Plans to reduce unemployment are crucial components of political competition as this State heads into an election campaign. The issue is at the top of citizens' priorities and the parties are vying to appeal to them with the most plausible schemes. Yesterday, the Government launched its "comprehensive policy for enterprise and jobs", which brings together many of its current and established proposals for creating employment, with the aim of halving the existing unemployment rate by the year 2007.
It is a competent and ambitious document, whose credibility depends on an assessment of how convincing are the means set out to achieve this objective. That is the difference between a target and a strategy, an election promise and a realisable plan. In the Government's favour, it must be said that this document addresses many of the conditions necessary to continue the strong economic growth which is the best guarantee that unemployment can actually be reduced on the scale proposed. It draws on much of the most recent research on growth, specifically the need to cultivate human resource management, education and training and a partnership approach to industrial change. Competitiveness is put at centre stage. It is clearly stated that Ireland should aim for a high productivity economy with relatively high paying jobs, rather than seek to outcompete less developed economies.
Taxation policy is brought centre stage in these proposals. The Government has confirmed plans to introduce a 12.5 per cent rate of corporation tax on trading activities and 25 per cent on non-trading activities. To compensate for tax loss and to maintain the yield it also proposes to increase the rates on dividend income and to curtail abuses in personal taxation schemes. Such an approach should enable Ireland to avoid scrutiny from the EU Commission and some other member-states which have been complaining about an unfair diversion of investment. It would also help to guarantee foreign investment over the long term, an important factor in encouraging firms to stay in Ireland.
Whether all this is sufficient to ensure employment growth and the reduction of long-term unemployment is another matter. Yesterday's document points up one worrying feature of Ireland's contemporary economic performance, the comparative weakness of domestic investment in manufacturing industry and services. The Government underlines the need to encourage banks and pension funds to promote such investment and it recapitulates on projects to stimulate new seed capital arrangements. Another major weakness in Irish industrial policy is the even more pronounced comparative weakness of investment in research and development by multinational and national companies and by the State itself. Although the Government has made a commendable effort to address this issue, its level of ambition falls far short of what is required for long-term development.
Fianna Fail would be better advised to concentrate its criticisms on these aspects of the Government's policy, rather than issuing alarmist warnings about capital flight if the current level of taxation on multinational companies is increased from 10 to 12.5 per cent in the year 2010.