide the basis for easing the taxation burden. The Commission's proposals in regard to PRSI will be reviewed as regards their equity, practicality and yield.  3. A more competitive economy, with lower inflation and increased production, will produce higher profits in industry and in agriculture. This will ensure a higher tax yield from these sources. Increased capital taxation will, also, make its contribution to a more equitable tax structure. Indirect taxation must also continue to play a central role in our taxation structure but any increase will be moderate to avoid abating the downward trend in inflation.  4. The Plan will reduce the proportion of GDP raised in taxation, excluding social insurance, from 34% in 1982 to 33% in 1987 (or from 35% of GNP to 34%) - that is an estimated reduction in taxation of about £200m. This will still leave the general level of taxation, excluding social insurance, much higher than the EEC average which is 28.507o of GDP. This comparison emphasises the uncompetitive burden of taxation borne by our economy. A bigger decrease in taxation, however, is not possible without seriously disturbing the careful, and, in the circumstances, moderate balance struck in the Plan between public sector pay and demand in the economy. Further lowering of taxation can be achieved only by containing public expenditure.  5. The main tax assumptions in the Plan are that existing tax rates and structures would continue to 1987 subject to the following changes:  - the burden of PAYE will fall between 1982 and 1987, amounting to a fall of about f 100m in 1987;  - excise duties will be raised in line with prices;  - additional taxation, rising to £400m in 1986, will be raised from capital, profits, the self-employed, farmers, and VAT.  The 100% Corporation Tax on manufacturing companies will be retained but the taxation yield from business profits generally will be increased significantly.  MONETARY POLICY  1. Monetary policy is aimed at maintaining the external value of the Irish currency while facilitating achievement of the Government's objectives for promoting financial balance, reduced inflation and, thereby, higher employment over the medium-term. Credit policy, as the major constituent of monetary policy, will be managed so that, in the context of the correction of the external and fiscal imbalances while maintaining adequate external reserves, sufficient funds are made available to the private sector - with priority being accorded to development of the productive sectors of the economy.  2. An appropriate level of interest rates is necessary to support credit policy. The international mobility of capital means that the general level of rates is significantly affected by the level of rates prevailing in the major international money markets. To the extent that it may be possible to influence events domestically, the Government consider that the aim over the period of the Plan should be to facilitate a level of interest rates consistent with the need to avoid pressure on the exchange rate, to promote an increase in the level of domestic saving from its present level, so reducing dependence on foreign borrowing and consequent interest payments abroad, and, to encourage the development of the private sector.  3. At present, nominal interest rates are high but so also is the rate of inflation. To the extent that economic policy is successful in reducing inflation and in restoring balance to the external account, it is possible to look forward with some confidence to the reduction of the differential between external and domestic interest rates. The interest rate burden has been eased for the productive sector of the economy through exchange risk cover schemes and special lending schemes, although these schemes have not been without their costs both directly for the Exchequer and in less efficient allocation of available credit.  4. To ensure greater consistency in the credit requirements as between the public and private sectors, the Government intend to examine the desirability of a move towards basing monetary policy ol total domestic credit expansion (DCE). This concept of DCE comprises Government borrowing both from domestic banks and abroad, as well as private sector borrowing from domestic banks. This suggested approach could result in a more balanced allocation o additional credit. Given that the Exchequer accounts at present for up to two-thirds of domestic credit, an attempt by the Central Bank to restrict domestic credit expansion would either limit the volume of total credit available to the Exchequer or encroach further on the private sector's access to additional credit. The control of domestic credit expansion entails, therefore, the compatibility of fiscal and credit policies if the credit needs of the private sector are not to be crowded out. This would require that the size of the Exchequer Borrowing Requirement be significantly reduced and that efforts be made to increase the extent to which it is financed by non-bank domestic borrowings. The planned reduction in the Exchequer Borrowing Requirement is likely to entail, in any event, a substantial reduction of domestic credit. DCE could also be curtailed by increasing the non-monetary financing component of the Exchequer Borrowing Requirement through increased sales of Government securities to the domestic non-bank sector and by increasing small savings. While purchases of Government securities by this sector in recent years had fallen relative to the cash flow of the investing institutions, there has been a welcome up-turn in recent months. The Government propose, nevertheless, to examine the possible scope for further development of the market in Irish Government securities; an effort to increase significantly the proportion of such non-monetary financing, however, would increase relative yields on Government paper and, thereby, other things being equal, tend to put upward pressure on interest rates.  5. The importance of the financial sector in a modern economy is self-evident. At this stage of our economic and social development, a fresh appraisal of the operation of our financial institutions and how they can contribute to the further progress envisaged in this Plan would be appropriate. The Government will consider further, in consultation with the Central Bank and other relevant interests, how this might best be carried out.  BALANCE OF PAYMENTS  1. The large balance of payments deficits we have been incurring in recent years are a major constraint on our further progress. We have financed these deficits by borrowing to maintain the foreign currency reserves at an adequate level. Such a policy, justified to counter the recession, clearly cannot continue indefinitely as foreign debt service would rise cumulatively to increase the external deficit. A fundamental objective of the Plan is to bring about a new and permanently improved trading balance in our economy which will relieve us of persistent balance of payments constraints.  2. The trading structure envisaged as developing under the Plan could bring our external account into a small surplus by 1987 as compared with deficits of over 13% of GNP in 1981 and an estimated 10% of GNP in 1982. This stabilisation of our external account will ensure greater freedom in fiscal policy, lower interest rates and the stability of our currency. The reduction in the Exchequer Borrowing Requirement implies a significant fall in foreign borrowing though the need to maintain adequate foreign reserves to finance international transactions will remain.  3. It is envisaged that exports will increase in volume by 12.2507o annually on average during the period of the Plan. This derives on the one hand from our greater export of industrial goods in response to improved wage cost-competitiveness and development measures. Agricultural exports will also expand through the higher output stimulated by the reduced cost of inputs with failing inflation and interest rates and by specific development measures. It is also envisaged that tourism receipts will expand in response to the more competitive cost conditions we will be able to offer the tourist and to the development measures to be undertaken under the Plan.  4. The Plan also envisages that imports will increase in volume by 8.25% annually on average during the period of the Plan. The Plan intends to bring about a permanent change in the situation where the growth of imports has been excessive relative to output and export growth. It is inevitable at our stage of development with large investment in new productive capacity that we need to import capital goods. Furthermore, our new industrial structure to date has substantially consisted of industries importing goods for further or final processing or assembly. But we already import to an abnormal extent goods which we should be producing competitively ourselves; goods in which we have lost competitiveness in cost, quality or design in recent years. The share gained by domestic producers in the home market for manufactured goods has declined by 8.5 percentage points between 1977 and 1980 or by about L400 million in lost home production in 1980 alone.  5. The Plan envisages new radical measures to improve this situation. Our industrial capacity has a high import content in materials and components which we can produce competitively ourselves and which are usually produced in other small countries with a more normal trading structure. This potential market for new industrial production and employment has been estimated at £600 million annually. It has similarly been calculated that building materials and products valued at f250 million annually, which could be produced domestically, are now being imported. The domestic market for consumer goods has been steadily lost in recent years to imported products. In textiles, the import share of the domestic market has risen between 1977 and 1980 by about 13 percentage points and in clothing, footwear and leather by over 20 percentage points.  6. The scope for increased production and employment to supply the home market is obvious. The first necessity is to recover the lost wage-cost competitiveness which is fundamental to our economic success at home and abroad. The sectoral policy measures to intensify identification of production possibilities, to introduce new technological processes and better product design and to improve management and marketing will build on the wage-competitiveness to increase import substitution on a competitive basis. The 10% rate of Corporation Tax on manufacturing companies in respect of domestic as well as foreign earnings makes it more profitable than in the past to trade on the domestic market.  INCOMES  1. The wealth and welfare of our community can only be increased through the competitive production of goods and services. Our goods and services must be competitive in price, quality and reliability of service and delivery. If we exceed the rate of increase in the average unit wage costs in our trading partners, we will lose competitiveness. Jobs will continue to be lost and our possibilities to create new jobs will be severely limited.  2. Unemployment cannot be reduced by any further increase in total public expenditure, because of the limits on taxation and borrowing, though a more productive direction in public expenditure can help to reduce unemployment. The extent to which we can gain in wage-cost competitiveness over our trading partners will mainly determine in the coming years our ability to create sufficient jobs to reverse the current trend in unemployment. The Plan envisages an annual average gain in wage-cost competitiveness of 4% against our trading partners though the gain in 1983 would be lower than this because of the carry-over effect of 1982 wage increases.  3. This gain in wage-cost competitiveness can be obtained by moderate pay increases combined with increases in productivity. Average unit wage-costs in our trading partners are forecast to rise annually by about 7.5% during the period of the Plan which implies that, through the combination of wage and productivity increases, the rise in our unit wage costs must not exceed about 3.5%. A higher increase will reduce or even eliminate the gain necessary for competitive wage-costs with consequent adverse effects on our ability to maintain or provide employment for our rapidly-growing labour force. The reduced output and tax receipts that would also arise, would make for harsher decisions on the public finances than those set out in the Plan.  4. Apart from the impetus it would give to increased production, productive investment and employment, the proposed average unit wage-cost increase will assist the moderation of inflation expected over the period of the Plan. The outlook for inflation is set out in paragraphs 48 to 50 below.  5. By 1987, it is expected that, internationally, unit wage-costs will rise somewhat in an improving growth environment. Our average annual level of unit wage-cost increases envisaged in the Plan to 1986 could, therefore, also start to increase in 1987, with the elimination of the current budget deficit and a continued rise in productivity, while still maintaining the 407o gain in competitiveness and the maintenance of the current budget balance. The Plan, therefore, envisages a four year period of moderate pay increases, concurrent, however, with much lower inflation than in recent years, in order to create a competitive economy capable of providing sufficient jobs for our population. Following such a period, pay levels could rise at a rate that would give real gains in living standards. This is the pattern of development which will occur in our trading partners and we cannot act otherwise.  6. What has been said earlier about special pay claims in the public sector, applies, also, in the private sector. Increases in pay in the private sector consistent with the desired wage-cost competitive gains must be inclusive of pay increases claimed on grounds such as productivity or relativity. Insofar as such claims were to be conceded, then it is assumed that other pay increases, such as those conceded by way of general pay rounds, would be correspondingly reduced. The economic justification for such special pay claims has already been questioned earlier in this chapter in the circumstances of the development and employment needs of our economy.  7. It is necessary to distinguish between the approach to incomes, profits and prices necessary to achieve the required levels of output and employment and the approach required to achieve an equitable distribution of the available economic resources. Equity will be sought by the pursuit of fiscal and prices policies designed to ensure that all personal factor incomes (and not simply wages and salaries) will rise only in line with the disposable incomes of wage earners. Any new legislation required to give effect to these policies will be considered.  PRICES  1. The combination of wage-cost restraint, reduced current public expenditure and containment of taxation will act to reinforce the slackening trend in imported inflation. The rate of price increase of our imported goods is now falling significantly. This moderating trend is forecast to continue, without being reversed by sharp oil price increases, to give an average annual increase of about 7.5% in import prices during the period of the Plan. Our quarterly rate of inflation at mid-August 1982 was 2. 1 %, the lowest quarterly increase since November 1978. The mid-November index is expected to rise at about the same rate giving an overall year on year increase at mid-November of about 13% as compared with 23.3% at mid-November 1981.  2. It is an essential part of the economic strategy of the Plan to maintain and reinforce that downward trend. This will assist the moderate income increases required for a more competitive economy and reduce input prices in our productive sectors. The Plan envisages that the average annual increase in prices in the period to 1987 will b( much closer to the expected average EMS rate for the period of the Plan than for the period since 1979. The general trend in inflation is expected to develop somewhat as follows over the period of the Plan:-  1983: of the order of 10-13%.  1984-86: of the order of 8-9%.  1987: of the order of 7%.  1. This moderating trend in inflation, in line with average EMS trends, will bring a new stability, greater confidence and important competitive gains to our economy as well as alleviating family hardships. It will provide a climate in which the moderate income increases envisaged in the Plan can reasonably take effect.  EMPLOYMENT AND UNEMPLOYMENT  1. The primary economic and social objective of the Plan is to reverse the current upward trend in unemployment. This objective wil be achieved by the cumulative effect of more moderate developments in incomes, inflation, interest rates and taxation. The result will be that our production and sale of goods and services will be greater by being more competitive. Moderation of income growth in the public sector will also make the productive sectors more competitive by stabilising the growth of taxation and by enabling borrowing to be diverted to create greater productive capacity and more efficient economic infrastructure. A series of sectoral policy measures will also be taken under the Plan to supplement and support the competitive gains in wage-costs and these are described in succeeding chapters of the Plan.  2. Unemployment is rising steadily in other EEC countries and this trend is expected to continue into 1983 and 1984. It will continue to rise here even more quickly unless we make our production of goods and services more competitive. The Plan proposes a moderate decrease in our income expectations at a time of falling inflation in order to improve our competitiveness. This proposal is sensible and reasonable and is justified by the obligation we have to ensure to our children the right to work in their own land.  3. Unemployment in our country poses a particular peril and problem. Our population and labour force are increasing at a far faster pace than almost anywhere in the industrialised world. Our task of providing jobs for our children is, therefore, greater than in other countries and our failure can result ultimately in heavier unemployment and deeper social disorder than in other countries. We have abated temporarily, through deficit financing, the growth of unemployment during the worst of the recession but we can now look only to the slowly-recovering international markets for the growth which will give new employment on the scale we need.  4. That scale is clear. Our labour force will increase annually by at least 17,000 on average over the period of the Plan assuming net emigration remains at the level of recent years. We need, therefore, a net annual increase in employment of that number to prevent unemployment rising.  5. The proposed sectoral development is shown in Table 4. The Plan envisages that the required net increase in employment can only be achieved in manufacturing industry, in building and construction and in private services. Agriculture will continue to lose about 3,000 jobs annually on average mainly due to retirements. This loss of jobs is, however, considerably less than the 10,000 jobs a year lost in the sixties and early seventies. Sectoral policy measures, however, will improve agricultural output and productivity to stimulate demand and employment elsewhere in the economy. The need for stabilisation of the public finances rules out creating additional jobs in the public sector financed by taxation or borrowing. As a result, it is estimated that net employment in the public service will decline by an annual average of about 1,000 to 1986.  TABLE 4  SECTORAL DEVELOPMENT  ANNUAL AVERAGE CHANGES 1983/87  OUTPUT PRODUCTIVITY EMPLOYMENT  Agriculture 3 4.5 -3,000  Industry 9.25 5.5 9,500  Building &  Construction 6 3 2,750  Public Services -.25 0* -500  Private Services 5.75 3 9,750  GDP 5 3.25 18,500   *National accounting statistical convention which does not reflect changes in efficiency.   1. The keystone in the employment strategy of the Plan is the expansion of net employment in manufacturing industry based on growing cost-competitiveness and the sectoral policy measures which will both give support to and benefit from that improved costcompetitiveness. It is envisaged that output will rise by an annual average of 9.25% and productivity by 5.5%. These are high rates of growth and reflect the effort that must be made to achieve the employment necessary. If the assumptions underlying the Plan are not realised, it should be clearly understood that the net employment gain proposed cannot be achieved. The choice between competitiveness in the widest sense and unemployment is clear.  2. It is envisaged that the increased volume of the public capital programme over the period of the Plan and the general stimulus to investment by the new economic climate will increase output in building and construction by an annual average of 6%. On the assumption that this will be accompanied by an annual average increase in productivity of 3%, employment in building and construction is expected to increase by 2,750 annually on average to 1987.  3. The growth in employment in private services has been rapid in recent years with the expansion of our commercial and financial sectors. This expansion is expected to continue in the more confident long-term outlook for our economy which the Plan will create. It is expected that output in private services will grow by an annual average of 5.75% during the period of the Plan. Assuming an annual average increase in productivity of 3%, net employment in the private services will increase annually by 9,750 on average during the Plan period to 1987.  4. The net employment changes in a sector are the result of the differences between the total number of new jobs provided less the number of existing jobs lost. The growth of unemployment in recent years has been largely caused by the fact that the number of existing jobs lost has been greater than the number of new jobs provided. For example, it is estimated that in manufacturing industry we provided about 40,000 new jobs in the two years 1980/81 but the jobs lost in the same two years are estimated at about 54,000. Jobs are lost because goods and services can no longer be produced and sold profitably.  5. The Plan envisages the provision of increasing numbers of new jobs by improved competitiveness, by greater and more selective investment in productive capacity and by measures to stimulate and encourage innovation and enterprise. It is estimated that the total number of new jobs to be provided under the Plan could be of the order of 215,000 of which about 130,000 will be in manufacturing industry.  6. In any economy, no matter how competitive or productive, existing jobs will continue to be lost through technological change, competition which cannot be matched or failures in management, product design or marketing. Under the Plan, however, measures will be taken to reduce, as far as practicable, losses of existing jobs, including more timely and more coordinated rescue services. Nevertheless, substantial unavoidable job losses will occur and the net employment changes envisaged reflect these.  7. The development envisaged in employment under the Plan is contained in Table 5. The net employment gains will accelerate during the period of the Plan as the competitive wage-cost gain and the new policy measures take effect and international trading demand slowly recovers. At the same time and for the same reasons, it is envisaged that job losses will decline. The overall effect would be that net employment could increase by an annual average of approximately 18,500 during the period of the Plan.  TABLE 5: EMPLOYMENT  1983 1984 1985 1986 1987  New Jobs 28,500 46,750  (annual average 1984-1987)  Jobs Lost 27,500 24,000  (annual average 1984-1987)  Net change in  Employment (000) + 1 + 12 +20 + 25 + 34  Measured against an average annual labour force increase of 17,000, it will be evident that from 1985 onwards unemployment could steadily decrease. If the new competitive conditions are realised by the private sector, we will by then have established an economy capable of generating self-sustaining employment more than sufficient to absorb our growing labour force.  1. In the period before 1985, in addition to the net employment gains specified above, the Youth Employment Agency will provide training and work experience which is expected to reduce the numbers on the Live Register by some 6,000. It is also intended to ensure by rigorous elimination of abuses that unwarranted recourse to the Live Register is rapidly eliminated. It is expected, therefore, that the Live Register could grow in 1983 and 1984 by a relatively small number compared with recent years and could then begin to decrease from 1985 onwards as net employment increases substantially exceed the labour force increase.  2. These figures illustrate what has been said earlier about the special difficulty in our society of reducing unemployment because of our exceptional labour force increase. Our labour force would increase by less than 10,000 annually if we had the average labour force increase of our Community partners. The net employment gains proposed would, in that event, reduce our unemployment far faster. This is the measure of our special problem in providing employment for our young people. It is the reason why we must be prepared, even more than other countries, to accept the moderate degree of sacrifice in income expectation which the Plan proposes.  3. Once we have made the fundamental decision that greater cost competitiveness is essential to increase employment, we should be confident of our ability to build an expanding economy successfully on that essential foundation. We have shown our capacity in the past to increase net employment in industry and services rapidly before we lost our cost competitiveness at home and abroad and markets declined. With the improvement of cost competitiveness, the more positive outlook for international markets and the new policy measures envisaged, including those to increase import substitution, we should be confident of our ability to achieve the rate of net employment increase which the Plan shows to be necessary.  4. Other countries faced with rising unemployment are taking the same sort of corrective action as is proposed in this Plan. We cannot isolate ourselves in a world where such actions are being taken in the countries with whom we must trade. Most of the other countries are already better placed than we are because they have lower rates of inflation, lower budget and external deficits, more moderate wagecost increases and slower growth in their labour force. These are the countries in which we must sell more of our goods and services if we are to create more jobs.  DEVELOPMENTS IN INCOMES, PRICES AND EXPENDITURE ON GNP  67. Table 6 summarises the developments in incomes and prices foreseen under the Plan:  TABLE 6: INCOMES AND PRICES  Annual average percentage change 1983/1987  Incomes Wages and Salaries + 10.5  Agriculture + 11.5  Profits (including retained  investment resources) + 23.5  Prices Consumer Prices + 9.25  Terms of Trade +.5  The development of agricultural incomes and of profits provide both the basis for increased availability of funds for domestic investment and for the greater taxation returns from these income sources referred to earlier. Over the period of the Plan, the possible developmentof non-agricultural wages and salaries per person foreseen is a pattern where the fall in living standards necessary to protect jobs and improve employment opportunities would be followed by real and sustainable increases in living standards.  68. Table 7 summarises the developments in demand or expenditure on GNP (volume) if all the assumptions of the Plan are fully realised.  TABLE 7: DEVELOPMENTS IN EXPENDITURE ON GNP (VOLUME)  Annual average percentage change 1983/87  Exports 12.25  Investment 6.25  Personal consumption 1.75  Public consumption -.25  Imports 8.25  69. The pattern of demand foreseen over the period of the Plan is for a rapid increase in exports, especially manufactured goods. This is based on a more efficient use of existing resources, improvement in cost competitiveness and the increased capacity of the economy to export due to new investment, both foreign and domestic, encouraged by the improvement in the international and domestic environment.  70. The increase in exports of 12.25% a year may appear high relative to present predictions of the immediate international growth prospects. The growth rate projected, however, must be seen both in the context of an average growth rate of almost 9% achieved in the period 1975 to 1979 when there was an increase of 4.5% in international trade and especially of the conditions for growth and expansion created by the Plan.  71. The growth of 6.25% a year in investment must also be seen in the context of the overall growth rate achieved in the period 1975 to 1979 when there was an increase of about 8% a year, and also against the background of the increase projected for public capital expenditure and the increases projected for agricultural incomes and non-agricultural profits, together with the more favourable business climate, including lower inflation and interest rates, on which the Plan projections are based.  72. The increase projected for personal consumption follows from the projected increases in employment and incomes. The increase in imports will reflect the pattern of demand, especially the high import content of manufactured exports and of investment in new plant and machinery, even after allowing for improved import substitution possibilities.  73. The foregoing would give a maximum growth rate of 5% a year on average for both GDP and GNP. This will clearly be difficult to realise and underlines the task which faces the economy. The Plan provides the fundamental economic foundation for growth in its objectives for the public finances, taxation, inflation, balance of payments and wage-cost developments. The exact extent and timetable to which growth is realised will depend on how favourable developments are on the international scene and on the response of the private sector to the new economic environment being created by the actions of the Government under the Plan. We should, at the very least, be able to attain annual average growth of 3.5% in GNP and, once a new growth path has been established on the foundations laid by the Government's measures, the annual growth rates would accelerate rapidly.  CONCLUSION  69. In this chapter,.the economic framework for the Plan has been set out. In the succeeding chapters, the sectoral policies and measures which will be applied, within the overall economic framework, are described. The essential objective of the economic framework is to correct the serious imbalances in our economic and fiscal structure  CHAPTER IV PUBLIC CAPITAL EXPENDITURE  1. Total public investment increased rapidly - over 60% in real terms - in the period 1977/82. Public sector spending on industry increased by almost 50% but there was a sharp drop in spending on agriculture of 20% as farm incomes in the latter part of the period declined; overall sectoral economic investment increased by 18%. Spending on productive infrastructure showed particularly rapid growth - of over £100m - in the period due to especially heavy investment in the ESB generating programme and in telecommunications. Capital spending on social programmes increased by two thirds; the main growth areas being housing and health.  2. Very large increases in public investment have resulted in resources being directed to programmes which, though of intrinsic merit, have little direct effect on the capacity of the economy to produce internationally saleable goods or services.  3. The key considerations that have been used in assessing the potential for the further development of public investment during the period of the Plan, as set out later in this Chapter, are:  - the extent to which the desired level of growth in manufacturing and agricultural output requires the application of additional real public resources;  - the availability of worthwhile programmes to replace some existing major programmes which will be completed during the period of the Plan particularly in sectors such as transport and energy;  - the need to improve the financial performance of commercial semi-State bodies so that investment by them generates an acceptable return.  4. The investment programme proposed over the Plan period will be undertaken in accordance with the following set of principles:  - the highest priority will be for investment which supports the productive sectors and associated economic infrastructure;  - lower priority will be given, particularly in the early years of the Plan, to investments not directly related to the productive process and which also increase demands on Exchequer current resources and/or costs in the private sector;  - the cost/benefit of investment will be a standard criterion for assessing priorities and implementing projects and, where appropriate, a positive net cash flow over the life of the projects will have to be demonstrated;  - all feasible opportunities for domestic production of goods and materials for the programme will be used and, beyond that, possibilities for trade with Northern Ireland firms will be developed;  - the need to minimise Government-influenced cost increases for the sectors producing marketable goods and services. The cost increases to be minimised include those which are borne through the tax system and those which arise because of pricing by public sector monopolies.  2. In the initial years of the Plan the overall objective of fiscal policy will be to start the Exchequer Borrowing Requirement moving down significantly. In that period the amount of resources available for the public capital programme will depend directly on the degree of success achieved in reducing the current budget deficit. The volume of the public capital programme will fall in any case in 1983, because of the need to contain capital expenditure on non-productive investment which creates current budget costs. In subsequent years, the overall level of capital spending will be influenced by two principal factors. As substantial progress begins to be made in phasing out the current budget deficit and the financial restructuring of semi-State bodies is substantially completed, resources will be freed for new investment. Secondly, as economic conditions improve, the level of private sector investment will increase and there will be a corresponding increase in the level of demand for grants (e.g. in the manufacturing sector).  3. Over the Plan period as a whole, the overall aim will be for the volume of public capital programme spending to increase by about 3% a year on average. The combination of freer resources and increased demand in the years after 1983 will lead to a gradual buildup in the overall volume of public capital programme spending - it will increase progressively from a rate of about 2% a year in 1984 to 8% a year in 1987.  4. Within the framework of the objectives set out above for public sector investment, known public investment requirements could be met from a generally unchanged volume of resources during the period of the Plan. However, it is reasonable to assume that over a lengthy five-year timescale within which radical economic changes are predicted, further worthwhile projects could be expected to emerge for which some global provision should be made. Over and above the individual allocations which broadly require maintenance of the volume of public capital expenditure, consideration will be given, in the light of prevailing budgetary circumstances, to committing further resources from a global contingency provision to projects which satisfy the stringent appraisal criteria proposed for all projects. Such resources will in principle be available for projects in the "sectoral economic investment" and "productive infrastructure" categories but will not be available for projects in the "social investment" category, the provisions for which are, therefore, to be regarded as absolute maxima.  5. In deciding whether to allocate any such additional resources to a particular proposal the following will be crucial criteria:  - a positive net cash-flow to the Exchequer and/or the body concerned over the life of the project;  - provision of a high ratio of self-sustaining employment;  - generation of beneficial net effects on the balance of payments.  The table following sets out, by category of programme, the development of public capital expenditure in each of the years from 1983 to 1987.  TABLE 1  TENTATIVE AND ILLUSTRATIVE PUBLIC CAPITAL EXPENDITURE PROFILE  (£ MILLION) (ROUNDED AT 1983 PRICES)  1983 1984 1985 1986 1987  INVESTMENT CATEGORY £M £M £M £M £M  SECTORAL ECONOMIC INVESTMENT  Public Capital Programme allocations* 545 620 630 645 680  Financial restructuring of semi-State bodies 165 150 55 - -  710 770 685 645 680  PRODUCTIVE INFRASTRUCTURE  Public Capital Programme allocations 880 855 855 845 865  GLOBAL CONTINGENCY PROVISION,  to be allocated in the light of the budgetary  outlook, for projects in the economic and  productive infrastructural categories which  satisfy the appraisal criteria set out in the  Plan 120 105 160 270 405  SOCIAL INFRASTRUCTURE 590 600 600 600 595  2,300 2,330 2,300 2,360 2,545  These figures exclude loans issued by the Agricultural Credit Corporation and the Industrial Credit Company for working capital purposes, as such loans do not relate to fixed capital formation. In future they will be excluded from the Public Capital Programme. (In 1983 such loans are expected to amount to about £80 million.)  APPRAISAL OF PROJECTS  10. Particular attention will be given to the appraisal of new and existing public capital expenditure projects and programmes with a view to establishing their priority ranking and the most cost-effective way of providing the required service. In that context, particular consideration will be given to the application and relation of user charges more closely to the cost of public investments.  11. As regards the capital expenditure of commercial semi-State bodies, all significant investment proposals will be submitted to the most rigorous and, where necesary, independent financial and commercial assessment before they are allowed to proceed. Unless the proposed investments are judged capable of achieving an adequate rate of return on capital employed they will be turned down. A similar approach will be taken in regard to proposals for the financial restructuring of semi-State bodies. The ultimate aim of each commercial semi-State body should be to give a rate of return at least equal to the cost to it or to the Exchequer of borrowing funds*, so far as its commercial activities are concerned. A clear definition of policy objectives and overall financial targets will also be set for each commercial semi-State body and their performance will be monitored on a continuous basis. A special unit is being established in the Department of Finance for this purpose. Where appropriate, semi-State bodies will be encouraged to undertake joint ventures with private sector enterprises or institutions. They will be eligible for industrial grants on the same basis as private sector enterprises. The total State investment involved in projects, inclusive of both equity and industrial grants, will be subject to the same rigorous financial and commercial assessment as that envisaged above for the capital programmes of the commercial semi-State bodies themselves.  12. For each major activity in public capital expenditure it is intended where possible to estimate outputs or benefits against which the cost effectiveness of programmes can be assessed. Future public capital programme publications are to include material designed to relate programme costs more directly to outputs.   *The present rate of return to the Exchequer on its investment in such bodies is   only 4%, compared to current domestic interest charges of about 15% on long-term   borrowing.   CHAPTER V MANUFACTURING INDUSTRY, TOURISM AND PRIVATE SERVICES  MANUFACTURING INDUSTRY  1. The development of the manufacturing sector will continue to be the critical element for the development of the economy and the expansion of employment opportunities over the Plan period. Table 1 summarises the main developments of the manufacturing sector since 1975. Following strong growth in output and employment in the midto-late seventies, which was helped by strong growth in domestic demand, both output and employment fell in 1980 due to the effects of the world-wide recession. While total output recovered in 1981, this derived largely from strong growth in output in new and in expanding grant-aided projects, particularly in the electronics and chemical/ pharmaceutical sectors. The rate of increase in output reflected productivity gains rather than increased employment, however, and total employment at end1981 was some 5,000 lower than at end-1980. The fall in employment of recent years has continued into 1982 due to a reduced number of new "start-up" projects, the decline in domestic demand, continued difficult trading conditions in overseas markets and the loss of competitiveness which has persisted generally,in the Irish manufacturing sector.  TABLE 1 (A): SUMMARY TRENDS  (07o CHANGE OVER PREVIOUS YEAR'S AVERAGE)  Output Productivity Employment Manufactured  per head Exports*  1975 - 4.3 1.9 - 6.1 -4.5  1976 10.2 10.6 - 0.4 20.0  1977 7.1 3.8 3.2 20.9  1978 8.4 5.3 2.9 11.5  1979 6.1 1.9 4.1 14.2  1980  - 1.1 0 -1.1 8.6  1981 2.9 6.5 - 3.4 10.4  *S.I.T.C. Sections 5-8 - agriculture-based exports are excluded.  Source: CSO  TABLE 1 (B): EMPLOYMENT TRENDS  Level of employment Net Change  at end-year  1975 195,600 - 13,000  1976 200,400 +4,800  1977 204,800 + 4,400  1978 212,500 + 7,700  1979 221,100 + 8,600  1980 212,100 -9,000  1981 207,300 -4,800  Source: CSO: Quarterly Industrial Inquiry.  2. Competing imports continue to make in-roads into domestic markets - penetration has increased from 29% in 1977 to 37.5% in 1980. It is particularly disturbing that a sharp rise in import penetration in some of the more "sensitive" sectors - e.g. textiles and clothing, footwear and leather - has taken place despite the fact that import prices in those sectors rose at a faster rate than domestic prices. This suggests that many Irish producers are also failing to compete effectively on the home market in terms of non-price factors including marketing efficiency, product quality and choice and delivery terms and this had added to the difficulties caused by the disimprovement in cost competitiveness which has occurred in recent years.  POLICY FRAMEWORK  3. The main challenge facing Irish industry over the period of the Plan is to expand output and employment against the background of:  - the slow growth in domestic demand associated with the need to reduce public expenditure and improve the balance of payments;  - the moderate growth in export demand which is projected over the period.  1. Irish industry will have to rely more on improving its competitive position in the market-place rather than on increases in demand to generate increases in output. Improved market share will have to be achieved in the face of increased competition at home and abroad from both the industrialised and developing countries all seeking to carve out increased shares of slow-growing markets.Fast growth in the output of Irish industry will, therefore, only be achieved if we can improve our relative cost position, make greater progress in improving non-cost factors such as management expertise, work practices in individual firms, marketing and industrial relations, and in general creating a positive, co-operative environment which is conducive to industrial growth. The creation of such an environment will be essential to promote the investment - both domestic and foreign – required to achieve rapid growth in the medium and longterm.  2. Government policies for the development of the manufacturing sector will have regard to the following:  - the rapid rate of increase in the labour force;  - the essential characteristics of Ireland as a base for industrial development in terms of domestic market size, accessibility to overseas markets and the availability of infrastructural and manpower resources;  - the significant improvement that has taken place in the structure of much of Irish industry over the past two decades and which provides a foundation of skills, knowledge and technical infrastructure which can be further developed over the period of the Plan;  - the resource constraints on the Exchequer which will necessitate the establishment of priorities and ensuring that State services to the manufacturing sector are fully coordinated and applied in the most effective way;  - the difficulties experienced by the manufacturing sector and their underlying causes in recent years which saw the rate of increase in manufacturing output fall from over 7% on average over the period 1977 to 1979 to less than 3% in 1981;  - the recognised weaknesses in many parts of the manufacturing sector, and particularly, in indigenous firms, in terms of marketing, production, financial and management expertise;  - the moderate demand conditions which will exist over the next few years in both domestic and most export markets;  the increasing competition between countries to attract a declining pool of internationally mobile investment.  1. The Government objective is to create the conditions in which output growth of 9.25% per year accompanied by employment growth of 9,500 per year on average can be achieved for the manufacturing sector over the period 1983-1987. It must be emphasised that these are average figures for the period, the necessary foundations for which will be laid in the early years of the Plan. The attainment of this outturn will depend critically on achieving significant improvements in wage cost competitiveness against our main trading partners over the period, improving the business performance of manufacturing companies and sustaining an improved environment for industrial development through Government action, industrial relations and employer initiatives. The high level of growth in output and employment will also require the manufacturing sector itself to respond to the improvement in competitiveness that will take place under the Plan and to the wide range of State incentives and support services available. If the required response is forthcoming it is projected that manufacturing employment could grow by about 12,000 jobs a year in the later years of the Plan. A new spirit of co-operation between both management and workers will be essential. Industrial policies will be directed specifically at creating, within the extent open to the Government, the conditions necessary to support the highest level of output increase, employment creation and exports possible in the manufacturing sector. In particular they will aim at:  - creating, as far as it is possible within the power of Government, an environment in which manufacturing investment can be undertaken with greater confidence; policies to reduce inflation, to achieve moderate wage increases, to bring the growth in public expenditure and taxation under control, to maintain a consistent and attractive package of incentives and to provide the basic support services and infrastructure will be of particular importance in this respect;  - a more effective, intensive and selective industrial promotion programme directed at both indigenous and overseas investment;  - securing a significantly improved performance in employment, output, exports and investment from domestic Irish industry through a greater coordination and selectivity of existing services, the upgrading of the marketing function as part of total business planning, the exploitation of the significant import substitution potential which exists for manufactured goods, the promotion of greater linkage between manufacturing firms and the development of manufacturing opportunities based on our natural resources;  - improving the marketing performance of Irish firms so that increased market share can be secured on both domestic and overseas markets;  - securing increased investment in research and development and innovation by both domestic firms and by overseas manufacturing companies;  - coordinating on a more efficient basis, the range of rescue services available for firms in danger of closing where it can be established that the firms concerned have the potential after help from these services to return to profitable trading;  - facilitating measures to improve manpower training for both management and workers and to create a climate conducive to better industrial relations.  POLICY MEASURES  1. In order to achieve the ambitious targets set for the growth of manufacturing industry, specific new policy measures will be introduced. New policy measures will be kept under constant review and revised or discontinued as necessary. Manufacturing firms will be considered for assistance only where they are competing on domestic or export markets. New measures to be introduced are outlined in the following paragraphs.  2. Company Development Plans. Company development plans will be the focus for all State aid in the future. This approach will be selective and based on the potential for development of the firms concerned. Assessments will be carried out on a joint cooperative basis with firms using the coordinated services of the various State agencies. The new approach will result in a development plan for selected individual firms aimed at securing significant improvements in output, employment, sales, product development etc. The continuance of aid will be linked to the achievement of the Plan objectives.  3. In the development of this more coordinated approach to the promotion of indigenous manufacturing industry the assistance which has been received to date from the European Regional Development Fund towards the development of Irish industry is acknowledged. It is proposed to build further on this. Particular attention will be paid to integrating the new selective company-by-company approach with the policies being developed by the Community at the present time for strengthening industrial research, technology and innovation.  4. In its promotional effort to attract overseas investment, the IDA will place a new emphasis on the promotion of licensing and joint venture opportunities to link in with the opportunities which will emerge from the domestic company-by-company approach now planned. The new approach will also make provision for the systematic identification and development of manufacturing opportunities arising from the purchasing requirements of manufacturing firms and State bodies. Government Departments and agencies with significant purchasing requirements for industrial goods will play a more positive role in encouraging local firms to meet these requirements.  5. Domestic Small Industry. Additional special measures to bring about a more rapid development of domestic small industry will include:  - the extension to all other areas of the country, under the aegis of the IDA, of the intensive approach to small industry promotion pioneered successfully in the Mid-West Region in recent years by SFADCO;  - the provision of incubator-type factories in association with the third level Colleges (Universities, Regional Technical Colleges and National Institutes for Higher Education) similar to that already in existence at the NIHE at Limerick and those being completed at present at the IDA's Enterprise Centre at Pearse Street in Dublin and on the campus at University College, Galway;  - a scheme to promote the adoption of small firms by larger companies through the matching of small company needs to the strengths of the bigger companies;  - a scheme to promote the secondment of senior personnel from large to small companies to facilitate sub-supply contracts and an improved management and technological capability in small firms;  - the promotion of industrial co-operatives.  12. Overseas Industry. Over the period of the Plan the attention of overseas firms will continue to be a key element of our industrial strategy. The aim will be to build on the success achieved to date. In promoting new projects additional weight will be given to the need to attract firms which can integrate well into the existing industrial structure, which can provide a range of highly-skilled jobs sustainable over the longer-term, which have an ongoing commitment to operating from this country and to expanding here as the opportunity arises and which provide a high benefit to cost ratio for the economy as a whole.  13. Export Development.  - Export development policy will place increased emphasis on market and product development and in promoting a greater commitment by established firms, particularly small firms, to exporting as part of the comprehensive business development plans referred to earlier. An increased level of marketing, advisory and development support will be provided to firms to assist them to increase export sales. The export potential of smaller firms, established primarily to supply components to larger domestic firms, will be identified and promoted as part of coordinated expansion plans for individual firms;  - improved services will be provided to assist firms at local level in market research and planning;  - the provision of aid to support the training in specific firms of additional export marketing/sales executives through the Employment Support Scheme will be developed;  - CTT staff will be deployed to exploit better potential for export growth in specific overseas markets viz. North America, South East Asia, the Middle East and Latin America.  14. Export Credit Insurance and Finance .  An expert group has recently reported on the scope for developing a more flexible regime of financial services for Irish exporters. The Group's recommendations are under consideration at present. Their implementation will require consultation with financial and other organisations with a view to:  - the introduction of improved and more competitive schemes for the provision of export credit finance linked to export credit insurance;  - the involvement of a broader range of financial institutions in the operation of the schemes;  - the greater promotion and marketing of export credit insurance as a valuable additional security to Irish exporters particularly as they diversify from traditional to new markets;  - the establishment of a more coordinated approach involving key economic interests in adapting insurance and finance schemes to meet the needs of the exporting sector and changes in competitive conditions abroad.  - These consultations will be concluded and new arrangements announced by the end of 1982.  15. Sectoral Development Committee. This tripartite Committee, composed of representatives of Government, employers and trade unions will, sector by sector, systematically establish the potential for growth and employment-creation in the productive sectors of the economy. Its findings will provide a focus for State promotion and investment in these sectors. It has already studies in progress on electronics, marketing, building and construction, and the beef industry and is arranging to undertake studies on fishing, clothing and textiles and mechanical engineering. In view of the recognised weakness in the marketing function of much of Irish industry the evaluation of marketing practices which is being undertaken by the Committee and which aims at identifying the changes which are necessary to improve the current position at both firm and national support level will be particularly important.  16. Science and Technology.  - A detailed four-year National Programme for Science and Technology will be published at the end of the year by the National Board for Science and Technology. Its fundamental aim will be to identify the scientific and technological priorities for the development of industry and other sectors of the economy. The programme will form the basis for the Government's consideration of the future development of science and technology in relation to our industrial development programme;  - particular attention will be paid to stimulating R & D and innovation in subsidiaries of overseas companies in order to complete and consolidate the transfer of technology already initiated through the attraction of these companies to Ireland;  - co-operation between the higher education sector and industry will be further developed;  - in order to strengthen the internal innovative capacity of Irish firms, arrangements will be made to make scientific and technological support and expertise from third level institutes and the State Departments and agencies directly available to manufacturing firms and potential entrepreneurs as part of a coordinated business development approach.  17. Import Substitution. Special units will be established in the Departments of Industry and Energy and the Environment to help achieve a significant increase in the extent to which Irish firms avail of the extensive and growing opportunities for import substitution which exist in the manufacturing sector generally and the building supplies industry respectively.  18. National Enterprise Agency. The National Enterprise Agency, reactivated by the Government earlier this year, is now becoming operational and will give a further impetus to industrial development policies in the areas of technological development, natural resource exploitation and import substitution.  19. Rescue Services and Job Maintenance.  - State rescue services will be further developed for firms at risk which have soundly-based prospects of returning to profitable trading if short-term problems are overcome. The new company-by-company approach will have particular regard to arrangements to aid firms in temporary difficulty. The State promotional agencies will ensure that all companies at risk which are in receipt of grant-aid will develop an appropriate business stategy for their activities and greater 'after-care' services will be provided, particularly for small and medium-sized firms. In developing the rescue services State aid will be administered on a more systematic and coherent basis to ensure the most effective results from State expenditure;  - in order to ensure that effective and timely action can be taken to aid manufacturing firms in difficulty a new approach based on maintaining continuing contact with firms on their progress by specially assigned Departmental/State agency staff will be developed.  18. Industrial Relations. The Minister for Labour will enter into further discussions with both sides of industry to identify the immediate action required to secure an improved industrial relations framework for the development of industry. These discussions will include the issues of worker participation and the content of a voluntary code of practice on the disclosure of company/enterprise information to foster greater understanding and co-operation between both sides of industry. The scope for the further development of profit-sharing arrangements will also be further examined.  19. Private Sector Organisations. There is considerable scope for private sector organisations involved in the development of industry to play a more positive part in ensuring more effective management and better marketing in Irish industry and the Government will discuss with the organisations concerned how this can best be brought about. The banking sector should play a more active direct role in the industrial promotion programme through, for example, the provision of more venture capital for industry and developing further their existing business advisory services and their financial schemes for export promotion including those in the area of export credit insurance. Similar discussions will be held with other financial institutions to examine the scope for improved financial services for the industrial sector. Arrangements will be made to identify more clearly the extent to which manufacturing firms benefit under existing tax-based lending schemes and how the use of such schemes conforms to the priorities of industrial development. These will be some of the issues to be examined in the appraisal of the operation of our financial institutions which it is proposed to undertake.  CONCLUSION  18. The development of the manufacturing sector is crucial for the development of the economy. The policy measures outlined in this section taken in conjunction with the action to be implemented in relation to incomes, fiscal, monetary and public expenditure policies discussed earlier will provide the foundation for the growth rates projected for the sector. The measures outlined have had regard to the recent NESC studies on industrial development policies. These studies, however, will be the subject of more detailed consideration in the context of a White Paper on industrial policy to be published shortly. This review will further develop in detail the measures set out in the Plan to bring about the growth in the manufacturing  sector envisaged over the period to 1987.  TOURISM  1. Overseas tourism (numbers and revenue) recovered after the decline in the early 1970s to reach a peak in 1979. Since then overseas tourism earnings have declined due to the international recession and to a combination of difficulties in the areas of industrial relations, the effects of the Northern Ireland problems, and particularly the erosion of our price competitiveness since 1979 relative to other tourist destinations as indicated in Table 1.  TABLE 1  ANNUAL PRICE CHANGES OF OTHER DESTINATIONS COMPARED WITH IRELAND FOR HOLIDAYMAKERS  IN EACH YEAR SINCE 1979.  RELATIVE COST OF HOLIDAYS IN: 1979 1980 1981 1982 3 YEARS  Ireland 100 100 100 100 100  United States 100 89 123 96 105  Britain 100 107 109 86 100  Germany 100 90 90 94 76  France 100 96 94 92 83  Holland 100 90 89 96 77  Denmark 100 88 94 92 76  Austria 100 93 91 95 81  Switzerland 100 87 94 98 80  Sweden 100 94 105 84 84  Norway 100 94 106 96 97  Italy 100 98 95 94 88  Spain 100 86 97 89 74  Notes:  (i) Annual price changes for individual countries subsequent to 1979 are deflated by the Irish CPI and adjusted by exchange rate movements.  (ii) A figure higher than 100 denotes an improvement in Irish competitiveness vis-avis that country.  (iii) Figures are based on annual inflation rates and exchange rate positions as at end of May for each year.  (iv) Figures for 1982 are based on estimates of inflation for 1982 in the May edition of the "National Institute Economic Review" (U.K.).  POTENTIAL AND POLICY FRAMEWORK  2. Tourism has the potential to make a significant contribution to economic growth in terms of export earnings, regional development and the provision of employment. Like manufacturing, tourism offers a product which must be marketed in a highly competitive international environment and its potential for growth is critically dependent on its cost competitiveness and on the industry's success in developing and marketing its product. However, a worthwhile return to the economy can be achieved by investment in improving the quality and image of Irish tourism.  3. In the short term the continued slow growth of world economies acts as an external constraint on the growth of earnings from tourism. In addition, the relatively sharp increase in our inflation rate and in the costs borne generally by tourist operators here relative to those in competing destinations has led to a decline in the industry's international price competitiveness and has reduced its capacity to invest in improving facilities.  4. As an island nation, the access transport area is of prime importance to Ireland in tourism terms. In this regard we have seen the removal of charter restrictions and the introduction of new fare types in all of our main markets. The introduction of additional services and increased shipping capacity has improved access by sea transport. However, improvements in services and facilities at access points must, subject to the limits of available resources, keep pace with these developments.  5. In deciding policies for the development of tourism over the period of the Plan, the Government will have regard to the following:  - the review of tourism policy which is being undertaken by the Department of Trade, Commerce and Tourism and which is expected to be completed by the end of the year;  - the constraints on the public finances which will necessitate that Exchequer expenditure on tourism development must be aimed at achieving the maximum return in terms of increased revenue;  - the need to achieve a higher proportion of expenditure on domestic tourism by Irish holidaymakers;  - the loss of international competitiveness by the Irish tourist industry in recent years and the decline in the industry's profitability;  - the difficulties of projecting a favourable image of Irish tourism abroad arising from the Northern Ireland troubles.  6. The Government's policies for the tourism sector will concentrate on:  - increasing tourist revenue from overseas sources at the greatest possible level;  - achieving a wide regional spread of the revenues accruing from  - tourism;  - ensuring that Exchequer expenditure on tourism is more effective and directed to those areas which show the greatest returns in terms of revenue creation and employment;  - increasing the domestic market share of expenditure by Irish tourists.  POLICY MEASURES  7. The following measures have been introduced in recent times to aid the tourist industry:  - free depreciation allowances made available under the 1978 Finance Act to registered owners of holiday accommodation as an incentive to invest in new tourism products;  - the fixed-rate long term EIB/ICC loan finance for a wide range ol investment projects in the tourism sector.  These have been beneficial to date and should become more so over the period of the Plan with the implementation of the proposed initiatives listed in the next paragraph. The recently introduced foreign loans scheme at concessionary rates of interest to cover additional working capital requirements in the tourism sector and on which the exchange risk is carried by the Exchequer should also be of benefit to the tourism industry. The range of existing financial incentives administered by Bord Fiilte for upgrading accommodation in hotels and guest houses and for improving facilities in caravan and camping parks will be maintained pending the outcome of the review of tourism policy.  8. Proposed initiatives:  - Measures to restore the tourism sector's international competitiveness will be undertaken in the course of the Plan. The policies outlined to reduce inflation, to achieve a moderate rate of income growth and to improve the competitiveness of the economy generally will be of particular benefit in this respect. An examination will be undertaken with a view to eliminating the cost disadvantages arising from the higher charges borne by the tourism sector in Ireland;  - as in the case of manufacturing, price is only one, albeit a significant aspect of competitiveness in tourism. Effective marketing abroad of a country as an international tourist location is equally important. The analyses undertaken by the Department of Trade, Commerce and Tourism in the course of the policy review to date lend support to the view that promotional publicity is a highly effective policy approach to attracting more overseas tourists.-The analyses suggest a close relationship between promotional expenditure in particular markets and growth in tourism revenue from these areas Within the limits of available resources it is intended to increase promotional publicity over the Plan period in particular countries which have a significant potential for increasing tourist numbers to Ireland and where it can be clearly shown that such expenditure will have a positive effect on tourism receipts. The publicity will also be aimed at improving our image abroad as a tourist location and at capitalising on improvements in our cost competitiveness; the fixed-rate long term EIB/ICC loan finance for a wide range of investment projects in the tourism sector.  - These have been beneficial to date and should become more so over the period of the Plan with the implementation of the proposed initiatives listed in the next paragraph. The recently introduced foreign loans scheme at concessionary rates of interest to cover additional working capital requirements in the tourism sector and on which the exchange risk is carried by the Exchequer should also be of benefit to the tourism industry. The range of existing financial incentives administered by Bord Fiilte for upgrading accommodation in hotels and guest houses and for improving facilities in caravan and camping parks will be maintained pending the outcome of the review of tourism policy.  8. PROPOSED INITIATIVES:  - Measures to restore the tourism sector's international competitiveness will be undertaken in the course of the Plan. The policies outlined to reduce inflation, to achieve a moderate rate of income growth and to improve the competitiveness of the economy generally will be of particular benefit in this respect. An examination will be undertaken with a view to eliminating the cost disadvantages arising from the higher charges borne by the tourism sector in Ireland;  - as in the case of manufacturing, price is only one, albeit a significant aspect of competitiveness in tourism. Effective marketing abroad of a country as an international tourist location is equally important. The analyses undertaken by the Department of Trade, Commerce and Tourism in the course of the policy review to date lend support to the view that promotional publicity is a highly effective policy approach to attracting more overseas tourists.-The analyses suggest a close relationship between promotional expenditure in particular markets and growth in tourism revenue from these areas Within the limits of available resources it is intended to increase promotional publicity over the Plan period in particular countries which have a significant potential for increasing tourist numbers to Ireland and where it can be clearly shown that such expenditure will have a positive effect on tourism receipts. The publicity will also be aimed at improving our image abroad as a tourist location and at capitalising on improvements in our cost competitiveness;  - increased emphasis will be placed on the need for the private sector in tourism to complement the efforts of Bord Failte by an even greater marketing presence. Hotels and other tourist enterprises will be encouraged and assisted in undertaking specific marketing programmes and the possibilities of increasing the involvement of tourism operators in the preparation of development plans will be examined. Particular attention will be paid to overall product policy to ensure that the tourist is offered value for money in terms of services, facilities and amenities;  - special emphasis will continue to be placed on the protection and preservation of the environment;  - the possibilities of extending the tourist season will be pursued to ensure greater utilization of tourist resources and to increase the profitability of enterprises engaged in the tourist business;  - through the activities of the Council for Education, Recruitment and Training for the Hotel, Catering and Tourism Industry (CERT) increased emphasis will be placed on the training of personnel in the labour-intensive hotel and catering sectors of the tourism industry;  - an assessment will be undertaken of the appropriate ways and means to stimulate the provision of additional tourist accommodation and amenities of the right quality and quantity in the right locations to meet particular needs;  - Irish people will be encouraged to opt to a greater extent for home rather than overseas holidays. The results for 1980 and 1981 indicate that there is a strong potential for increasing tourism revenue from  this source;  - the scope for reducing excessive overseas travel will be examined.  - Government Departments and public agencies will pay greater attention to those of their activities which impinge on tourism and thereby release Bord Failte resources to concentrate on the primary aim of increasing the volume of tourist business and raising standards and services throughout the industry;  - the feasibility of initiating youth employment programmes in the tourism field will be further examined by the Department of Trade, Commerce and Tourism in consultation with the Youth Employment Agency.  PRIVATE SERVICES  1. The private services sector as a whole has grown significantly over recent years and employment reached 338,000 (or almost 30% of total employment in the economy) in 1981. The recent trend in employment is summarised in Table 1. In contrast with agriculture and manufacturing industries, the sector is largely sheltered from international competition. However, over the Plan period the extent of its exposure is likely to increase due to an increase in the opportunities for the export of services, technological developments (particularly in relation to information technology) and the impact of liberalising EEC legislation on hitherto protected services such as insurance.  TABLE 1: PRIVATE SERVICES SECTOR - EMPLOYMENT TRENDS  END-YEAR EMPLOYMENT % INCREASE ON PREVIOUS  YEAR  1977 302,000 -  1978 314,000 4.0  1979 326,000 3.8  1980 333,000 2.1  1981 339,000 1.8  The sub-sectors which have shown the greatest increases in employment include banking, insurance, and professional services.  POTENTIAL AND POLICY FRAMEWORK  2. The main determinants of future growth in private services are as follows:  - the trend in disposable income, and consequently, consumer demand which will determine the demand for services of various kind including leisure activities and entertainment;  - growth in other sectors of the economy (e.g. manufacturing, building and construction) which will affect demand for services suct as financial, insurance, consultancy and other professional services;  - the spread of population growth throughout the country which (given the existing low level of service activity in many regions) may have a relatively greater aggregate impact on services activity nationally than the overall growth in national population would suggest;  - the extent to which exports of services can be expanded;  - developments in new technology.  The degree to which competitiveness and efficiency can be improved will also be important for the development of the sector, e.g. a reduction in banking charges could lead to greater opportunities for employment in banking. In this regard the public sector is a significant consumer of, and has regulatory functions in relation to many private services. There may, accordingly, be scope for the public sector in specific instances to promote greater efficiency and competitiveness in private services.  2. Overall, the net impact of technological change on employment is unlikely to be dramatic over the period of the Plan. The introduction of new technology is likely to lead to increased efficiency and pressu on jobs in some sub-sectors (e.g. financial services) but improvement in technology will also, however, lead to the identification of new employment opportunities (e.g. in the information and computer software sub-sectors).  3. Government objectives in relation to the private services sector can be simply stated as encouraging greater efficiency and cost effectiveness and in helping to provide the general economic environment in which this can best be brought about. The State's influence on developments in the private services sector is largely indirect and operates through the impact of State measures on activity in other sectors of the economy which have spin-off effects on the services sector. In addition, the State promotes directly the development of tourism and exports of certain services both of which are especially important to the balance of payments. A number of State initiatives have been taken in more recent times to exploit the potential in the services area. These include the following:  -  IDA Services Programme.  Following the enactment in early 1981 of enabling legislation, a new International Services Programme was launched by the IDA in September, 1981. The new programme is designed to assist and promote the establishment of Irish and overseas firms with good quality employment opportunities in selected service businesses. A special incentive package specifically designed for service industries has been devised the key elements of which include employment, training and capital grants. An intensive promotional campaign designed to maximise the development potential of international services is underway and is expected to yield a substantial increase in activity in the current year.  - Low Rate of Tax for Certain Services. New service companies locating at Shannon which contribute to the development of the Airport are entitled to a reduced rate of Corporation Tax of 10 per cent on profits on certified activities. In addition, design and planning activities carried on anywhere within the State, in connection with engineering works executed outside the EEC, are liable for tax at the reduced 10 per cent rate since 1981.  2. Because of the diverse range of activities involved in this sector and deficiencies in the available data it is extremely difficult to project accurately employment trends over the period of the Plan. However, on the basis of the best information available total employment in the sector is projected to increase by an average of 9,750 a year in the period 1983-1987. The main stimulus to growth in employment is expected to come from spin-off from growth in other sectors of the economy, especially manufacturing industry.  NEW POLICY MEASURES  2. Measures designed to stimulate activity in other sectors of the economy will have positive effects on the growth of services while the reduction in inflationary pressures will provide a more favourable environment for growth. The following specific measures are geared towards promoting a more rapid expansion in the exports of services:  A. Intensified CTT Promotion: The Government are preparing legislation which will enable CTT to promote,assist and develop I export of services. CTT assistance will include:  - advice to enterprises on how to prepare for exporting services  - assistance to exporters in the identification of appropriate opportunities and in the initial presentation to potential clients;  - assistance in the preparation and presentation of tender and similar documents;  - monitoring the overall environment, both national and international, for factors likely to inhibit the export of services fr( this country and promoting the removal of such constraints where feasible.  Initially, the main sectors on which CTT's attention will be focused are:  - agricultural development and processing;  - construction-related services;  - training services;  - technical and general consulting services, including commercial laboratory services and research and development services;  - computer software and data processing;  - media recording and publishing services;  - health services.  B. Export Credit Insurance: Export credit insurance is an increasingly important element in the obtaining of export orders a is very often a feature of business contracts with Middle Eastern , African countries. The Government are preparing legislation whic will permit, inter alia, the range of services listed in (i) above to a of the full range of export credit insurance.  CHAPTER VI AGRICULTURE, FISHERIES AND FORESTRY  AGRICULTURE  RECENT DEVELOPMENTS AND POTENTIAL  1. The last decade has been a period of great change for the agricultural sector arising predominantly from Ireland's participation in the Common Agricultural Policy of the EEC. The main features of the agricultural economy over the period are summarised in Table 1.  TABLE 1: FARM INCOMES, OUTPUT, INPUTS, INVESTMENT (1970 = 100)  Period  (a) Total Per Capita Gross agric. Net Inputs Investment  Incomes Income Output A. O.  Nominal Real Nominal Real Price Volume, Volume Price Volume- Nominal Real (b)  1971  - 1973 154.9 127.8 163.1 134.4 135.6 110.4 102.5 122.5 112.6 165.1 140.6  1974 181.2 117.5 198.0 128.4 172.2 114.7 117.1 200.1 112.8 125.1 67.8  1975  - 1978 355.0 151.7 406.7 173.4 305.4 125.2 126.1 295.9 126.3 389.4 133.9  1979  - 1981 398.0 110.7 478.9 133.0 424.1 133.0 119.8 447.2 163.4 608.1(c)148.1  (a) These figures are the average for the period given relative to the base year 1970=100  (b) Approximate as there is no consistent index with which to deflate over the entire period  (c) 1979 - 1980 only.  The most noticeable developments have been:  - agricultural incomes grew substantially in real terms throughout most of the period but these gains were eroded by developments after 1978;  - growth in the volume of inputs and outputs was reasonably satisfactory, again up to 1978, as were relative price movements. However, in the most recent years relative prices of inputs and outputs have moved adversely while growth in the volume of inputs  used has far outstripped growth in the volume of output. These developments, particularly the latter, raise fundamental questions concerning productivity and efficiency;  - investment in agriculture grew rapidly during the period under th( influence of buoyant prices and substantial income growth and was further facilitated by a major allocation of resources in the form of grants and incentives financed by both the State and the EEC. It is clear from the table that the full production potential created by thes investments has not yet been realised.  2. The performance of agriculture in recent years may be attributed not only to the recent deterioration in relative prices, cash flow difficulties caused by falling incomes and high debt service commitments, and adverse weather conditions in some periods, but also to a failure by farmers to adjust production systems in the light of major changes in the production and pricing environment affecting the agricultural economy. Net output has declined and the achievements of agriculture have fallen short of what has been expected, given the opportunities afforded by the Common Agricultural Policy and the magnitude of resource allocations made to agriculture over the period.  3. While the potential for increased output in agriculture, as measured by soil capacities and other factors, is substantial biological structural and demographic constraints mean that agricultural development is a relatively slow process. It is these elements rather than the level of resources allocated to agriculture which ultimately determine the growth which can be achieved. The existing land stock is capable of carrying much increased numbers of animals and does not in itself constitute a constraint to agricultural development at the present time. Moreover, the quality of existing land is continuously being enhanced by land improvement and drainage activity.  4. In the absence of policy changes, the constraints are such that growth in agricultural product would do little more than restore production to its 1980 level by mid-eighties. However, by tackling th constraints and exploiting the existing potential, growth in the region of 30% per annum can be achieved. The Government have adopted this level of growth as the output objective for the period of the Plal Its realisation will have a significant impact in terms of farm enterprise and income. Its achievement will be dependent on the success of the policy measures already being implemented, the furthe re-orientation of policy towards developmental objectives and the introduction of specifically output-related measures.  POLICY FRAMEWORK AND APPROACH  2. In developing policies to aid the achievement of the target set for the agricultural sector the Government have had regard to the following:  - resources available to the Exchequer are limited and will remain so for the foreseeable future. Agricultural policy must, therefore, be redesigned in the context of a re-allocation of existing resources, i.e. the farmers' own resources and those of the Exchequer, in such a way that the overall level of returns to agriculture will be significantly improved;  - our membership of the EEC and participation in the Common Agricultural Policy determine that national strategy be formulated within the framework of the existing comprehensive and detailed policy to which we are committed and which has to date proved highly beneficial both to the farmer and to the national economy;  - as price rises alone are not likely to provide a solution to the farmincome problem, it is essential for the prosperity of agriculture to ensure that domestic inflation is brought into line with average EEC levels;  - the impetus to improvement in the agricultural sector must come primarily from improved efficiency and increased output at individual farm level.  6. The Government's objective in relation to agriculture is to achieve the greatest possible increase in output with consequential improvements in farm income, the balance of payments and the impact on demand throughout the economy. The utilisation of resources, whether of a current or capital nature, will be strictly related to this objective and policies will be directed towards:  - ensuring a more efficient use of inputs with a view to generating increased net agricultural product;  - realising the hitherto unrealised potential of the large volume of investment made during the last decade, thus increasing capacity utilisation and generating further net product and income;  - motivating the substantial numbers of farmers who so far have not used the aids and supports available to increase production or who have used them without sufficient efficiency criteria;  - ensuring as far as possible that State expenditure in relation to agriculture does not overlap with social expenditure, but rather concentrates on the agricultural development which is so essential if the farm income problem is to be resolved through output growth.  POLICY MEASURES  7. Recent Developments. New Policy measures have recently been introduced in the following areas:  - National Herd: Growth in the national herd is the key factor in determining agricultural growth in the short to medium term. Several measures have recently been introduced designed to encourage development in this area. Thus, a £70 interest subsidy is available in 1982 for each additional calved heifer retained in herds. A comparable scheme will operate during 1983 and 1984 when a direct grant of £70 will be payable again in respect of calved heifers which are additional to numbers recorded in the preceding years. In addition, a calf premium of £22 is operating during the 1982/83 marketing year, payable when the calf reaches six months. These measures, together with the Suckler Cow Scheme and the headage payments under the Disadvantaged Areas Schemes represent an attractive range of incentives to increase breeding stock numbers and should have the effect of boosting output above what might otherwise be achieved.  - Farm Modernisation Scheme: Under the Scheme, higher rates of grants are available to development farmers i.e. farmers who follow a development plan which will generate a level of income comparable to the average income outside agriculture. Changes have been implemented following a comprehensive review of the Farm Modernisation Directive by the EEC. The most important change introduced some flexibility in fixing the target income to be achieved by development farmers. Member States can opt for a reduction of 5% in the target income and individual farmers can also opt for a further reduction of 10% .  Both of these options are now applied in Ireland, thus making higher rates of grant available to a wider band of farmers capable of development and of achieving an increase in production.  - Higher rates of grant are also available under the Programme for Western Development to full-time farmers in the West who cannot attain development status, provided they follow a farm improvement plan with the emphasis on increasing production of cattle and sheep. in addition, certain other full-time farmers throughout the country continue to be entitled to higher rates of grant. In both cases, however, this higher rate of grant applies to a limited volume of investment. Full-time farmers outside these categories and certain part-time farmers continue to be eligible for aid, but at a lower rate.  8. Development Plan for Agriculture. A Working Group, representative of a wide range of agricultural interests, has been established by the Minister for Agriculture to help in the process of review of existing policy and design of alternative measures. This Group has been set the task of suggesting policy measures which will generate the greatest possible growth in agricultural production while taking cognisance of the national income situation and Irish membership of the EEC. It is expected that the Group will shortly present practical proposals for changes in those areas of agricultural policy which are identified as presenting the best opportunities for the generation of additional production.  9. New Measures. Policy measures in the following areas will receive priority over the period of the Plan:  - Farm Investment:  - The grant structure under the Farm Modernisation Scheme will be reviewed with a view to concentrating resources on the most productive types of investment; in particular, grants for buildings will be directed specifically to activities most likely to directly lead to improved efficiency and output e.g. basic livestock accommodation, winter feed facilities as well as pollution control;  In order to ensure that planned investments are such as to yield a worthwhile return both to the farmer and to the State, an improved investment appraisal procedure is required within the Scheme. Development plans will be approved only if it is clearly established that the projected returns justify the investment. Substitution of labour by capital will not be encouraged on farms where existing labour is already under-utilised;  - The operation and administration of the Farm Modernisation Scheme will be further reviewed with a view to allowing the professional staff of ACOT to devote more of their time to advisory work and farm planning.  It is envisaged that these various changes in the Farm Modernisation Scheme will be implemented within the existing level of resources allocated to that Scheme.  - Further Measures to Expand the National Herd., The Government will initiate discussions with the EEC authorities with a view to revising the Disadvantaged Areas Scheme so as to provide a developmental incentive facilitating output growth. These discussions will cover the development of a structured system of payment whereby the grants will give an inducement to greater output and, in particular, to the expansion of the breeding herd.  - State Sponsored Services: The advisory services provided by State agencies in agriculture will be reviewed to ensure a more effective and unified approach to encouraging farm efficiency at individual farm level. Expenditure on education, advice and research will be reviewed with a view to improving the allocation of existing resources to those areas of the agricultural sector most likely to benefit, - particularly the large number of farmers with a production potential which has not so far been exploited. The Government will continue to review the extent to which existing research activities are appropriate to the development of Irish agriculture. Both AFT and ACOT will seek to develop mechanisms whereby relevant research results can be disseminated among a broader spectrum of farmers with development potential.  - Producer Groups: The establishment of producer groups will be further encouraged with a view to promoting more orderly production and marketing of products for which existing marketing arrangements are inadequate e.g. livestock, horticultural products and potatoes. The Department of Agriculture, in association with other interested partie including co-operatives, will undertake a detailed review of existing arrangements and prepare proposals for the substantive development of producer group policy. The Department will also consider whether the establishment of a Horticultural Board would be a practical and effective way of achieving expansion of the horticultural sector, with particular reference to marketing.  - Disease Eradication: In the animal health sphere the Brucellosis Eradication Scheme has been particularly successful and it is now expected that brucellosis will be eradicated by 1986. Bovine tuberculosis is proving much more resistant to eradication efforts. Some changes in the approach to the eradication of this disease have already been introduced and others are being formulated in order to achieve a drastic reduction in incidence by the end of the planning period. A further important problem in regard to animal health is the continuing high level of calf mortality. The agricultural support services, particularly ACOT and the veterinary services of the Department of Agriculture, will give special attention to the encouragement of improved hygiene and other relevant management practices so as to substantially reduce the extent of this problem.  - Land Structure, Education and Training: Although intrinsically more long-term in nature and unlikely to contribute greatly to agricultural growth in the short or medium term, the results of recent detailed studies of the land structure question and of education and training in agriculture will now be brought to the forefront of agricultural policy discussions, with a view to identifying and implementing those measures which will generate growth in agriculture beyond the period covered by the present Plan.  2. The policies outlined above are designed to tackle the factors which have been identified as contributing to present problems in agriculture or inhibiting further development. The emphasis will be o increased output and on relating investment to that objective. Increases in the breeding herd and their spin-off effects should result in improved capacity utilisation where investment has already taken place. Relative price movements are unlikely to generate increased re, farm incomes. Improvements in efficiency and increased overall level of net product are the only feasible means of achieving worthwhile and sustainable increases in real farm incomes.  AGRICULTURE-BASED INDUSTRIES  2. In addition to the beneficial effects of output growth on the incomes and living standards of the agricultural community, benefits will accrue also to those industries involved in the processing and marketing of agricultural raw materials. The increased flow of raw materials to the agriculture-based industries will contribute to improved capacity utilisation in many industries currently experiencir supply shortfalls. Further, these developments will be instrumental in ensuring greater stability of employment for the many thousands of industrial workers employed in these industries. Moreover, the recently published IDA strategy for the development of the agriculture-based industries places particular emphasis on higher added-value products. The recent removal of anomalies in the EEC price-support system which militated against processing in the beef sector will be of particular benefit. However, while efficiency and profitability should improve, and while there should be an intensification in added-value activities, the scope for technological change and increased productivity in the agriculture-based industries is such that no major net addition to employment is likely to arise in this sector. Thus, the achievement of the target for growth in net agricultural product, while allowing consolidation and stability of employment and generating increased exports, is not expected, per se ,  to generate significantly greater employment either at primary or secondary level.  OUTLOOK  2. The implications of the objectives adopted under the Plan for the volume of agricultural output, gross value added, employment, exports and the agriculture based industries are shown in Table 2.  TABLE 2 (A)  AGRICULTURE: ESTIMATED OUTPUT, EXPORTS AND EMPLOYMENT 1982-1987  (1982 PRICES)  1982 1983 1984 1985 1986 1987  Gross Agricultural Output 2,150 2,200 2,250 2,300 2,360 2,410  (including stock changes) 100 102 105 107 109 112  Net Agricultural Output 1,510 1,550 1,590 1,630 1,670 1,710  (including stock changes) 100 102 105 107 110 113  Gross Value Added at market 1,170 1,200 1,230 1,260 1,290 1,320  prices 100 103 105 108 111 113  Gross Value Added at factor 1,200 1,250 1,280 1,310 1,350 1,375  cost 100 104 107 109 112 114  Employment (No. 000's) 194 191 188 185 182 179  100 98 97 95 94 92  Total Agricultural Exports 1,430 1,480 1,530 1,590 1,640 1,700  100 103 107 111 115 119  TABLE 2(B)  AGRICULTURE - BASED INDUSTRIES  1982 1983 1984 1985 1986 1987  Gross Output 2,440 2,510 2,580 2,650 2,750 2,820  100 103 106 109 112 116  Employment (No. 000's) 28.5 29.0 29.5 30.0 30.5 31.0  100 102 104 105 107 109  Exports 1,1201,170 1,230 1,280 1,340 1,400  100 104.5 109 114 119 125  FISHERIES  1. In the sea-fisheries sector over the past five years, there has been a considerable development of the industry with the number of boats in the fishing fleet increasing by over 1301o (including a doubling of vessels in the larger 100 gross tons and over category), investment in fishery harbours amounting to over £11 million, the total catch more than doubling to over 187,000 tonnes in 1981, exports showing a morl than three-fold increase in volume terms and full-time employment showing a more than 30% increase to over 3,400 in 1981. Table 1 shows the rate of expansion in the Irish sea fishing industry since 1975 as compared with that of other EEC countries.  TABLE 1: SELECTED PERFORMANCE INDICATORS OF SEA-FISHING INDUSTRY - EEC COUNTRIES  Vessels LANDINGS NO. OF FISHERMEN* EXPORTS  (Tonnage) (Tonnes) (Tonnes)  1975 1981 1975 1981 1975 1981 1975 1981  Belgium 23,904 21,585 41,995 48,982 1,072 894 21,410 52,3  Denmark 131,152 125,1321, 743,766 1,793,72 011,11315,126625,479770,3  Germany 155,569 94,560 296,900 276,500 6,216 5,142 89,873 194,000  France 270,467 197,685 691,900 733,000 34,021 21,033 84,075 114,1  Ireland 24,356 36,591 75,967 187,843 6,600 8,740 39,000 137,4  Italy 262,776 305,855 390,783 417,871 65,000 40,000 97756 96,653  Netherlands 85,838 106370 284,340 401,394 4,092 4,073 232,628 457,029  UK 286,259 193,647 868,900 743,400 22,134 23,927155,000 330,000  Greece n. a. n. a. n. a. n. a. n.a. n. a. n.a. n.a.  *Full-time and part-time  2. Potential  - Sea Fisheries: Most of the commercially valuable sea fish stocks i our areas are at present being fished to the maximum capacity consistent with self regeneration. Some are being overfished and others are only recovering from past over-fishing. While the room fo further expansion in catches is therefore limited in the short-term the enforcement of conservation measures based on scientific advice should ensure increased catches in the longer-term from traditional species. Diversification to non-traditional species which are not subject to limitation in catch also offers some scope for expansion.  - Aquaculture: Aquaculture or fish farming is an industry for which Ireland is particularly suited because of the relative urity of our inland and coastal waters and offers valuable opportunities to increase production of highly marketable species with a spin-off in increased processing and employment, the latter particularly in remote areas in where job opportunities are limited. Surveys recently undertaken by the National Board for Science and Technology have confirmed the existence of a wide range of suitable coastal sites for further development. Constraints affecting development of fish farming include the scarcity of suitable stock for on-growing, the delayed return on investment, the incidence of disease and the lack of expertise among potential operators.  - Inland Fisheries: Inland fisheries possess potential for further development both as a fisheries resource and as a tourist attraction. Exclusive of persons employed in the marketing and transport of fish, it is estimated that about 5,800 persons find whole-time or part-time employment in the sector and visiting anglers are estimated to generate tourist revenue of about £20 million per annum at the present time. The significant decline in our salmon stocks over the years is cause for serious concern. This fall off is attributable to overfishing, pollution and, to a declining degree, to fish disease. Salmon stocks have also been affected by intensive sea fishing particularly off Greenland and the Faroe Islands but recent international agreements covering such fishing are expected to show significant results.  - Marketing: There is considerable scope for increasing our exports of fish and fish-products. This can best be achieved by creating an image for Irish fish as a high quality product. This potential, however, can be realised only with the co-operation of fishermen, processors and exporters who must adopt a more positive attitude to presentation and quality control. A further increase in home consumption can also be achieved through better distribution. Because we are members of the EEC, market demand and returns to fishermen and exporters here depend largely on the marketing policies exercised by the Community.  - Processing: Further expansion of primary processing will depend largely on increased landings of recovering species, e.g. herring and species not subject to fishing controls, such as, horse mackerel. There is, however, considerable potential for expansion of secondary processing which is labour intensive and provides the best possibilities for employment creation in the industry as a whole. Increased production from fish farms will also provide additional raw material for processing.  POLICY FRAMEWORK  3. In bringing forward policies for the development of the fisheries industry, the Government will have particular regard to the following factors:  - existing EEC fisheries policy and the Common Fisheries Policy at present under negotiation;  - the large-scale investment that has taken place in the fisheries fleet and associated on-shore facilities over the past decade which possess the potential for increased utilization;  - the importance of maintaining well-founded conservation measure in the interests of the long-term development of the industry  - the cost-price squeeze that has affected incomes from the fishing industry in recent years;  - the scope for considerable improvement in the marketing of Irish fish and fish products on domestic and overseas markets;  - the increasing importance and potential of aquaculture;  - the importance and potential of our inland fisheries as part of the wider fisheries industry and as a significant tourist resource.  4. Government policies over the period of the Plan will aim particularly at:  - securing agreement on an EEC common fisheries policy which will ensure the largest possible exclusive coastal zone for Irish fishermen and provide quotas for the Irish fleet in accordance with the commitment given by the Community under the Hague Agreement of 1976;  - the maximisation of the profitability of the fleet by encouraging greater productivity and cost effectiveness and by further developing its capacity to exploit fully the resources available;  - increasing to the greatest extent possible output, employment and exports in the aquaculture sector;  - achieving a significant improvement in the marketing of fish and fish-products;  - the expansion of secondary processing facilities to bring about increased employment and value of exports;  - the rehabilitation of our salmon stocks and the development of our inland fisheries as a recreational amenity and as a tourist attraction.  POLICY MEASURES  5. In pursuing their objectives for fisheries policy the Government will adopt the following measures:  - Common Fisheries Policy: The Government through the Minister for Fisheries and Forestry will continue to press Ireland's case for an adequate coastal zone reserved to Irish fishermen and for adequate quotas.  - Fishing Fleet: Stocks of traditional fish species in our general area are being exploited at a level which will not permit a further large scale expansion of the fleet when the increased catching potential of the existing fleet is taken into consideration. However, some adjustments to the structure of the fleet through substitution of larger vessels, conversion of existing vessels and refurbishing of second hand vessels will be required. The BIM Marine Credit Plan is being reviewed and will be recast as necessary to take account of changing circumstances. Emphasis will continue to be placed on training with particular reference to gear technology and improved productivity. In view of the serious problems related to fish stocks a policy of fleet stabilisation, modernisation and cost-effective improvement, rather than expansion is now appropriate.  - Fishery Harbours: It is expected that the modernisation programme for the inajor fishery harbours will be largely completed by 1984. Thereafter, efforts will concentrate on the appropriate development of other harbours.  - Aquaculture: Private enterprise and co-operative endeavour will have a key role to play in the development of this sector. The provision of technical advisory services will be further coordinated and expanded where necessary. Financial incentives will continue to be made available for the development of the sector and the terms will be reviewed and varied as appropriate. It is estimated that by 1987 the value of farmed fish production will have risen to some £15 million with employment more than doubling to about 2,500. The bulk of the produce of fish farms will continue to be exported and a carefully planned marketing strategy will be developed in consultation with producers.  - Marketing and Processing: The establishment or development of fish processing enterprises will depend greatly on private enterprise. The Government, in as far as is open to them, will aim to provide the conditions under which private enterprise can identify and exploit the opportunities available. To this end State services to the fisheries industrv will concentrate on:  - the development of secondary processing capacity;  - further encouraging the development of links between the production and processing sectors with a view to establishing a more integrated and soundly-based industry;  - introducing more effective measures to ensure the production of quality products which can compete in Community and other foreign markets; particular attention will be paid to quality control;  - developing a vigorous marketing policy to expand our fishery exports and secure increased prices for our products.The revised EEC Council Regulation on the common Organisation the market for fishery products which came into effect on I June, 1982, should also help to achieve more stable market conditions fo fishery products within the Community. Irish prices are expected to show improvement when the regulation takes full effect.  - Inland Fisheries: A development programme for inland fisherie required under legislation will be brought forward and implemented as the basis for exploiting in a planned and effective manner the development potential of our inland fisheries. The programme will take account of the conservation and rational exploitation of our salmon stocks, the conservation and improvement of other stocks c freshwater fish, the value of our inland fisheries as an amenity and tourist attraction and the development of sea-angling. There will bc more effective enforcement of the more stringent national and local salmon conservation measures introduced in recent years. The level re-stocking of depleted rivers will be greatly expanded with the aid the new ESB hatchery which, it is proposed, will produce 500,000 smolts each year when it is in full production.  FORESTRY  1. The present effective forest area covers some 350,000 hectares (or about 865,000 acres) over 86% of which is in State ownership. This estate constitutes a significant natural resource with both national aand regional economic and recreational potential. In 1981, about 3,600 persons were employed directly on the development, exploitation an maintenance of State forests; some 1,750 people were employed in sawmilling and related activities; and about 300 were employed in pulpwood processing, a figure which will increase by up to 450 when the medium-density fibreboard plant at Clonmel becomes fully operational in the Plan period.  2. Over the past three decades considerable resources have been invested by the State in expanding the national forest estate. Over th period of the Plan and beyond, this investment will provide substantial opportunities for development and for substituting domestic timber for imported wood and wood products.  POTENTIAL AND POLICY FRAMEWORK  1. Market forecasts confidently predict ready outlets for Irish timber Home grown timber provides only 30% of national requirements for sawn softwood. It is estimated that 86% of the imports of all wood and wood products (excluding furniture), are replaceable by species that can be grown successfully in Ireland; in 1981, these imports were valued at £310 million including £180 million worth of paper and paper products. Moreover, Irish demand for wood is expected to increase by 90% by the year 2000 due to anticipated population growth and expected rise in per capita consumption. Prospects on the export market are also favourable. The EEC as a whole imports more than 50% of its timber and it is expected that Britain will still be as importing 75% of its requirements in the year 2025. International estimates project an 8% shortfall in world timber supply by the year 2000 and a 32% shortfall by the year 2025.  2. The amount of timber available for sale from State forests will double over the present decade and redouble in the next decade to reach 3 million cubic metres by the year 2000, including 2 million cubic metres of sawlog. Timber production from private estates is expected to remain static over the next decade at about 80,000 cubic metres a year.  3. Significant improvement in performance on the domestic and export market will crucially depend on the technical and marketing skills of the processing sector, and on the development, already in train, of appropriate technical specifications for intermediate and endproducts.  4. Having regard to the development potential arising from the forest estate the main objective of the forest programme over the period of the Plan will be to increase further the size of the estate and the supply of wood to be processed for home and export markets taking into consideration also the value of the estate for amenity, recreational and wildlife (fauna and flora) conservation purposes.  POLICY MEASURES  1. Policy measures over the Plan period will be concentrated on the following areas: maintaining the State planting programme at the average annual level achieved in the recent past i.e. 7,500 hectares per year; this is the maximum volume of planting attainable in that period pending an improvement in the land reserve situation. The longer-term aim is to plant 10,000 hectares per annum, including reforestation and private planting. This is considered to be an appropriate level of new planting given the age structure of the present forest estate and the anticipated level of demand for wood and wood products in future years:  - the acquisition of sufficient land to build up the plantable reserve so that planting targets can be attained. To this end, full advantage will be taken of the present favourable climate for land acquisition;  - the future encouragement of private forestry with the aid of grants and technical advice with a view to enabling the private sector to make a more significant contribution to the overall national afforestation programme;  - continued research by both the Forest and Wildlife Service and the IIRS aimed at improving the marketability of home-grown timber and improving the management of the planting programme and forest estate;  - developing and maintaining an up-to-date profile of national and international wood markets to provide sawmillers with effective information, to serve as feedback to silvicultural practices and to aid the continuing development of the marketing policy of the Forest and Wildlife Service;  - the services of the IIRS will continue to be availed of to promote a better image of home grown timber and to establish standards for native sawnwood usage. In this context, research is already under way on the physical properties and drying characteristics of home grown timber and their relationship to silvicultural practices and tree genetics. Steps are also being taken towards the development of an inexpensive stress grader to encourage mechanical grading of home grown sawnwood;  - the potential of specialised markets for Irish timber will be further examined with a view to exploiting this potential over the Plan period e.g. increased use for transmission poles, scaffold boards etc.;  - the development of the timber processing sector will be pursued with particular vigour. The emphasis in this area will be on the development of cost-competitive production units of optimum size equipped with the most appropriate and up-to-date technology. The Government will assist in the development of such plants leading to the creation of approximately 1,300 new jobs over the Plan period, thereby increasing significantly the domestic processing sector's share of the home market;  - to allow expansion of the sawmilling sector the Forest and Wildlife Service aims to increase sales of sawlog to 670,000 cubic metres by 1985 (a 50% increase on the 1981 sales figures) and to 730,000 cubic metres by 1987. The development of the industry will be promoted within a plan formulated on a joint basis by the IDA and the Forest and Wildlife Service. To aid the sawmilling sector in its development the FWS will build up its expertise on sawmilling techniques, encourage mills to improve their product by grading timber for structural use and aid their marketing effort by providing up-to-date information on domestic and overseas wood markets.  CHAPTER VII ENERGY, MINERALS AND HYDROCARBON DEPOSITS  ENERGY  1. Demand Trends. Primary energy input in Ireland is made up of oil, coal, peat, natural gas and hydro. The relative contribution by product over the period 1976-81 is shown in table I  TABLE 1 - PRIMARY ENERGY INPUT 1976-1981  Energy  (103TOE)* 1976 1977 1978 1979 1980 1981  Peat 1,186 1,235 1,182 1,160 1,141 1,120  Coal 491 518 551 828 782 852  Oil 5,200 5,534 5,777 6,151 5,704 5,069  Hydro 162 204 185 215 214 222  Natural Gas - - - 258** 492** 896**  Total 7,039 7,491 7,695 8,612 8,333 8,159  *TOE - tonnes of oil equivalent.  * NET usage of feedstock is not included.  2. Primary energy demand grew steadily from 1976 to 1979. In 1980, however, a decline of 307o was recorded on the 1979 peak level of 8.6 million tonnes of oil equivalent followed by a further decline in 1981.  Oil showed the largest decrease (about 21 %) between 1979 and 198 1, and within the oil sector, the sharpest fall off was apparent in the consumption of fuel oil. The decline in consumption since 1979 reflects the slowdown in economic growth, improved conservation, higher energy prices and the increasing use of natural gas for electricity generation.  POLICY FRAMEWORK  3. Less than a quarter of the energy consumed in Ireland is supplied by the State agencies (ESB, Bord na Mona (BNM), Bord Gail Eireann (BGE), Irish National Petroleum Corporation (INPC)). Private companies supply the remainder, apart from the 1% supplied by town gas utilities.  4. Oil. Over 60% of our energy consumption is supplied by oil - in 1981 the oil market represented some 5.1 million tonnes of oil, largely distributed through the major international oil companies. This year has seen a continuation of slack demand and stable oil prices expressed in dollars. There is, however, uncertainty about the future trend of oil prices. A pick up in both demand and prices could occur during the Plan period and a supply disruption cannot be ruled out.  5. The Irish National Petroleum Corporation (INPC) has the objective of underpinning the country's oil supplies. This has been achieved to date through Government to Government contracts. The INPC now also has the task of operating the Whitegate Oil Refinery recently purchased by the Government. While the projected output of the refinery is about 35% of the total national demand for oil, it has the capacity to supply over 50% of total demand. Refining operations at Whitegate have been resumed on the basis that each of the oil companies would purchase a proportion of their market requirements from Whitegate - that proportion to be uniform across the trade and the pricing arrangements to be such as to cover the costs involved for the INPC. These arrangements are provided for in an Order by the Minister under legislation recently enacted.  6. Natural Gas. On redetermination, the estimated reserves of the Kinsale Head natural gas field have been increased by one third to 1.35 trillion cu.ft. This has allowed for both expansion and optimisation of gas usage (i.e. to increase the extent to which it replaces the higher value imported fuels, particularly gas oil) in premium markets. At present a pipeline to extend the supply from Cork to Dublin, the largest premium market, is under construction and is expected to be completed by late November, 1982. Broad agreement on the extension of supply to Northern Ireland has been reached and it is expected that detailed arrangements will be finalised shortly. Based on the estimated reserves and the likely demand, the life of the field should be in the region of 20 years. Natural gas pricing policy is being adjusted by the Government in a progressive and balanced way to reflect more closely the energy value and opportunity cost of the gas. This development is reflected in the revised pricing arrangements with the ESB and most recently in the terms agreed in principle for the supply of natural gas to the Dublin Gas Company and Northern Ireland.  7. Peat. In the case of peat production the Government have sanctioned a revised pricing structure to enable Bord na Mona to finance a significant proportion of its investment programme from internal resources. In recent years relatively low prices meant that domestic demand for the Board's products consistently exceeded supply and the new pricing regime should secure a better balance in this respect.  8. Coal. While there has been a noticeable increase in the level of coal sales in recent years this fuel still accounts for only 1007o of tota primary energy requirements. There is a small amount of indigenous production but the bulk of coal used here is imported.  9. Electricity. In the field of electricity a most important recent development has been the reduction of dependence on oil for electricity generation from 73% in the year ended March 1979 to 40% in the year ending March, 1982. The replacement of imported oil with indigenous natural gas which now produces 36% of electricity has been achieved through completion of a large investment in generating capacity in the Cork region. Additional flexibility in the use of gas will be achieved through the conversion of oil-fired plant in Dublin now underway to be run on either oil or gas. Natural gas has been priced at a level that has enabled the ESB to keep its fuel costs well below the cost of oil, but this price level will be progressively adjusted upwards in line with policy on energy pricing. Factors that will determine future price rises comprise fuel costs, operating costs including labour costs, revenue buoyancy and the cost of financing the Board's investment programme. In the case of the investment programme the fall that has taken place in the demand for electricity over the past two years has meant that the spare plant capacity of the ESB had increased to 65% by 1981. The Government have initiated an inquiry into all aspects of electricity pricing policy.  10. Energy Conservation. While it is important that the nation have a secure energy supply it is also important that this energy be consumed efficiently. Accordingly, the conservation programme of the Department of Industry and Energy has received increased emphasis in recent years and is aimed specifically at achieving such efficiency. The programme is implemented on a sectoral basis designed to achieve significant energy savings in industry, residential use, transport, agriculture, commerce and the public sector.  11. Arising from the factors discussed, energy policy over the Plan period will have particular regard to the following:  - an expected increased demand for all forms of energy together with significant changes in the composition of that demand and the required primary energy inputs; (as set out in tables 2 and 3);  - the uncertainty surrounding likely developments in the real level of energy prices and in the availability of supplies;  - the likely fall in oil dependence in proportionate terms while recognising that the security of oil supplies will remain critical to our economic development;  - the need to maintain competitive energy costs to ensure that economic growth is not hampered;  - the significant resources which will be required for the energy infrastructural investment programme in order to diversify fuel sources, maintain efficiency and develop native resources at a time of great difficulty for public sector finances;  - the underlying determinants of energy price levels including that of secondary energy sources where large added costs accrue from the conversion of primary energy inputs;  - the performance of the State agencies involved in energy provision in terms of efficiency, employment, remuneration of capital invested and, in general, the extent to which they are meeting the policy objectives laid down for them;  - the depletion and utilisation of the present levels of reserves of of indigenous energy resources and the practicality of developing new sources.  TABLE 2 - FINAL ENERGY DEMAND (103 TOE)  1981 1985 1987  Electricity 737 785 833  Peat 589 780 820  Coal 832 860 880  Oil and LPG 3,886 4,055 4,100  Natural Gas &  Town Gas 140 490 610  Total 6,184 6,970 7,243  TABLE 3 - PRIMARY ENERGY INPUT (103TOE)  1981 1985 1987  Peat 1,120 1,540 1,580  Coal 852 1,070 1,910  Oil 5,069 4,390 4,350  Hydro 222 190 190  Natural Gas 896 1,740 1,320  Total 8,159 8,930 9,350  3. The main objective of Government policy over the Plan period will be to ensure a supply of energy at reasonable prices so that, as far as possible, neither supply nor price constrains economic development. In order to attain this objective, policies are at present being, and for the period of the Plan will continue to be, directed towards reducing the country's dependence on imported energy and improving the security of supply, promoting the development of all indigenous energy sources, encouraging hydrocarbon exploration, improving flexibility in the use of available energy supplies, ensuring that energy production and distribution under State control is efficie and competitive in the market place and that the cost of security measures are identified and kept to a minimum and promoting the efficient use of energy in all sectors of the economy.  POLICY MEASURES AND APPROACH  3. In implementing energy policy the Government will, where necessary, use State agencies to obtain supplies of energy at home and abroad where such supplies are required for stiitegic reasons or where State intervention is required to ensure that the benefits are as widely spread as possible. Supplies and stocks of fuels will be regulated by law where required by strategic and security considerations. Where strategic rather than economic considerations affect the price and distribution of fuels the cost to the economy of such security will be clearly identified and kept to a minimum. The price at which energy supplies at the disposal of the State is sold will be determined by the market to the greatest extent possible but will be sufficient to cover the investment and security costs involved.  4. Tables 2 and 3 show energy input and consumption for 1981 and projections for 1985 and 1987. The projections are based on planned economic growth rates and allowance is made for improvements in energy conservation and use.  5. Oil. While it is planned to reduce the proportion of demand supplied by oil, it will remain an important source of energy because of its advantages and, indeed, because it is practically irreplaceable in certain uses, particularly transport. Scope for development in the oil sector arises in respect both of securing sources of supply and building up strategic stocks.  6. As regards securing sources of supply, the INPC has a 3 year renewable contract with Saudi Arabia for 500,000 tonnes of crude oil per annum. A 5 year contract with the British National Oil Corporation for a further 500,000 tonnes per annum was recently concluded. The INPC will work towards maintaining secure oil supplies during the period of the Plan consistent with keeping the cost of supplies as low as possible. The extent and nature of its involvement in the oil procurement and refining market over the period will be kept under review but it is not envisaged that the INPC will become actively involved in distribution. A major task for the Corporation will be to manage the Whitegate refinery so as to improve its product range and reduce the cost of operation to a level that can be sustained in commercial operations.  7. We are required under EEC regulations to maintain stocks equivalent to 90 days consumption and while the major part of this requirement is held here a proportion is held abroad. It is essential that, over the period of the Plan, our level of stocks is based on the strategic realities of and prospects for the Plan period i.e. the continuing danger of a severe supply disruption or sudden high price increase, both of which situations will require the cushioning effect of adequate stocks of oil. For this reason over the Plan period the level of security afforded by stocks will be improved through:  - maximising the utilisation of existing storage space;  - achieving a better balance between the different types of oil;  - increasing the level of strategic as distinct from commercial operational stocks, together with the retention of refinery capacity.  In addition the storage space and level of stocks will be kept under review. Such a policy will contribute greatly to security of supply, bu carries costs for investment in tankage and stocks which are over and above the level required for ordinary commercial purposes.  3. Natural Gas. It is in regard to natural gas that perhaps the greatest scope exists for development over the Plan period. Analysis of the main policy considerations which will guide strategy on the extension of the gas supply network to parts of the country other tha Dublin and Belfast is underway at present. In the planning of this programme the question of the economics of development and of maintaining a regional balance will be prime considerations. To date, the development is based on a single gas field. The programme will b reviewed annually in the light of developments in the market and of the performance of the field and the depletion policy will be adjusted accordingly. The building of a natural gas infrastructure will be a further incentive to exploration.  4. Because it is a direct substitute for oil, the natural gas programm is of benefit both to the nation and the Exchequer. At present, the gas being used saves about £200 million annually on oil imports. The surplus revenue from the sale of the gas goes to the Exchequer. The replacement of higher value fuels in Dublin and elsewhere will increase its value to the nation, both through import savings and through its contribution to Exchequer finances. The costs attached to the programme are mainly the pipeline transmission and distribution system costs and appliance conversion costs. The benefits and costs to the nation of using gas as a fertiliser feedstock are at present under examination.  5. Peat. There is considerable scope for expanding production of peat during the Plan period. Investment by Bord na Mona in the period to 1987 will be mainly on its third development programme which involves the development of up to 25,000 hectares of new bogs extending over 10 counties in the Midlands and the West. A significant expansion in briquette capacity is also planned. The new briquette factory at Littleton, Co. Tipperary, commenced production in 1981 and is capable of producing 140,000 tonnes per annum at full production. A new scheme at Ballyforan, Co. Roscommon, is scheduled to come into production in early 1985 and will have a capacity to produce 140,000 tonnes per annum. By 1987, Bord na Mona production of peat products is expected to amount to 1.44 mtoe.  6. Direct consumption of peat and its use for electricity generation represents an annual saving to the nation of the order of £100 million on energy, mainly coal imports and generates considerable employment. The ESB has provided an important market for Bord na Mona's products and sales to the ESB will continue to account for a substantial proportion of the Board's output. Approximately 65% of annual milled peat production will be used by the ESB.  7. Coal. The supply of coal is virtually entirely under private sector control. At present coal is consumed largely by the domestic sector (7601o in 1981) and some increase in usage in this sector can be expected. Coal usage by industry is low - 0. 13 mtoe in 1981 - and efforts to encourage industries to switch to coal have met with limited success. Among the factors militating against a change to coal are the capital costs involved, the fact that much of industry's equipment is relatively new, the length of the pay-back period and the storage and handling facilities required. The major coal diversification project is the construction of the Moneypoint units by the ESB.  8. The environmental impact of large-scale switching to coal is of increasing concern and while present levels of consequential atmospheric pollution are low there are no grounds for complacency. The switch to natural gas in Dublin over the next 2/3 years will tend to ease the situation. In further developing our coal utilisation policies special consideration will be given to the environmental impact.  9. Electricity. Economic growth can be constrained by both electricity supply uncertainties and levels of tariffs. It is clear that the planned level of electricity supply capacity will exceed demand over the plan period and, in itself, will not, therefore, inhibit growth. The investment involved will increase capital servicing costs but reduce fuel costs as coal is a much cheaper fuel than oil. Depending on the level of demand, the effect of unutilised generating capacity may mean that additional capital servicing costs will exceed fuel savings and, thereby, have an adverse impact on electricity prices. While it is recognised that it may be difficult to change the generating programme in the short term, the plant programme will be reviewed in the light of changing circumstances. This review will attempt to assess the extent of present and future overcapacity and the costs and benefits to the consumer of investment in generating capacity based on strategic considerations. On the basis of the review, a policy aimed at achieving a balance between security of supply (in terms of fuel dive . rsification and an appropriate margin of total capacity over peak demand) and consequential financial effects on consumers will be developed with a view to minimising the cost of electricity. While the implementation of this policy may have little impact over the early years of the Plan period, it may emerge from the review of the existing plant programme that the timing of certain projects will have to be altered.  MINERALS  MINERALS  1. Some 2,200 people are directly employed at present in Ireland in the mining and minerals exploration industry. Quarrying provides employment for about another 3,500. The minerals industry also contributes net foreign exchange earnings - exports of lead, zinc and copper ore concentrate in 1981 amounted to 353,000 tonnes valued a £40 million. (This compares to 618,000 tonnes valued at £63 million 1980, the downturn being mainly due to the protracted strike at the Tara mine at Navan.) Barytes exports were valued at £5 million in 1980 and £7 million in 1981. The industry also contributes to the economy through the purchase of goods and services produced in Ireland.  POLICY FRAMEWORK AND POTENTIAL  2. Exploration activity is facilitated by the Department of Industry and Energy through the granting of prospecting licences under the Minerals Development Acts 1940-1979. There are some 600 exploration licences current, mainly held by Canadian, U.S., U.K., French, Dutch and German exploration companies. While the main interest has been in exploration for base metals there has recently been a trend toward exploration for other metals and certain nonmetallic industrial minerals. The exploration industry is essentially a private sector activity but the State has become directly involved in some aspects of the work e.g. in funding the recently completed comprehensive study of the country's coal resources.  3. The development of deposits of scheduled State-owned minerals i@ facilitated through the granting of State mining leases to the particular mining companies. There are over 40 such leases in existence. The safety and environmental aspects of all developments are controlled by the State through the Department of Labour and the relevant planning authorities.  4. The policy objectives in the mining sector may be summarised as follows:  - the encouragement of exploration and development;  - optimising the return to the national economy from mining;  - maximising direct State revenue from mining.  2. The Irish mining industry has recently contracted further with the closure of the lead/zinc mine at Silvermines, Co. Tipperary, the copper mine at Avoca, Co. Wicklow and a barytes mine at Clonakilty, Co. Cork. However, a new coal mine development has recently commenced in Co. Laois and there are some prospects for further new mine developments, though most of these prospects will require some improvement in the related factors which determine development, notably metal prices, before commercial exploitation commences. Among these prospects are:  - the Bula lead/zinc orebody at Navan;  - talc/magnesite deposits at Westport and Inisboffin;  - various anthracite and semi-bituminous coal deposits;  - some other lead/zinc/copper/silver deposits e.g. Ballinalack.  2. Longer term prospects for the industry depend on the maintenance of a high level of exploration activity. Ireland continues to be regarded as a country with attractive metallic and non-metallic minerals potential with large tracts which have yet to be intensively explored by modern methods.  POLICY APPROACH AND MEASURES  2. Minerals policy over the Plan period will be addressed to overcoming the technical, financial and economic problems and constraints encountered by the mining industry. In the technical sphere, ore deposits are increasingly difficult to locate and there is a clear need for the use of more modern techniques. Ready access to the large body of exploration data submitted by exploration companies to the Geological Survey would ease the technical difficulties being encountered. Discussions aimed at making this data more readily available are at present being undertaken with the exploration companies concerned.  3. The financial and economic problems experienced by exploration and mining companies at present include the high level of finance charges which bear heavily on an industry which traditionally has a high debt/equity ratio, depressed prices for base metals and uncertain demand prospects. These factors also militate against profitable investment in downstream activity. The measures outlined in the Plan to achieve a significant improvement in the domestic economic environment, including interest rates, inflation and wage costs, will be of help to the industry in dealing with current problems.  Other measures which will be adopted to address the problems facing the industry at present and to attain the State's objectives for the development of our natural resources include:  - the rationalisation, where possible, of the development of deposits, particularly those in which the State has an equity interest;  - an investigation of schemes to extend the economic life of mines (on which the companies and the State may have a different perspective) by means of such measures as a revenue retention fund;  - a review of the economics of downstream development possibilities;  - an examination will be undertaken aimed at identifying how the services which the Geological Survey provides for the mining industry can best be improved.  HYDROCARBON DEPOSITS  1. Exploration activity in the Irish offshore area has been governed since 1975 by the Exclusive Off-shore Licensing Terms 1975, as amended in November, 1980. In June, 1982 the Department of Industry and Energy organised a second licensing round to give impetus and structure to an accelerated exploration effort. To date, 70 off-shore exploration wells have been drilled, resulting so far in the discovery and development of one commercial field, the Kinsale Head Gas Field. Significant accumulations of hydrocarbons were identified at three other locations which are the focus of continuing exploration/delineation to assess commerciality.  POLICY FRAMEWORK AND POTENTIAL  1. The prospects for the offshore area are reflected in the interest in the blocks on offer in the second licensing round. Of the 24 blocks awarded, 18 are in the Celtic Sea, 2 in the Kish area and 4 in the Porcupine Basin. Only 2 wells have been drilled to date in the Kish area which is close to Dublin and the full potential of this Basin remains to be tested. The four Porcupine blocks were awarded to the British National Oil Corporation which is a newcomer to the Irish offshore. Overall the new licencees have given commitments to do 8,500 line kilometres of seismic survey work and will drill up to 26 wells in total. Since the announcement of awards under the second licensing round in June last, three blocks in the Slyne area which werc among those on offer in the round were awarded to the Elf Aquitaine Group on a seismic option basis.  2. The State has four objectives in relation to hydrocarbon  development:  - to promote and encourage exploration activity in the prospective areas;  - to establish as soon as possible, the existence of commercial accumulations of hydrocarbons and to promote the development and production of indigenous hydrocarbons;  - to provide for an optimal return to the State from such developments through royalties, taxation and State participation;  - to ensure that development is fully integrated with the potential and possibilities of the Irish economy, particularly as regards information and technology transfers, supply of goods and services and development of the hydrocarbon industry.  1. While the general outline of the exploration programme is known over the next few years, every effort will be made to encourage further work. As a result of the seismic work and drilling commitments secured under the second round, a satisfactory level of exploration activity will be maintained over the next few years. The results of this exploration will determine the direction of future policy. A commercial discovery would have major implications for the economy and particularly the balance of payments. It would also have major infrastructural and social implications. In particular, if such resources are to be developed in a way that will bring tangible benefits to the community, a realistic view will have to be taken of both the size and timing of the surplus which a discovery of a particular size would generate. Experience of other countries suggests that, in deepwater offshore development, it often takes substantially longer than expected to develop production facilities and the resulting delay in revenues to the State can have major consequences for ambitious expansion programmes, while at the same time industry and competitiveness may be undermined by unrealistic expectations. In this general context it is encouraging to note the considerable interest in the Celtic Sea area which has been shown by applicants in the recent licensing round. The technology of developing a find in this relatively shallow-water basin is fully developed and production could be achieved fairly rapidly if a commercial discovery is made.  POLICY APPROACH AND MEASURES  1. Exploration activity has been promoted through successive general licensing rounds, the active pursuit, between licensing rounds, of an "open door" policy in respect of acreage not allocated under licence and the coordination and publication of all information (not specifically subject to confidentiality obligations) at the disposal of the State in relation to previous exploration activity and the geology and prospectiveness of particular areas. This approach will be continued over the Plan period.  2. The only proven commercial hydrocarbon deposit - the Kinsale Head natural gas field - has been brought into production and the first stage of an extended gas distribution network is under construction. This will encourage further exploration because the new facilities will be available for marketing any further natural gas finds.  3. A reasonable return to the State is provided for under the financial provisions of the existing licensing terms. These provide, not only for royalties and taxation, but also for State participation in the development of a commercial deposit and the sharing of the benefits accruing from such development.  4. An active promotion programme and monitoring system has been in operation for a number of years in relation to the use of Irish goods and services in exploration activity and in the development of the Kinsale Head Gas Field. The experience gained in the latter context will provide a basis for securing a more extensive use of Irish goods, personnel and enterprise in future developments.  CHAPTER VIII INFRASTRUCTURE  TRANSPORT  POLICY FRAMEWORK  1. The current international recession has had a significant adverse impact on the transport industry. Factors such as the rise in oil prices, the depressed environment for international aviation and shipping services, the stagnation in the volume of production of transportable goods and high rates of inflation have had severe repercussions on the finances of enterprises in the transport sector. Within the Statesponsored transport bodies the very high level of investment which has been undertaken has not been serviced by the activity generated. High manning levels have also had a negative financial impact.  2. Policy measures over the period of the Plan will have to cope with the consequences of:  - the substantial increase, from £33 million in 1977 to nearly £100 million in 1982, in the cash level of State subvention to cover the operating losses of CIE;  - the serious deterioration in the financial position of other transport State-sponsored bodies which required, since 1977, an injection of over £40 million by the Government as equity finance.  1. During the period of the Plan some existing major programmes will end (e.g. Howth/Bray electrification, replacement of CIE bus fleet). The heavy and continuing demands on limited State resources are such that any further investment in the transport area which might lead directly or otherwise to reliance on help from public funds must have sound economic justification. Such investments will be considered primarily on their merits on the basis of the objectives set, out for public sector investments earlier in the Plan and, where such criteria are met, will be financed, if necessary, by the State. The aim will be to concentrate investment expenditure on commercially and economically justifiable projects.  2. As the transport sector develops over the next five years there will undoubtedly be a need for more effective co-ordination of transport matters between the Department of Transport and other Departments and agencies involved in the sector. The development of harbours, airports and the road and rail infrastructure should be part of one process rather than having, for instance, road development and traffic management treated separately from other transport investment proposals.  3. Public transport undertakings, which at present employ over 28,000 people, have little potential for creating significant numbers of self-sustaining jobs over the next five years. The transport sector will, nonetheless, have a vital supportive role to play in the development of the economy.  POLICY MEASURES  1. The Government have been undertaking a fundamental reappraisal of the role of the State transport bodies and intend to ensure that in future the principle of commercial viability is effectively adopted by all commercial transport State companies as their basic operating criterion.  2. The Government believe that public transport should, to the maximum extent possible, be paid for by those using the service. To the extent to which this is not possible and where there is a sound justification for the provision of State funds for transport services or for investment in necessary infrastructure, resources will be available for projects which stand up to evaluation by reference to their rate of return and to their effectiveness in the development of the economy and in providing essential services.  INTERNAL TRANSPORT  CIE  1. McKinsey Consultants were engaged in September, 1979, to study the reasons for the deterioration in CIE's financial position, and to recommend, on the basis of a comprehensive review of the Board's activities, any measures that could be taken to remedy the problems.  2. The McKinsey Report recommended four major changes:  - disestablishing CIE and creating three separate public transport operating companies (Railway, Dublin Buses and National Buses);  - combining National Roads and Rail infrastructure and service functions in the Department of Transport;  - restructuring reporting relationships between public transport operating companies and the Department of Transport;  - strengthening the functions of the Department of Transport to allow transport policy to be kept under continuous review.  1. The McKinsey Report suggested that portions of CIE's rural bus services and CIE's freight services should be undertaken by the private transport sector. In putting forward their recommendations for the restructuring of CIE, the consultants argued that the dominant role of CIE which had been enshrined in legislation and the extent of the Board's autonomy were no longer appropriate given the greatly diminished share of the transport market which is now served by CIE and, in particular, the reduced role of the railway. In effect, the present institutional structure, dating back to the mid-1940s, and the extent of the influence which can be exerted by CIE, were perceived by the consultants as a hindrance to the development of national policy suited to the present needs of the transport sector.  2. The Report suggested as short-term remedial action, centralisation of CIE area management structure, strengthening of rail service marketing and streamlining of freight operations by concentration on the bulk freight market. The impact of such action, according to the Report, would allow a reduction of 25 per cent in the railway deficit by 1990. Implementation of the freight proposals would involve compensation costs but would reduce the CIE deficit over time. The strengthening of the marketing approach suggested would involve regular price increases to reflect increasing operating costs. This is a fundamental requirement if the growth in Exchequer subvention payments is to be constrained.  3. The foregoing short-term changes would not be sufficient to contain the expanding deficit on the railway. McKinseys devoted most of their report to the long term choice regarding the railway. They stopped short of recommending closure of the railway because when "all system costs" (including rail redundancies, extra road traffic costs etc.) are taken into account, closure did not emerge as the obvious choice. However, if the policy objective was confined to the net Exchequer outflow, then the McKinsey options for reduction or closure of the network would clearly arise for consideration.  4. If the Government decide to continue the railway system the present "open-ended" type of subvention should be discontinued. Criteria should be established for the payment of subvention in respect of services which are uneconomic but which are recognised as essential in the public interest. Such payments should then be made above-the-line", i.e. as payments for service rather than as at present "below-the-line" i.e. in recoupment of losses. The issues involved are at present under discussion between CIE and the interested Government Departments.  5. Decisions are about to be taken on the major issues relating to the railways, the structure of CIE and the reporting relationship with Government. Clear guidelines will be established in regard to manning levels, a market oriented approach to services based on improved pricing systems and the cost of providing services. The overall Government objective will be to ensure that the public transport system provides services effectively on the principle of commercial viability, with departures from that principle permitted only on the basis of specific criteria as to the manner in which the function will be discharged.  6. The steps being taken by the Dublin Transportation Task Force to reduce Dublin's traffic congestion and hence improve bus utilisation will be continued and intensified when the Dublin Transport Authority (DTA) is established in 1983. These steps, coupled with CIE's investment in new buses, should result in improvements in the efficiency of Dublin City Bus Services. The DT, will be a regulatory body and will help to improve the administration of Dublin transport in four major respects:  - Transport Planning: By providing mechanisms for aligning the transport plans of the DTA and the development plans of the three Dublin local authorities, the DTA legislation will provide for a permanent process, which is lacking at present, for the integration of transport planning with land-use planning.  - Transport Budgeting: The DTA will make recommendations annually in relation to both capital and non-capital expenditure, and the amounts settled by the Government will be channelled through ti Authority to CIE and the local authorities. The balance between capital and non-capital and within capital the priorities between roac and other transport infrastructure, will thus be assessed in an integrated way, which is not the situation at present. (Such an integrated scheme will be particularly important so as to maximise the benefits from expenditure in the light of the limited Exchequer resources.)  - Public Transport Services: The DTA recommendations will provide the Government with the means of striking a balance, on th( basis of fully articulated options, between the level of public transpo services, the level of fares and the level of Exchequer subvention. Th balance is struck at present only on a very unscientific basis.  - Traffic Management: The DTA will both design traffic management schemes and make the subsidiary laws to implement them. At present, the Gardai make these subsidiary laws and scheme are designed by both Dublin Corporation and CIE.  1. The Government will be looking for some positive developments in the near future on the introduction of one-man bus operations in CIE. CIE estimate that the introduction in 1983 of one-man bus operations in Dublin (coupled with other economies) would produce financial saving of f-2 million. There would be a corresponding savin in areas outside Dublin.  ROAD HAULAGE  1. The Report of the Transport Consultative Commission on Road Freight Haulage, which was published in July, 1981, recommends the removal, on a phased basis, of the restrictions on access to professional road haulage so as to make road freight transport generally more efficient, flexible and competitive. The Report notes that restrictions on access to the professional haulage industry have impeded growth in the quality of transport and contributed to a situation where as much as two-thirds of road freight activity continues to be undertaken by "own account" vehicles. This represents under-utilisation of investment in vehicles and equipment.  2. The central recommendation in the Report is the liberalisation of existing licensing arrangements over a period of two years so as to make licences freely available to all qualified applicants. This envisages "own account" operators who are suitably qualified being able to obtain licences to engage in general haulage. The liberalisation is linked with improved enforcement of the transport and traffic law and quality controls as part of the overall programme of raising the level and standard of services provided by the industry.  3. The Government accept the Commission's approach and will take a decision on the implementation of the Report's recommendations shortly.  ACCESS TRANSPORT  Aer Lingus  1. Future Government policy towards Aer Lingus will be based on the review of its commercial and financial position carried out earlier this year. The drive towards increased productivity should be intensified in order to reduce the excessive burden of central overheads which are affecting costs on all services.  2. The Government's recent decision to invest £10 million in Aer Lingus in 1982 (with further equity investments of £10 million per annum in 1983 and 1984) and the payment of a sum of £5 million per annum for 1983 through 1985 will help to improve the Company's financial situation. In order for Aer Lingus to live withing the Exchequer resources being made available, it also has to take measures to increase the amount of finance internally generated. The Company's non-transport enterprises outside the State are being examined for this purpose. The Company will have to demonstrate its ability to contain costs, to improve productivity still further and to tailor its capital expenditure to a minimum level in line with  commercial requirements.  B + I  1. The B +I Line has been encountering serious financial problems in the recent past. Some of the principal reasons for these problems are outside the Company's direct control, for example, fuel prices, intensive price competition and stagnation in tourism. Other financial problems, such as the Company 'Is high financial charges, stem from the over-ambitious investment programme undertaken since 1978. A vigorous commercial approach is the only way for the Company to ensure efficient and profitable services. To this end the Company is now restructuring its operations. The performance of all the Company's services is being monitored on a monthly basis and the scope for further economies is being examined. A radical retrenchment and rationalisation of B + I's operations is necessary. Time and decisive action will be needed to ensure that all services will be operated on an economic basis and the Company's cost overheads significantly reduced.  IRISH SHIPPING  1. For the past decade the overall profit record of Irish Shipping Limited has been particularly good. However, in spite of its profit record, the Company has had to contend over the years with the fluctuations on the deep-sea market and has successfully coped with periods of slump because of the profits generated by its ancillary activities. The present slump in tramp shipping is, however, the worst that the Company has had to contend with. In 1981, the Company recorded a F,3 million loss on the shipping side. Since then the situation has deteriorated and very considerable losses will accrue in the shipping area in 1982, and for some time to come. Irish Shipping's profitable investments will not be able to cushion the Company against these losses and stringent remedial action will need to be taken by the Company.  OTHER TRANSPORT FACILITIES  1. The last two years have seen the beginning of an expanded network of scheduled domestic air services with services from Dublin to Cork, Shannon, Galway (Carnmore) and Waterford. At the same time, there has been an extension of facilities at a number of nonState owned airports. Construction of the Connaught Regional Airport at Charlestown, Co. Mayo is in progress and the construction of an airport at Letterkenny, Co. Donegal is planned.  2. In the case of public investment in harbours and State airports, the Government consider that, in future, such investment should, where possible, be operated on a strictly commercial basis and that it should be self-financing. This means that, in future, public investment should be related to the specific and identifiable requirements of new trade or industrial development or essential services.  PRIVATE AND PUBLIC TRANSPORT  1. The Government foresee a continuing need to ensure the availability, albeit with some scaling down of the cost to the Exchequer, of transport for those who do not have the choice of providing their own.  2. The balance to be struck between public and private transport differs as between different parts of the country and between different forms of transport. In Dublin, the steps now being taken are geared to increase the utilisation of public transport e.g. the electrification of the Howth/Bray line and the introduction, inter alia, of bus priority schemes. In rural areas, the emphasis is more on adapting the levels of bus services to the varying levels of demand. This calls for a more flexible approach, for example, encouraging private operators and local communities to experiment with different vehicle types (such as post buses or minibuses). In this regard, the first post bus service commenced in July, 1982. As regards freight transport, the objective is to ensure a better utilisation of facilities in the private and the public sector. The recommendations of the Transport Consultative Commission in relation to the removal of restrictions on competition and impediments to efficiency, are being considered in this context to see what savings they can bring to the economy.  TELECOMMUNICATIONS  POLICY FRAMEWORK  1. The Government's objective is to provide an efficient modern telecommunications service at the lowest possible cost, consistent with the need to achieve a reasonable return on capital employed. Manning levels and remuneration in the service will be critical in the context of maintaining a low cost service, and will be carefully monitored. It is the Government's policy to have the telecommunications service operated by a State-sponsored body on this basis, as soon as the necessary legislation before the Ddil is enacted and the negotiations with the staff concluded.  2. The Government's general objectives in regard to the telecommunications service are:  - to provide a telecommunications infrastructure which will be adequate for the industrial, commercial, administrative and social needs of the country;  - to assist the Irish telecommunications and electronics manufacturing industry in the process of providing and maintaining a good telecommunications service.  3. On that basis, the following general objectives have been set for the Telecommunications Development Programme:  - to raise the quality of the telephone, telex and data services for subscribers to the level in other EEC countries, and maintain it at that level;  - to provide a fully automatic telephone service, including subscriber trunk dialling, both internally and internationally for all subscribers;  - to increase the rate of connections so that applications for telephones could generally be met on demand;  - to lay the groundwork which would cater for continuing growth.  POLICY MEASURES  4. The general policies to be pursued are to provide efficient services to meet the demands in the most cost-effective manner, to develop good customer relations and to adopt a market-oriented, business-like approach.  5. The policies that will be implemented over the period of the Plan will include:  - maintaining the rate of telephone connections at upwards of 90,000 per year over the period of the Plan;  - providing a fully automatic service for every subscriber, involving the conversion of the remaining manual exchanges to automatic working;  - extending Subscriber Trunk Dialling (STD) and International Subscriber Dialling (ISD) to all subscribers and to all countries;  - providing direct international transmission links to the extent justified by network security and economic considerations, and in particular, to provide in 1984, a Satellite Communication Earth Station operating in the INTELSAT System;  - improving the telephone billing system by providing more detailed information for customers and/or facilities to check metered call usage;  - greatly reducing the delay in answering callers requiring operator assistance and in repairing subscriber's apparatus;  - expanding and modernising the telex and data networks to enable applications for service to be met promptly and a service of high quality to be provided;  - providing new services e.g. National Packet Switched Data Network, Public Mobile Automatic Radio Telephone System, National Radiopaging System etc., consistent with the requirements of economic and commercial development;  - improving and expanding the terminal equipment available to subscribers;  - preparing for the introduction of an Integrated Services Digital Network (ISDN) in later years;  - examining the question of the termination of the telegram service as an increase of at least 50% in charges would be required to maintain the service as an economic one.  6. Tables 1 and 2, give the estimated telephone demand and the telephone connections proposed, on the basis of an investment level of between £970 million and £1,200 million. (The actual investment level in any year will depend on a range of factors; viz, demand, prices, funding costs, economic conditions, etc.):  TABLE 1  INVESTMENT OF £970 MILLION ('000)  1983 1984 1985 1986 1987  ]an Telephone demand (Gross) 95 109 109 109 109  Telephone demand (Net) 80 90 90 90 90  Connections 90 90 90 90 90  Waiting list 30 20 20 20 20  Working lines (year end) 690 757 824 890 958  TABLE 2  INVESTMENT OF £L,200 MILLION ('000)  1983 1984 1985 1986 1987  Telephone demand (Gross) 95 109 109 109 109  Telephone demand* (Net) 80 100 100 100 100  Connections 100 100 100 100 100  Waiting list 30 10 10 10 10  Working lines (year end) 690 770 850 920 990  * Assumes that "net demand" is greater than that anticipated at Table 1 above.  7. It is proposed to raise an appreciable amount of the investment capital from private sources via Irish Telecommunications Investments (ITI) and, when Bord Telecom Eireann is established, it will be a matter entirely for the Board to raise the capital required. Tariffs for telecommunications services have been set and will be maintained so that a substantial operating profit will be achieved each year during the period 1983-1985, and a net profit, after allowing for interest charges, will be achieved by 1984.  8. The current development is taking place, and the future development will take place, in accordance with the existing "Five Year Telecommunications Development Plan" covering the period 1980-1984. This Plan specifies a phased and coordinated programme of work which will meet the needs and objectives in a timely and cost effective manner with a maximum of co-ordination between the various activities. The serious danger of elements of the programme being out of synchronisation with other elements will need to be carefully monitored to avoid unnecessary waste of expenditure. Substantial elements of the current programme, viz, exchange buildings, digital exchange equipment, transmission networks, etc., are already in place or well advanced. The overall unit cost of making telephone connections should, therefore, show some decrease over the period of the Plan. Cost-efficiency will remain of paramount importance.  THE POSTAL SERVICE  1. It is the Government's policy to re-organise this service as a commercial State-sponsored body with an all-equity capital base as soon as the necessary legislation at present before the Dail can be enacted and negotiations with the staff organisations concluded.  2. The postal service which, often in the past, returned a surplus, has been running at a substantial loss in recent years. The costs of providing the service have risen steeply mainly because of inflation. The volume of traffic has fallen as a result of the economic recessio consumer resistance to prices and the uneven standard of the service and as a result of the inroads made by couriers. Unless the necessary remedial action is taken, the service could go into serious decline. The main steps necessary to restore the service to profitability are to improve the standard and increase the level of efficiency, thus containing costs and, with the aid of a marketing push, stimulating traffic. Proposals for improving the standard and increasing the levy of efficiency have been developed and their implementation, in consultation with the staff, is a matter of first importance. The typt and quality of services provided need to be geared to the existing demand. Some services are uneconomic and little used and their cessation will have to be pursued. The introduction of new mail and counter services, such as, airlifted parcel services and delivery of unaddressed mail, is to be pursued. The standard of accommodatioi needs to be improved, and the use of mechanical and/or automated mail processing and other aids will have to be advanced.  3. The overall financial aim is to restore the service to a surplus earning enterprise.  ROADS  POLICY FRAMEWORK  1. It is generally accepted that the roads network is deficient and needs to be improved to cope efficiently with the present and expect growth in the volume of road traffic. The Road Development Plan for the 80's, published in May 1979, indicated that significant amounts of resources (£685 million at 1978 prices) would be needed build a national road system to a satisfactory level.  2. Investment in roads is designed to upgrade the primary road network and relieve growing congestion in urban areas. An improved network is important for economic efficiency, environmental protection and better road safety. The Government's objectives in implementing the roads programme can, therefore, be summarised as follows:  - provide an adequate inter-urban system for the major towns and easy access to ports and airports;  - eliminate traffic hold-ups by the provision of by-passes for town on national routes;  - reduce urban congestion by providing new bridges, ring roads and relief roads.  1. It will continue to be part of Government policy to encourage private sector investment in the roads programme where it can be shown that such private investment would result in the lowest possiblecost. Private interests are already involved in the proposed Ringsend toll bridge and in joint operations with the local authorities in the provision of multi-storey car parks. The Government will continue to seek EEC funds to supplement Exchequer funding of the roads programme.  POLICY MEASURES  1. It is intended to bring the Road Development Plan for the 80's towards the completion of its course over the period of the Plan. Priority will be given to improving the national road network through major works and normal improvements to national routes. Capital expenditure on roads is envisaged to increase significantly in the years ahead as follows:  (£ MILLION) (ROUNDED AT CONSTANT 1983 PRICES)  1983 1984 1985 1986 1987  Road Investment 100 111 122 122 122  This level of investment will enable a number of key road-works to be completed, greatly improving the flow of traffic on national routes, relieving urban congestion and providing a road network capable of meeting industrial and commercial needs.  5. An investment programme in roads totalling many hundreds of millions of pounds clearly puts a premium on an effective and economical organisational structure to carry the necessary work through. The Government have recently established an inter-Departmental Working Group to consider and make recommendations on the Organisation of inland transport as a whole, both central and local. The Working Group's examination will be relevant to the important objective of securing maximum value for money from the roads programme. The Group will be asked to consider the desirability of establishing a National Roads Authority.  SANITARY SERVICES  POLICY FRAMEWORK  1. Economic development and demographic factors over the period the Plan will require a continuing commitment to the provision of sanitary services. Investment in factories, farm buildings, hotels and housing relies on adequate sanitary services being available. The Government will endeavour to undertake projects that offer the best returns at national and local level. Scarce resources will constrain the extent to which sanitary services are provided in anticipation of future economic growth and industrial development.  2. Investment in sanitary services is designed to provide a level of water and sewerage service adequate for industrial, agricultural and commercial growth and housing development. The main emphasis over the Plan period will be on major schemes which convey the largest national benefit in terms of improved infrastructure and serviced land. In view of the increasing investment in sanitary services, it will be necessary to consider imposing realistic charges both on individual users of sanitary services and developers so as to recoup part of the cost. This matter will be examined in the context of legislation to empower local authorities to charge for services generally.  POLICY MEASURES  1. Policy over the Plan period will be directed at building up capacity to meet demand. Investment will be increased significantly in real terms, rising from £118 million in 1983 to a projected £150 million 1987 as follows:  (£ MILLION) (ROUNDED AT CONSTANT 1983 PRICES)  1983 1984 1985 1986 1987  Sanitary Services 118 128 139 144 150  Investment  4. Priorities over the foreseeable future for this investment are: - schemes to serve new housing and new industry;  - schemes needed to make good deficiencies in existing sanitary services systems;  - schemes of headworks, trunk mains, reservoirs, etc., to enable private group water schemes to develop in areas where reliable sourc would not otherwise be available;  - schemes needed primarily for the prevention and abatement of pollution.  HOUSING  POLICY FRAMEWORK  1. The broad aim of Government housing policy has been to ensure that, as far as resources of the economy permit, every household can obtain accommodation of good standard located in an acceptable environment at a price or rent they can afford. The Government will endeavour to ensure that house prices do not push housing beyond the reach of many families and that adequate finance is available at a reasonable price. The historically high interest rates of recent years have put pressure on families in meeting the loan repayments associated with the conventional annuity-type mortgage. The recently established Housing Finance Agency offers house buyers an alternative mortgage repayment system by linking loan repayments to a fixed proportion of the borrower's income. This eases the burden of repayments, especially over the early years of the loan.  2. The costs of public housing have risen sharply in recent years and this places a limit on the extent of State support. The emphasis over the Plan period will be on encouraging householders to provide their own houses and on reducing the degree of State support for public housing. Deserving families in genuine need will have to be provided with public housing to the extent that resources can be made available.  3. The major objective being pursued by the Government, of dramatically lowering inflation, is of particular importance to the housing sector. Apart from reducing the rate of increase in house prices, lower rates of inflation should lead to lower nominal interest rates. This should substantially reduce the real cost of housing to existing owners and in particular, first-time owner occupiers should find it much easier to purchase houses.  POLICY MEASURES  1. The Government have now reviewed the operation of the schemes of financial assistance for private housing. Regarding the £3,000 mortgage subsidy scheme, they have decided that, in the case of applications for the subsidy which are received in the Department of the Environment on or after the date of publication of the Plan, the subsidy will be payable annually over a period of five years instead of six-monthly intervals over three years under the present scheme. £1,000 will be payable in the first year, £800 in the second year, £600 in the third year, £400 in the fourth year and the balance of £200 in the fifth year. Prospective lower interest rates and lower inflation should more than compensate house purchasers for the amendment of this scheme.  2. Although the response to the tax relief provided under Section 23 of the 1981 Finance Act for private rented accommodation has been satisfactory, scope for further expansion in this area is being examined.  3. The Government will continue to encourage building societies to direct funds towards the more moderately priced houses. Over the Plan period, the respective roles of the SDA loan scheme and the Housing Finance Agency will be kept under review.  4. The local authority house building programme will be the subject of a critical review. House completions this year are estimated to 5,700 from over 6,000 in 1977, despite significantly increased financial allocations since then. The costs of local authority houses have escalated in recent years from £12,500 per unit in 1978 to about £30,000 now. In some central city areas where costs of land and building costs are higher than normal, the costs of some units of accommodation may exceed £40,000.  5. The provision of local authority housing also attracts current expenditure by way of the annual Exchequer subsidy on loan charges. The cost of the subsidy has increased from £52 million in 1978 to almost £100 million in 1982. The average subsidy on each new local authority house is now running at £87 per week, while rental income from these houses fails to cover even maintenance and management charges. At the beginning of 1982, the average rent paid on new loc authority houses was as low as £8.60 per week. It is estimated that rental income in 1982 will amount to £29 million, while maintenance and management charges are estimated to total £52 million this year  6. Recent years have seen a very rapid rate of household formation which has resulted in a high level of demand for public housing. Demand for this type of housing has been encouraged by the very lc rents. At the same time, there are some local authority tenants who could well afford private housing. As a result, severe pressure is put on Exchequer finances at a time of resource constraints. This requires a review of both the level of rents and of the criteria for eligibility for local authority housing.  7. Economic development and greater urbanisation have increased the demand for land, especially serviced land, and are expected to continue to do so over the Plan period. The Government intend to give priority to investment in sanitary services to provide, so far as resources permit, an adequate supply of serviced land. This will ease the pressure on building land prices and facilitate economic development. Nevertheless, this matter is of concern to the Government and they look forward to receiving the report of the Oireachtas Joint Committee on building land which has been established to consider the whole question of controlling the price of building land and to make recommendations.  8. The tentative expenditure profile for public investment in housing in 1983, based on the preceding policies is set out below:  (£ MILLION) (ROUNDED AT 1983 PRICES)  1983  Local Authority Housing 210  House purchase etc. 141  Private Housing Grants 19  Other 3  Total Housing 373  It is intended that the overall annual housing capital allocation for 1984 to 1987 will remain at f 373 million at constant 1983 prices.  EDUCATION  1. The main area of public capital expenditure in the education sector is in the provision of grants towards new educational buildings and extensions. The provision of capital at first and second levels is determined mainly by the rate of increase in enrolments which is governed by the size of the increase in population in the relevant agegroups and the participation rates outside the compulsory education range (six to fifteen years). In addition, urban expansion necessitates the provision of new schools in suburban areas, whilst there is a continuing need to replace accommodation (existing) which falls below acceptable standards. At third-level, capital needs must be related more closely to the type of courses which it is considered should be provided in the general interests of the economy, and the question of the provision of additional facilities or the upgrading of existing facilities must be decided on the basis of priorities, taking account of the manpower needs of the econmy, the relative costs involved, demographic factors and the general resources position.  POLICY FRAMEWORK  1. Within the limits of the financial resources which it has been possible to provide, very significant progress has been made at first and second level in recent years in meeting the priority capital needs in the provision of new buildings and the replacement of sub-standard accommodation. An increased number of second-level pupils have been taking subjects which are more directly relevant to the world of work than the more traditional academic subjects. The general process of making second-level schooling more relevant to the world of work is being further developed by the pre-employment courses now being offered in many schools and by the School/Industry Link Scheme which was initiated by the Manpower Consultative Committee of the Department of Labour. At third level there has been, in recent times, a new emphasis on science and technology with the completion of a programme for expansion of seven Regional Technical Colleges, the provision of the first phase of building for the new National Institute for Higher Education (NIHE) in Dublin, the commencement of the second phase of the NIHE in Limerick and a new College of Education in Limerick to train technical subject teachers for second level schools. A special manpower programme was also initiated under which facilities were provided in many third-level institutions to meet identified manpower needs in science and technology.  2. It is anticipated that net enrolments in the coming decade at first and second level will increase by about 70,000 and the thrust of capital provision over the Plan period will be to utilize the financial resources available to cope with this expansion in numbers. While this increase in enrolments is considerably lower than in the previous decade, there will also be demand for places arising from population shifts and for the replacement of old and uneconomic buildings. The demand for additional third-level capital facilities is also expected to increase rapidly and it will be necessary to order this demand into clear priorities so that the limited resources which will be available for investment in the public sector generally can be used in the most effective way. In this respect, regard will be had to the fact that while capital and later running costs are very heavy in all parts of the labour-intensive education sector, they are particularly high at thirdlevel.  POLICY APPROACH AND MEASURES  1. The basic approach to public capital investment in education over the Plan period will be to achieve maximum effectiveness in the use of the limited resources available and, accordingly, to implement only those policy measures with the highest benefit to cost ratio in educational terms. The 1983 allocation will be £94m and it is intended that the annual allocations for 1984 to 1987 will be of the same order. Low priority expenditure, e.g. on recreational facilities will have to be contained. At first and second-level particular attention will be devoted to ensuring that in the distribution of scare resources increased emphasis will be given to what might be called educationally deprived areas.  2. The possibility of providing school transport facilities other than through State agencies will be further examined.  3. The further reform of the curriculum in second-level schools will be advanced by the setting up of a Curriculum Council as referred to in the White Paper on Educational Development. This Council will be representative of educational, cultural, commercial and agricultural interests and will advise on the direction that reform should take. In particular, it will have regard to the need to relate the curriculum to a greater extent to the employment needs of pupils while maintaining the benefits of a broad-based education. At third-level, consideration will be given, in consultation with the interests involved, to making the most efficient use of existing very valuable facilities including, if necessary, the question of restructuring the academic year.  HEALTH  POLICY FRAMEWORK  1. There are four main categories of institution which constitute the health service development programme  - Acute general and specialist hospitals  - Psychiatric hospitals and centres for the mentally handicapped  - Geriatric hospitals and homes  - Others (e.g. health centres, clinics, institutions for the Deaf and Blind).  1. Many factors have contributed to the existing development needs of the health services. The principal factors are  - the last decade has seen a steady increase in the country's population. There has been a relatively high birth rate so that a large percentage of the population is now under 15. The number of elderly in the population has increased significantly. These factors together make for a considerable increase in demand in related health service areas, as new townships develop on the periphery of the large urban centres many existing institutions become removed from the population they are expected to serve, in the last quarter-century there has been a virtual revolution in diagnostic and treatment techniques in the health services, particularly in hospital services, many existing services are based on ageing institutions which have become economically unviable or medically outdated, and which offer accommodation below currently acceptable minimum standards.  1. The basic principles of the ongoing capital programme are to develop general and specialist hospitals with the objective of rationalising the organisation of the services and ensuring that acceptable standards of treatment and facilities can be provided;  - to continue the desirable shift from institutional to community care in the provision of psychiatric services, while ensuring that the institutional care which will continue to be required is of an acceptable standard;  - to provide proper and appropriate institutional facilities for the mentally handicapped of all ages;  - to ensure that adequate provision, in facilities of acceptable standards, is made for the needs of the growing elderly sector of the population;  - to continue to meet the needs of other sectors of the population, particularly in new townships, through the provision of health centres, community centres, clinics, etc.;  - to so develop institutional and community health services in the overall that the nation's health needs can be catered for adequately within the limitations imposed by prospective economic conditions.  1. The pace and nature of development must, owing to the very heavy running and borrowing costs of additional in-patient facilities, take cognisance of the problems posed by prospective non-capital resource constraints. Health developments must be kept in line with likely resource-availability in the years ahead. Priority projects only can be undertaken. Emphasis in choice of priorities must be directed toward replacement of out-dated facilities, reorganisation of uneconomic institutions, modernisation of units which offer standards below those acceptable in modern times and re-direction of that element of demand which can be met by less costly community-based services away from expensive institutional care.  2. In the period ahead, if the necessary developments in the institutional framework for health services are to become a reality and to contribute effectively to improving the health of the nation, a prime requisite now is to achieve stabilisation, then a positive reduction, in the costs of existing health services. It will therefore be a prime objective of Government over the period of the Plan to achieve greater economy and effectiveness in existing health services and greater efficiency in their administrative structures, both to contribute to a reduction in the current budget deficit and to free resources to meet emerging priority needs. Realisation of the full benefits of the capital expenditures envisaged over the period of the Plan is contingent on success in achieving greater efficiency in existing services.  POLICY MEASURES  1. The Government envisages that expenditure under the Public Capital programme over the Plan period will be (rounded in 1983prices)  Year 1983 1984 1985 1986 1987  Amount £ £55m £58m £53m £54m £50m  This level of expenditure will enable  - continuation to completion of all existing contractual commitments, which include several major developments in the general hospital and mental handicap areas  - commencement of a number of selected priority projects which, when completed, will affort substantial improvement over the spectrum of the health services  - replacement of equipment in general hospitals which will be essential to maintenance of effective, high-standard, care  - replacement and/or modernisation of a number of institutions, particularly among psychiatric facilities and those devoted to care of the aged, in which accommodation at present is below desirable standards.  GOVERNMENT CONSTRUCTION  1. The Office of Public Works (OPW) programme covers a wide range of State building, e.g., the provision of office accommodation for civil servants, specialist buildings for scientific and research purposes required by Departments such as Agriculture and Fisheries in the light of continuing developments in these fields; updating of facilities for the Gardai in line with modern requirements;Employment Exchanges and Postal buildings required to provide adequate and efficient services for the public; works at State harbours and Western development harbour works; accommodation for Courts in the Dublin area; works for the President, the Oireachtas and Embassies abroad and development of National Parks, Monuments and Waterways.  2. The Government policy measures to restrict the size of the public sector should reduce demands on OPW for the provision of new space. It is envisaged that, for the future, OPW's building activities will involve mostly the renovation and refurbishment of accommodation that is already in OPW's ownership. The Government have, however, recently approved a decentralisation programme to twelve provincial centres. Proposals have been sought for private sector participation in the provision of the accommodation required.  3. Over the programme period, the present level of expenditure should be maintained in real terms, subject to the proviso that this may be reviewed when more is known about private sector participation in the decentralisation programme.  CHAPTER IX MANPOWER AND PUBLIC SECTOR POLICIES  Manpower Policy and Employment Schemes  DEVELOPMENT OF MANPOWER POLICY  1. The objective of the Government's manpower policy is to improve the quality of the labour force and the operation of the labour market by anticipating changes in supply and demand, developing training and retraining schemes and the provision of effective placement and redundancy payments services. In addition, a number of measures have been taken to raise the level of demand for labour.  2. Overall responsibility for the development of manpower policy rests with the Minister for Labour. Responsibility for individual elements of policy has been assigned to a number of agencies within or associated with the Department of Labour such as the National Manpower Service, ANCO, the Youth Employment Agency and CERT. Other Government Departments and statutory bodies are also involved and the Minister has the benefit of the advice of the Manpower Consultative Committee.  3. A combination of measures has been adopted to improve the level and range of skills and the occupational mobility of the workforce. These measures include the expansion of training and retraining programmes; better placement, guidance, information and advisory services relating to jobs and vacancies; the operation of the redundancy payments scheme and the assessment of likely changes in the demand for certain occupations. Improved liaison and coordination between the Service and the Department of Social Welfare has already been indicated in Chapter 3.  4. The resources of the National Manpower Service have been considerably strengthened and expanded in recent years. Since 1976 the number of vacancies notified to the Service has increased by 50% while the number of jobs filled by the Service rose from 18,500 in 1976 to 27,300 in 1981.  5. The Service also operates the Employment Incentive Scheme aimed at encouraging employers to take on extra workers. To date, jobs for over 17,000 adults and 14,500 school-leavers have been provided under this Scheme. In order to encourage greater use of the Scheme the Government in 1982 increased the premium payable under it, and doubled the payment period. The Service also administers the Work Experience Programme designed to assist school-leavers.  6. The Service will intensify its efforts to assist unemployed workers to find jobs or to participate in training and work experience programmes. Special attention is now being given to the long-term unemployed. A subsidy of £45 per week is now payable for up to twelve months under the Employment Incentive Scheme in respect of each additional worker over 25 years of age who has been registered as unemployed for 6 months or longer and who is taken into employment. This initiative represents the first targeting of a scheme towards the long-term unemployed. In addition, a report on the problems of the long-term unemployed prepared by the Manpower Consultative Committee will be published before the end of 1982.  MEASURES TO CONTAIN UNEMPLOYMENT  1. The question of what measures the Government can take to reduce the level of unemployment, which are complementary to and not substitutes for other measures and disciplines already mentioned, is discussed in the following paragraphs. In addition, the Government will continue to strengthen programmes such as training, placement and guidance aimed at maintaining a dynamic and adaptable labour force.  2. The Youth Employment Agency has given priority in 1982 to:  - expanding programmes within the existing framework to absorb as many new participants as possible;  - establishing individual projects at local or community level designed particularly for disadvantaged groups or areas;  - developing information systems about youth unemployment so that greater precision can be achieved in the designing and targeting of programmes.  1. The number of youth participants in the various schemes - the Work Experience Programme, the Community Youth Training Programme, the Environment Improvement Scheme, the Temporary Grant Scheme for Youth Employment, ANCO and CERT - is expected to rise from 22,300 in 1981 to 32,500 in the current year. In the case of the Work Experience Programme, the numbers participating in the current year will be in the region of 9,000 or the equivalent of about 2007o of the numbers leaving school to join the labour force. The contribution which the Programme makes to assisting the transition from school to working life is shown by the numbers who secure employment immediately or very soon after completion of the Programme. Other schemes also assist this transition. In addition, new schemes started by the Agency and referred to at paragraph 8, will absorb 2,500 participants this year. The total number of man-years of employment will rise from 9,300 in 1981 to an estimated 14,500 in the current year.  2. Among its activities for 1983 and 1984, the Agency is considering the following priority concerns:-  - encouragement of measures within the school system to provide for better transition from school to work particularly for those at lower levels of educational attainment;  - a progressive expansion of, preferably community-based, measures for raising the employment related skills of young people, with no or minimal employment experience, from disadvantaged backgrounds, through a combination of educational and industrial training-based techniques;  - a major initiative directed at the longer term registered unemployed in the age group 18 to 24 years;  - a community and youth enterprise development programme aimed at the creation of sustainable employment for young people particularly in non-traditional forms of work.  It is expected that in 1983 about 45,000 young people will participate in schemes coming under the aegis of the Youth Employment Agency.  11. ANCO proposes, subject to the availability of resources, a very considerable expansion of training capacity over the next five years as the following table shows:-  PLANNED THROUGHPUT OF TRAINEES IN THE PERIOD  1981 - 1986  1981 1982 1983 1984 1985 1986  General Training  Programme 12,942 15,780 20,900 22,000 23,000 24,000  Apprentices (First  Year Off-the-Job) 2,121 3,030 3,050 3,800 3,800 3,800  Other Apprentices 174  Community Youth  Training Programme 2,125 3,400 4,800 4,800 4,800 4,800  Special workshops 987 1,000 1,500 1,800 2,000 2,300  Total 18,349 23,210 30,250 32,400 33,600 34,900  in brief, therefore, ANCO is proposing to nearly double the numbers trained between 1981 and 1986. Some 80% of trainees are likely to be under 25 years of age.  1. In June last, the Government established a Working Party to examine ways of providing training, work and analogous schemes as possible alternatives to unemployment benefit/assistance. The report of this Working Party is being considered by the Government.  2. In conjunction with the current review of the European Social Fund, the Government will press for further aid from the Fund for employment schemes. In addition, Ireland is participating in a cooperative action programme sponsored by the OECD and the French Government on local initiatives for employment creation.  3. The experience of the recession in advanced economies has already demonstrated that over-reliance on traditional measures to combat unemployment such as adjustments of economic, industrial, fiscal and other policies have been only partially successful. It is obvious, therefore, that a more imaginative and vigorous approach is called for to curb the impact of the recession on employment. Options that merit consideration include increased recourse to shift work, and part-time work. For example, on the question of shift work, unit costs of output could be reduced and competitiveness and employment opportunities increased by the more intensive use of fixed assets and capital equipment.  4. There is also the question of adopting measures to encourage arrangements whereby the amount of work available would be redistributed among a greater number of people. Such arrangements are practical only to the extent that they do not adversely affect competitiveness and a measure of income sharing is therefore implied. Studies have shown that if the incidence of double jobbing and excessive overtime were curtailed, more people could be employed without necessarily affecting competitiveness. Accordingly, the Government propose to promote legislation shortly to fix the normal working week at 40 hours and to limit overtime to 40 hours in any 4 weeks or 100 hours in 12 weeks. The intention is that overtime above these limits would be subject to official approval.  The Public Sector  POLICY FRAMEWORK  1. Growth in the size of the public service and consequently in its cost must be reversed as part of the overall objective of reducing the volume of current public expenditure and the current budget deficit.  This means that:-  - the numbers employed in the public service must be reduced;,  - pay increases for the public sector must be moderate;  - the most efficient use must be made of existing public sector resources;  - those employed in the public sector must be given clear work targets and priorities.  POLICY MEASURES  1. The following action will be taken to implement these objectives:-  - the numbers employed in the public service will be reduced through improved efficiency and modification or termination of public services. Target reductions have already been set by the Government at 5% by end 1985 for most public service groups. Allowing for increased requirements in a limited number of areas, an overall reduction of 4,000 in numbers employed will be achieved by 1986;  - the continuing relevance of the Devlin Committee approach to public sector reform will be reviewed by a small Committee of selected Departmental Secretaries and private sector experts with a view to making specific practical recommendations to improve efficiency in working methods, accountability and management in the public sector;  - a system of monitoring the performance of commercial semi-State bodies, which constitute the wider public sector, is being introduced to ensure that they operate efficiently and remunerate the substantial amount of Exchequer capital invested in them. Manning levels and pay rates consistent with policy for the remainder of the public sector and with specific efficiency requirements will be one of the elements taken into account in this monitoring system.  - overtime in the public service will be significantly reduced by improved planning and supervision to enable work done on overtime to be completed in normal hours. Factors which give rise to overtime will be systematically examined and responsibility for reducing or eliminating overtime placed on individual managers;  - the scope for introducing earlier retirement and for job sharing, at no additional cost, will be further examined;  - staff mobility to areas of greatest need will be implemented after consultation with staff interests especially through the identification of existing activities that can no longer be justified in present conditions.  - the aim will be that any new services can only be provided if an existing one is discontinued;  - the demands arising from the Parliamentary process will be discussed by the Department of the Public Service and the Committee of Parliamentary Procedure and Privileges to establish more efficient work guidelines for the public sector;  - the probationary system will be reviewed to ensure that it is being used in practice to improve efficiency.  CHAPTER X WE MUST NOW DECIDE  1. This Plan outlines the measures we must courageously take as a nation to recover our full economic strength and achieve our economic and social potential. Constructive comment or criticism of the Plan will be welcomed. Its objectives are not guarantees but indicate what can be achieved if we make the necessary efforts and international trends remain positive.  2. The Plan proposes stringent measures to restore balance in the public finances, including elimination of the current budget deficit by 1986, to halt and reverse the trends of the last decade in public expenditure, to moderate the growth in taxation and make it more equitable, to create the competitive conditions essential for growth in employment, to accelerate the productive and economic infrastructure investment programmes essential for development, and to bring new criteria of efficiency to bear throughout the public sector.  3. The Government are fully determined to adhere to the strategy outlined in this Plan, whatever the difficulties involved. The Estimates for 1983 which will be published shortly, will reflect this same  determination. The progress of the Plan will be continuously monitored so that when necessary, measure to reinforce its operation and to secure the achievement of its objectives, particularly through industrial and other sectoral developments, may be expeditiously introduced.  1. This Plan is but a start. It provides the main economic and financial framework for our development over the next five years. But within that framework we must deepen and extend our knowledge and concern about our society. The very fact that our financial resource are limited must make us ensure that our social policies are progressive and not regressive in their application. We cannot afford in our society, with our limited resources, to operate social policies which are wasteful or are not primarily directed to those genuinely in need. Our health, education, social welfare and housing policies must be carefully and compassionately reviewed to ensure that the constraints on expenditure are administered flexibly and not in a way detrimental to those in genuine need. At the same time, eligibility for services and the appropriate degree of support must be openly and objectively analysed with a view to determining clearly those who are in real need. We have scarce resources, given the exceptionally high degree of dependency in our society, and we must be satisfied that these resources are fully used to increase social equity and equality.  2. The Government, therefore, propose to establish shortly, in consultation with the principal interests involved, a permanent structure for economic and social planning. Our exceptional economic and social needs, deriving fundamentally from our high population growth and dependency ratio, require a national consensus on economic and social growth and, in particular, on its distribution. The National Economic and Social Council, the Economic and Social Research Institute and other research institutes, the National Board for Science and Technology and the economic and social faculties of our higher education system have already done much to clarify our economic and social choices. In the new permanent economic and social planning structure, the expertise and experience of these bodies will be fully drawn upon in designing and developing new social policies more responsive to our special social circumstances.  3. The measures proposed in the Plan require us, in many ways, to look at our economic strengths and weaknesses anew. They require us, above all, to understand that in the immediate years ahead our economic progress must be won in a world adapting painfully but inevitably to the new economic constraints that now bind the Western world.  4. Income and welfare expectations are now conditioned by the necessity to build more competitive, less inflationary and more technologically-advanced economies. New factors have caused this: the staggering rise in the cost of energy in the seventies, competition from emerging Third World countries, technological change. All these must be assimilated if economic progress in the West is to continue.  5. This requires vast new investment to reshape and restructure economies, in addition to the normal investment in replacement and renewal needed to maintain efficiency. This investment can occur only in conditions of moderate and stable prices, costs and interest rates, and of stability in exchange rates, so that national and transnational investment on the scale required can be made with confidence and security.  6. Unless we are prepared to reshape and restructure our economy, we will lose out in the new competitive conditions being created by our trading partners. Overseas investment will pass us by and go where costs will be more competitive. We will be unable to produce and sell sufficient goods and services to absorb our growing labour force. This Plan outlines the measures we must take. The decision to take them or not is for all the people.  7. In considering what decision to make, it is salutary to remind ourselves of what other nations and Governments have done, or are proposing, in the face of the same adverse economic forces and factors which beset all our economies. The principal features of these measures are summarised in the Appendix to this Chapter.  8. In spite of the measures they have taken, or propose to take, most countries expect unemployment to continue to grow for some further period dependent on the success of the new measures. The European Commission expects unemployment to continue to rise throughout the Community in 1983. In Denmark, France and the Federal Republic of Germany, the countries where unemployment is lowest, it is expected that the rate of unemployment will rise to the 10% level. Unemployment in the United States has already exceeded the 10% level and is expected to increase further.  9. These are all countries with richer and stronger economies than ours. We face the same economic and financial realities which they face, but in our case, they are in many respects more severe. Our inflation, our unemployment, our internal and external deficits and our foreign borrowing are higher. But more important in the long-run than these and more fundamental to our decisions is the fact that our population and labour force are increasing much faster than in other EEC countries.  10. Our population is now increasing at a rate faster than it was in the period before the Great Famine of 1847. Unlike then, we are now a sovereign and independent people and, as such, we face the responsibility of providing ourselves for the economic and social welfare of a population increasing faster than it did in the first half of the nineteenth century. The Government are putting forward in this Plan, and shortly in the Estimates and Budgetary proposals for 1983, a comprehensive series of decisions required to enable us to begin to construct an economy which can satisfactorily cater for the unprecedented population increase we will experience in this and coming decades. We cannot and must not fail the challenge. We cannot allow divisions and disunity to deflect us from the national measures we must take.  11. The decisions are not easy. They require moderation of income and welfare expectations. They require some sacrifice and acceptance of some new burdens. But the Government believe that all these are necessary and bearable. There is no other way in which we can hope to provide a satisfactory economic and social future for our growing population.  12. We, more than any other people because of our tragic history, must be prepared to accept readily the responsibility of caring and providing for our young people who, thankfully, now crowd our cities, towns and countryside instead of being scattered throughout the world, as were so many past generations of young Irish people. This Plan shows how we can build an economy to support this growing population if we have the will, courage and responsibility that is required. The decision is for the nation to take now.