THE SCALE of the economic downturn since 2008 has created the necessity to make major policy changes to ensure the economy is well positioned to benefit from the international upturn. Our wide range of economic difficulties – on the public finances and on job creation – have presented the government with a challenge and an opportunity: to introduce new thinking on how best, via structural reform and policy innovation, to achieve a rapid rate of economic growth and sustainable employment in the years ahead. The report of the Innovation Taskforce has offered a prescription, and suggested that up to 117,000 jobs can be created in the next decade, if its advice and recommendations are followed.
In the 1980s, the Telesis report produced a major review of industrial policy and a decade later the Culliton report completed a similar exercise: both these reviews proved highly influential, and they also marked significant turning points in national economic development.
The latest proposals for the development of a ‘smart economy’ are part of that process of periodic review, renewal and regeneration. This time, however, the taskforce report is presented against a far more difficult economic landscape, as the Irish and global economy struggle to overcome comparable problems – similar in nature but different in scale. In most developed economies, slow growth and high levels of personal and government debt have depressed consumer demand, reduced employment and delayed recovery.
The report of the taskforce follows a decision by Government in December 2008 to create the conditions for the development of a ‘smart economy’ strategy - one relying on innovation, enterprise and ideas, as the engine of economic growth and employment creation. The taskforce was asked to propose policy options for the Government that would increase innovation and entrepreneurship. And in its report, it has suggested that State agencies and education institutions should jointly market and brand Ireland “ as a leading innovation location and destination of choice” for overseas investors: an “International Innovation Development hub”. In that regard the proposal for a 5 per cent tax rate on the profits from “innovative activities” carried out here or in other European countries, is a necessary incentive to generate serious domestic and international interest. Likewise, the taskforce’s proposal to encourage entrepreneurship, through a lower rate of capital gains tax for innovative start-up companies with export potential, provides a further incentive to investors to locate in Ireland.
Much now depends on what the Government makes of this report, and how quickly it acts to implement its recommendations. In 1992, when the Culliton report outlined the challenge facing the Irish economy, it recognised that it was time for change. In 2010, the report of the taskforce underlines a broadly similar message. How we – Government and people – accept this latest challenge will, as Culliton then rightly said, “determine our future levels of employment and national wealth”.