Self-Employed and the SME Sector: Motion [Private Members]

Deputy Dara Calleary

I move:

That Dáil Éireann:

notes:

— the importance of the self-employed and micro, small and medium sized enterprises (SME) sectors to the Irish economy with 350,000 self-employed people and 580,000 people in enterprises of 50 people or less;

— the disparity in tax treatment between the self-employed and PAYE sectors;

— that certain social welfare benefits are not available to self-employed people such as Jobseeker’s Benefit and Illness Benefit;

— the continuing difficulties being experienced by the self-employed and SMEs in accessing affordable credit; and

— that Irish SMEs pay much higher interest rates than other EU countries for credit;

recognises:

— the domestic SME sector is diverse in nature and employs workers with a wide range of skills in all parts of the country; and

— the success of Ireland in attracting foreign direct investment over many decades and the importance of giving a similar level of priority to the domestic enterprises; and

calls for:

— the introduction of an earned income tax credit for the self-employed on a phased basis of equal value to the PAYE tax credit;

— the provision, on a voluntary basis, of a full range of social protection payments, including Jobseeker’s Benefit and Illness Benefit to self-employed PRSI contributors as part of a commitment to fostering an entrepreneurial culture as well as enhancing social solidarity;

— an extensive information campaign by the Department of Social Protection to highlight the benefits and services available to self-employed people;

— an expansion of the role of the Strategic Banking Corporation of Ireland to allow it to lend directly to SMEs and the self-employed with expansion opportunities;

— incentivisation of entrepreneurs to set up new businesses by providing tapered relief from Capital Gains Tax; and an extension to the Credit Guarantee Scheme to assist Irish businesses whose loans are at risk of being sold to investment funds to refinance at affordable rates.

I wish to share time with Deputies Michael McGrath, John McGuinness and Charlie McConalogue.

Acting Chairman (Deputy Jack Wall)

Is that agreed? Agreed.

Deputy Dara Calleary

I look forward to the debate over the next two nights on the role and future of SMEs. It is good that we can bring small business to the fore of parliamentary business. While we have an excellent committee, previously chaired by the Minister of State, Deputy English, and currently chaired by Deputy Marcella Corcoran Kennedy, which addresses many of these issues, that work, because it takes places downstairs in the committee rooms, goes unnoticed. The role of SMEs deserves more than that.

As a country, we place great value on and attention to foreign direct investment. We have a fantastic track record in this regard and are world beaters in terms of the work which the IDA does in attracting foreign direct investment to this country, for which it is to be commended. We need to pay the same attention and make the same fuss of the 350,000 people in this country who are employed in and operate SMEs. We need to pay the same attention and make the same fuss of the men and women of this country who on a Monday morning may not know from where they will get the money to pay the salaries of their employees at the end of the week, never mind themselves. We need to pay the same attention and make the same fuss of self-employed businesspeople who make up a large cohort of the percentage of people in this country who are on low incomes. This is the want and the lot of many SME owners. They are left on their own without support, back-up or guidance. There is a fractured system of support across the country which is, at least in some places, excellent and in others dreadful. The lack of consistency in this regard is choking many businesses and not providing them with opportunities.

Tonight, we are laying down some specific proposals in regard to securing a future for SMEs. There are many other issues we could mention in this motion but we have decided to focus on taxation and PRSI changes and access to finance. Many colleagues will discuss other issues around that. Many of us in this House will have had the experience in the last number of years of being approached by people who during the so-called boom times employed large numbers of people, but when their business went under as a direct result of the collapse in the economy were abandoned by the system while the people they had employed were given every support possible, including retraining, social protection assistance and so on. They were abandoned by a system that put a value on assets that were no longer of value, that could not understand, appreciate or be flexible enough to deal with business failure and could not understand or appreciate the personal impact this had on the individual or the desire of many of those individuals to restart their businesses. This is not a political charge; it is a system charge. We have a system that does not know what it means to understand the urgency of small business or the urgency of decision-making around small business. It is a system that thrives on regulation and paper, leaving small businesses choked by paper and rules, and not for the want of going to a lower base or lower common denominator but because we love gold plated regulation in this country.

We need to set ourselves a firm ambition. I am very critical of the Government amendment which contains broad objectives that anybody would sign up to. They are of the Andrex puppy type in that they are nice and fluffy and everybody loves them but there is nothing specific to actually measure them against. The Fianna Fáil motion is quite specific and focused. The Taoiseach's statement that he wants Ireland to be the best small country in the world in which to do business by 2016 is also vague. We want Ireland to be the best country in which to be a small business. We want specifically to put small business at the forefront of enterprise policy. The proposals we make tonight are not, as suggested earlier by the troops in the Fine Gael press office, a reaction to demand for policy. They have been in the pipeline for some time, including as set out previously by Deputy Michael McGrath's proposals around the disparity in tax treatment, including capital gains tax, included in budget submissions in October 2013 and 2014. Deputy O'Dea will speak about his PRSI benefits policy, which has been in existence since 2012.

The Minister of State will be aware that at the time of the launch of the credit guarantee scheme I articulated the Fianna Fáil view that it was too expensive and would not work. We were proven correct. We were promised that there would be a review and that legislation to amend the credit guarantee scheme would be introduced in the Autumn session last year. We were then told it would be introduced this Spring session. We are now in the Summer session and there is still no sign of the credit guarantee review legislation. All the time, that specific legislation is needed. It is needed, as stated last week during a Topical Issue debate, by businesses whose loans are being sold from under them by, in particular, Ulster Bank. These businesses need the protection of the credit guarantee scheme to refinance their loans. The legislation is required urgently. People's livelihoods are being sold from under them while the system tries to redesign a system that is broken. Despite that people's livelihoods are on the line two and a half years later we are still talking about a scheme which everybody knew from the start was flawed and would not meet its ambition.

I acknowledge the changes made to the microfinance scheme and the turnaround that has occurred in that regard over the past year. Those involved have brought a sense of vibrancy and urgency to the situation but the whole area of credit finance remains unresolved. We are still not giving SMEs the kind of finance they deserve. The banks continue to publish statistics that indicate they are refinancing. Despite that they are being given more money through the Strategic Banking Corporation of Ireland for so-called new business, they continue to call in loans and to refinance them and then declare this as new lending. They are continuing to put extra charges on people and small businesses and to tell small business on what day they can do their business. There are banks in this country that are dictating on what day businesses can lodge coin, leaving many businesses having to retain cash on their premises, which is not good. There are banks which are pulling away wholesale from rural areas, thereby forcing businesses in those areas to travel long distances to lodge cash. That is not something we want to see but it is what is happening. This is the reality for small business in terms of banking, which is not good enough.

Earlier, we spoke about variable interest rates for mortgage holders. Variable interest rates in regard to business lending are off the scale. There is no sense of competition in the market. Two years ago, the decision was made to establish a strategic banking corporation that would focus on small business, in the same way as the ICC and ACC did in the good old days. The Government opted instead to use the money that became available to it to invest in the existing pillar banks, leading to no competition or hunger between them for business and no sense of new products or new service to a business community that is crying out for that type of service and is required to give that type of service to its customers. We long-finger the banking problems as well.

The Government amendment praises the local enterprise offices, some of which I acknowledge are working very well, including the economic investment unit in Mayo. I acknowledge the fantastic work done by that unit in delivering the transatlantic cable project, which will be hugely important not alone for Mayo but for the entire country.

However, the LEOs are the county enterprise boards, CEBs, re-branded. In terms of service, there has not been a significant change from what was provided by the county enterprise boards, which served people fairly well. With regard to training, the majority of the CEBs served us well. What the LEOs need is new fire power. They need the ability to give small loans, more than what is being given at present. The LEOs need to expand their role in the context of a 21st-century economy as opposed to a 19th-century economy, as this is the thinking behind much of the legislation underpinning the LEOs, which is undermining them. They needed a complete change of thought as well as change of name, and they need to be out there. They need to be down and dirty, to understand where small businesses are at, and to be more urgent and responsive on a consistent basis. In terms of service, it should not matter whether a business is on one side of a county border or the other. These are persons putting their lives on the line to create opportunities for themselves and others, and they are entitled to the best possible service regardless of their geography, but that is not the way at present. The notion that the Government can continue to lean on the LEOs and put them up there as a great creation when all they are is a new name on a successful body has to change. The LEOs have to change as well. They have to be more hungry and more consistent in the services that they deliver.

Later, Deputy Michael McGrath will speak about the disparity in tax treatment. Deputy O'Dea has proposed increased PRSI benefits for the self-employed. He proposed a scheme under which the self-employed would be encouraged to pay into a fund, which would be there in the event of a business going under to support the self-employed while they retrain, re-imagine and re-launch themselves. That is a culture we need in this country. We need to believe in business people and we need to believe in business as a career opportunity. There are 65,000 students preparing to do the leaving certificate examination, and we want them to think of setting up a business in the same way they think of the professions or the trades, or the same way they think of going off to college for a few years. We want them to be comfortable in thinking that if it goes wrong and if, for whatever reason, the business does not work out, they will get back on the horse and start again, because that is the culture we need. As a country, as I have stated consistently, we love to celebrate failure. We love to see things not working out for somebody. We need to change that attitude. Instead of celebrating failure, we should acknowledge failure as part of the learning process in life. It makes one do something different. It makes one do it better on the next occasion. If we encourage such a culture, it is the kind of culture that will foster business.

On that basis, I wish everybody involved in the Student Enterprise Awards tomorrow every success. Those are the kinds of event, at transition year level and at college level, that are beginning to take hold around the country. Every student should have some understanding of business. Instead of isolating business studies at leaving certificate level, we need to make it a core subject to which students get exposure. Anybody taking up an apprenticeship or trade should be given business experience and business education so as to be equipped with the essentials that are needed.

Members, who are all in the same boat in their offices, meet many people looking for supports and backup. People repeatedly go looking for that support and cannot find it. Previously, I proposed to the Taoiseach - he undertook to pursue it, but that has not happened - that the best business database in this country is that of the Revenue Commissioners. One is hardly set up in business before the Revenue Commissioners are in touch. They would have the ability, if there was cohesion, organisation and interest in Deputy English's Department, to send to every business in this country a few times a year notice of the supports and grants available. Frankly, business people are too busy trying to keep their heads above water to go looking for that. If the Revenue Commissioners can send them every kind of correspondence going within weeks of their establishment, surely it can try to give them help as well. If there is to be one initiative that comes out of this debate, I ask the Minister of State, Deputy English, that this be it.

The other bodies that know more about business than businesses do are the local authorities. For local authorities, businesses are ATMs that they keep going to and that they keep trying to get cash out of. Eventually, for many businesses, the ATM says "No," because they cannot keep giving. Previously, I have told the story of a successful start-up employing ten people in the services sector in one county, which opened a branch in another county employing five people. This involved significant up-front investment on the part of the business owner. The first letter they got from the relevant local authority was not one welcoming the business to the county, thanking it for choosing that county to set up the business and stating the supports available. It was a demand for €6,500 in rates, a demand for water charges and a demand for parking levies that had not been paid. That was the welcome that was given. The attitude of many local authorities to business is that they are a cash cow or an ATM. They do not see businesses as customers. They do not see business as a partner in the development of their counties. That, too, has to change.

All in all, we have a system that does not understand business in 2015 and does not understand SMEs in 2015. It does not understand what it is like on a Friday evening after one has done a week's work, or a Saturday evening or a Sunday evening if one is working seven days. It does not understand what it is like not to have enough money to pay one's self after paying everybody else. A business owner might have paid the Revenue Commissioners, the local authority and the staff, and is then left without anything. Until that system is forced to change, we will continue to treat business as some sort of pet - something to be stroked, patted on the head every day and told, "You are a good boy. Sit, boy. Stand still, boy," while we do nothing to give them a hand and allow them to use their teeth. Let us get some ideas over the next two nights but, more importantly, let us do something about it.

Deputy Michael McGrath

I very much welcome the opportunity to make a contribution to this debate, and I commend my colleague Deputy Calleary on his introduction of this motion on behalf of the Fianna Fáil Party. The motion is a continuation of a theme that my party has been pursuing over quite a long period. It is quite practical in nature. In my view, it is the type of motion that Opposition parties should be putting forward. It deals with many of the key issues that are affecting the self-employed and small business owners in this country every day. It deals with taxation, PRSI and access to social protection benefits, lending, and the tax environment for entrepreneurs in terms of capital gains tax relief. I will refer to some of those in more detail in a moment.

This motion from Fianna Fáil is designed to support those who are currently self-employed and those who currently own small businesses, and, equally importantly for the future of the country and for our economic development, those who wish to become entrepreneurs and small business owners. Not enough time is spent in this House debating these fundamental issues.

When it comes to foreign direct investment, as Deputy Calleary stated, Ireland is a strong performer indeed. No country can match our track record in attracting and retaining foreign direct investment, FDI. We are the envy of our European partners in this regard. Successive Governments have played their role in ensuring that the FDI environment in Ireland is strong, not least with the commitment to the 12.5% corporation tax rate. We have a critical advantage in being the only English-speaking country in the eurozone while providing access to a large European market. Of course, our historic relations with the United States do not do us any harm either. However, there is a paradox at the heart of economic policy in the State. While we make every effort to support the endeavours of multinationals to establish themselves and thrive in Ireland, it would seem we are far less concerned as a nation about supporting the self-employed and domestic SMEs, which, after all, employ the majority of those working in this country. They should be given far more practical support in terms of the day-to-day challenges that they face.

There is no shortage of Irish people with good ideas for products and services that consumers would be willing to buy, but too often the obstacles in their way prove too great. Setting up a business in Ireland is a daunting undertaking as it involves having to negotiate a minefield of regulatory and financial hurdles. As a nation, we need to change our attitude towards those in business and take radical steps to encourage and support new startups.

In the motion, my party outlines a number of practical measures which we believe would make a real difference to the self-employed and the SME sector in terms of the economic life of this country. By contrast, the amendment that has been put forward by the Government is deeply disappointing and self-congratulatory in tone, and contains no specifics whatsoever.

The Government has been leaking furiously in respect of changes to the taxation regime for the self-employed. Yet, when the matter was put to the Government by way of a motion in the Dáil tonight, it did not even acknowledged the issue. The Government is not acknowledging the fact that self-employed people are being treated in a fundamentally different way in terms of their income tax arrangements. This is disappointing to say the least. It is easy to leak a line to a national newspaper, which will take it gladly and publish it, but there is an opportunity on the floor of the Parliament tonight to show that this is a priority for the Government. Certainly, that has not been shown in the amendment, although perhaps the Minister of State will illustrate it in his speech later tonight.

As we know, the PAYE tax credit of €1,650 per annum is available to all employees but not to the self-employed or proprietary directors. The primary reason the PAYE tax credit was introduced and limited to employees was to take account of the fact that, at the time, the self-employed generally had the advantage of paying tax on a prior year basis. This meant they had a significant timing advantage, particularly in times of high inflation. However, this logic is no longer relevant because payment dates have changed significantly since the credit was first introduced. Now preliminary tax, which is typically 90% of the final tax liability, is paid in the current year. This eliminates the timing advantage and requires some tax to be paid in part on profits that have not yet been earned.

It is our strong view that in so far as possible the tax system should treat people in an equitable manner. Self-employed people lose under the current regime because while they receive the personal tax credit they cannot claim an equivalent of the PAYE tax credit, which is €1,650. This has a particularly stark impact at lower levels of income. As noted on publicpolicy.ie, budget 2015 worsened the relative position of low-income self-employed persons. The website has stated that a self-employed single person on an income of €15,000 now pays almost eight times more tax and PRSI than an employee on the same income and has a lower entitlement to social welfare benefits.

Let us consider the signal we, as a country, are sending out to the self-employed and to young people who may be looking at the option of becoming self-employed or starting up their own businesses. The fact is the taxation system discriminates negatively against them. I acknowledge this has been the case over a period of successive Governments. Now is the time to say that it is not fair, that it must change and that it should be addressed as a priority. Fianna Fáil has outlined firm proposals in this regard today. We believe an equivalent tax credit should be made available to people who are self-employed on a phased basis. The overall cost of that would be €450 million per annum. We believe a reasonable start would be to provide a tax credit of €500 for the self-employed in year one. This would cost in the region of €140 million. Given that in last October's budget the Government gave an income tax package of well over €600 million, this is not unrealistic in any sense. A significant and tangible move could be made to extend that tax credit to the self-employed.

I realise this will take time but we believe over the longer term the 3% surcharge on high-income self-employed persons should be phased out and ended. Ultimately, this would serve to equalise the application of the universal social charge to PAYE and self-employed persons. Again, I believe this is a question of the environment we create. There is nothing wrong with earning more than €100,000 in this country. Without doubt, when major austerity had to be introduced and tax had to be increased, people at the higher end had to shoulder more of the burden because they were earning the highest amount of income. That was only proper and fair. However, our objective as a country should be to treat the self-employed and PAYE workers on an equal basis. We should be working towards implementing that aim.

I am keen to highlight the issue of capital gains tax and the treatment we apply to entrepreneurs who start up their own businesses. There is a limited convoluted and cumbersome relief on the Statute Book at the moment. Let us compare it to the simple system that operates in the United Kingdom, where a 10% capital gains tax rate applies to qualifying entrepreneurs. By comparison, Ireland is only in the halfpenny place in terms of attracting young people who want to start up a business. We should bear in mind that much of this type of investment in financial services, information technology and in the technology sector is highly mobile in nature. Ireland is no longer the destination of choice for someone who has an idea that develops into a high potential start-up company because of the punitive taxation system we have in place. The 33% rate for entrepreneurs is now a deterrent and a disincentive to people starting up their own business in Ireland. We believe this needs to be addressed. We have proposed for a long period and in several budget submissions made to the Department of Finance that a special 15% rate should apply to qualifying entrepreneurs who start up a business, develop it successfully and eventually sell it on. Many of them will reinvest in the economy.

I am keen to highlight important legislation that our colleague, Senator Darragh O'Brien, is bringing to the Seanad tomorrow to ensure that Irish small and medium-sized enterprises compete on a level playing field with their European counterparts in successfully bidding for public procurement contracts that provide significant social benefits. Every year the State tenders for more than €8.5 billion worth of goods and services. However, Ireland, unlike many other European Union countries, focuses on the lowest tender price offered with no consideration for the social impact of certain tenders with a higher cost. In essence, there should be a system whereby the wider economic benefits of supporting Irish SMEs through the procurement system should be measured and dealt with by way of the procurement process in place.

I could go on about several other issues but I know my colleagues have a number of important points to make as well. I commend Deputy Calleary on putting forward this motion. It is practical and solution-driven. I hope the Government takes note of this and, as it appears to be doing in respect of mortgages and other areas, elects to adopt ideas that Fianna Fáil is coming up with to solve key problems in the economy.

Deputy John McGuinness

I spent most of my life being self-employed before I was elected to this House in 1997. During the course of that time and my involvement in several businesses, which employed 30 people, there was little support for the SME sector. I consider myself to be very much part of the micro-section of that sector. Nothing much has changed. If anything, it has got worse. For example, I believe winding down the county enterprise boards and re-branding them as local enterprise offices as part of the county councils will prove to be a retrograde step. The county councils have no real knowledge of business or enterprise skills within their organisation to deal with this. By and large, the LEOs will be simply administrators dealing with what they call small businesses but what are really businesses within niche markets that do not touch the high street, the brand names on the high street or many other sectors that need support and help.

The situation is likewise in respect of the general policy within the Department and as it filters down to Enterprise Ireland or IDA Ireland clients. I believe all enterprise policy, activity and the logistics in terms of trade missions should be centred in one Department, that is the Department with responsibility for enterprise. I do not see a role for the Department of Foreign affairs and Trade or for people who, generally speaking, have been trained in diplomacy but not in business promotion or accommodating business techniques abroad. This is an important market for us but one that requires skill, engagement and risk. I do not see anyone else with those ingredients except business people. The Department needs to learn a great deal more about how that business is done at home and abroad.

The Government's amendment and what has been said in the House show that governments can change but the attitude of those who manage Departments that engage with enterprise does not. For example, the Government claims to recognises the improvement in the tax environment for small and medium-sized enterprises. However, there has been no improvement in the tax environment for SMEs. Government Members should ask retailers in the high street or small-business people in industrial estates about this.

I am talking about family-owned businesses that are owned by individuals, businesses that have been there for generations. An awful lot of them have closed because of the lack of understanding of Governments in regard to tax issues that affect the SME sector.

The Minister of State talks in his amendment about the new sources of finance that are being made available to the SME sector. I can tell him that despite the billions of euro that have been put by the Government into our banks, which was meant to be for small businesses, very little of that has gone towards the restructuring of loans or the support of the SME sector. Since 2008, businesses have spent every single cent they have earned in order to keep open or to pay for the loans they could qualify for. Some of them were hanging on out of sheer pride because the business might have been in the family for generations.

The banks have failed to restructure loans that are perhaps not central to the core business and they have failed to give the opportunity to business people to perform. I have never seen as many businesses within the SME sector almost imprisoned by the banks and put into a state of limbo because they cannot transact or do business given the fact they do not have a supportive bank. At the same time, they cannot get out of their banking arrangements because that is the bank they have made the arrangements with, and no other financial institution will take them. They would have a good core business if only they were released to do that business.

I suggest that the credit unions, which have some €7 billion in total, be asked to contribute in some way to the support of the SME sector. They are the only ones that truly understand what a business means to a community and how to support business. Whatever is needed from the Central Bank, the credit unions should be facilitated.

There is a German public bank that is saying to us here in Ireland that this is the model we should follow. It was not affected at all by the downturn in the banking sector because of the way in which it managed its affairs. It supports businesses throughout Germany. That model works for it and it should be encouraged by the Central Bank and the Government to set up in Ireland in order to give an opportunity to those who have good business ideas to come forward, be funded and be successful.

There was a time in this country when 1.2 million people were employed within the SME sector but that must have nearly halved by now. Many of our entrepreneurs have gone to other countries because the environment for doing business is not what it should be for the SME sector. The Minister of State spoke about the new focus on start-ups. There is no focus on start-ups. The LEOs have no idea how to support a start-up business. The businesses that are in business and have been successful over the years are finding it difficult to get the financial support, the expertise, the mentoring and, indeed, the tax environment that would assist them in passing their business from one generation to another.

The Minister of State pointed to the success of the Pathways to Work strategy and he suggested other initiatives taken by the Government in this regard. It just has not worked. We do not see businesses taking on the number of people they need because there is no real financial incentive for them to do it. Vouchers could be used for mentoring or for many other aspects of buying in professional opinion for a business but that has not been embarked upon.

Last but not least, the Minister of State said the Government resolves to continue to engage with SMEs. What do the SMEs ask for? When the Minister of State talks about microfinance, credit finance and the Strategic Banking Corporation of Ireland, it is alien to them. They are simply interested in a bank that understands business, that will facilitate them, that will give them loans and that will assist them out of their debt in terms of restructuring. It not that they will not pay but a question of accommodating them in order to pay. It needs a Government that understands governance. How can the Government fit the same straitjacket of governance on every single business? It just cannot be done because small businesses cannot carry the cost of that burden.

What is the burden? It is when ten different Government agencies call to business premises on a very regular basis and go through paperwork in a way that treats business people like criminals and asks them to respond immediately or forthwith. That is not understanding from Government. In my opinion, that is bullying by the State agencies of small businesses that are attempting to the best of their ability to comply with over-regulation. Departments or bureaucrats can put out figures and say to the public that they have reduced costs by a value of €25 million. The Minister of State can ask any business in a high street or an industrial estate whether that is a fact and they will tell him it is not.

A further point concerns procurement. If anyone wants to see how the Government really thinks about small businesses, just look at the procurement process. It is so out of reach of the SME sector that the SMEs cannot compete. The Government suggests they should collaborate with their opposition in business in order to get the contracts. What absolute nonsense that is. There is €9 billion at stake. I can tell the Minister of State that the small business people, particularly in the area of stationery or machinery supply to Government, are simply not satisfied with the moves the Government is making.

I appeal to the Minister of State, by way of conclusion, to put to one side all the nonsense and gobbledygook that the bureaucrats give to him about what is happening to small businesses and to listen to the small business sector. I am going to launch a business document this week which covers every single aspect of business. I ask that it be examined in the context of real support for the small businesses that have made this country over the years.

Deputy Charlie McConalogue

I join my colleagues in supporting the motion put forward by Deputy Dara Calleary. The Government should welcome it because I have no doubt that, having assessed it, the Minister of State, Deputy English, will see that it is constructive and that it puts forward many real solutions to the problems experienced by self-employed people working throughout this country and by small and medium enterprises.

It has been mentioned by previous speakers that we have done very well in terms of the international and IDA-led investment into Ireland over the decades. That is something which many countries would seek to emulate and copy from us. However, there is not the same thirst internationally to copy the model we have in regard to how we treat the self-employed and small and medium enterprises. That is because, unfortunately, too many burdens have been put by the Government on those who are self-employed and those running small and medium enterprises, and that burden has continued to increase year on year over recent times.

Alongside that, as the recession developed and put many self-employed people and small businesses out of business, those people also came to realise there was no support in place for them. Many of these people had provided PAYE employment in the past. When they laid people off, they provided redundancy payments in many cases to people who were subsequently able to avail of the safety net of social welfare payments. However, those who were running these businesses and those who were self-employed found that they themselves were not able to avail of the safety net they expected to have from the State.

There has been a culture shock where, as those who were unemployed assess their experience at the hands of the State, in many cases they are thinking twice about whether they should actually look to set up businesses again or go back into self-employment.

That is a barrier to ensuring that the potential of many people is reached.

Deputy Calleary has put forward a number of real and valid suggestions which the Minister of State should take into account. They include increasing PRSI benefits for the self-employed, improved access to credit for the SME sector, ending the disparity in the tax treatment between the self-employed and PAYE workers, an extension to the credit guarantee scheme and a capital gains tax environment that encourages start-ups. Each of these proposals is well thought out and will make a real difference if embraced by the Government.

Much has been made of the proposals put forward and implemented in regard to the reform of county enterprise boards in their re-establishment as LEOs. Unfortunately, in too many cases, the reality has been that it has simply been a rebranding. Many businesses that need real support are not able to avail of it to the extent they require because the LEOs need to be better supported in terms of the resources they have to be able to engage with local businesses. Many people need ongoing mentoring.

In many cases with proper investment and an increase in the grants available LEOs could make a real difference in terms of getting new businesses and enterprises off the ground. Another key factor, which was mentioned by Deputy McGuinness, is the level of regulation on small businesses, such as those involved in retail. The increased red tape and paperwork they have to deal with on an ongoing basis is excruciating.

We all get regular feedback from those starting one, two or three people enterprises that they are trying to stay as small as possible rather than grow because of the difficulties and complications increased employment can create for a small enterprise. It is something that should not be the case and needs to be addressed urgently to ensure the potential of the economy is realised. Areas outside of cities will depend on those who are self-employed in small and medium enterprises to grow. It is to be hoped an economic recovery will take root, something which has not yet happened largely because the supports that small and medium enterprises and the self-employed sector need are not in place.

Minister of State at the Department of Jobs, Enterprise and Innovation (Deputy Damien English)

I move amendment No. 1:

To delete all words after “Dáil Éireann” and substitute the following:

“acknowledges:

— the central role of the self-employed and micro, small and medium sized enterprises (SME) in the jobs recovery, which have generated the majority of the 90,000 extra jobs, with particularly strong performance by enterprises supported by Enterprise Ireland (EI) and the Local Enterprise Offices (LEO); and

— the central role of the Action Plan for Jobs (APJ) process in improving each year the opportunities for SMEs, which sets out actions and is designed to achieve specific impacts in terms of exports, start-ups, access to finance, market penetration, innovation, access to talent, recruitment, and the environment for doing business; and

notes in particular:

— the improvements in the tax environment for SMEs that have been made;

— the new sources of finance that are being made available to SMEs;

— the new focus on start-ups since the launch of Ireland’s first strategy for entrepreneurship: National Policy Statement on Entrepreneurship in Ireland;

— the success of the Pathways to Work strategy, new measures to help SMEs recruit such as JobsPlus and the roll out of a network of Intreo offices that work closely with the new LEOs to improve recruitment by SMEs off the Live Register; and

— that it resolves to continue to engage with SMEs on a systematic basis and to develop policy initiative’s that will assist their growth in the Budget and in the wider policy arena.”

I agree with Deputy McGrath that this is something we should probably discuss more often in the House. I welcome the opportunity to discuss SMEs supports and the work and job creation in which they are involved. In that regard, while I might not agree with everything the Opposition said, I welcome the chance to discuss this. I am only sorry, as are my colleagues, that the Minister, Deputy Bruton, and the Minister of State, Deputy Nash, could not be here. They are both out of the country and the timing has not worked out; it is not anyone's fault.

This is an important issue. Deputy Calleary mentioned the work the committee would do in this area. It must be recognised that great work goes on at the committee. It is cross-party and everyone, including spokespersons, does their bit to contribute to policy changes. When I was a member of the committee I wondered if anyone listened. I realised during my seven or eight months in the Department that people listen, have watched what we do and value our work. I have seen suggestions the committee brought forward over the past couple of years feed through to policy changes and initiatives, which is good to see. I hope during my time as Minister of State that we can do more of that and work more closely together.

There is a recognition in the Department that the committee does great work. I welcome the atmosphere in the committee meetings, as a former Chairman and now as a Minister of State. We need it because businesses need us to work together and not fight over silly stuff. The majority of speeches have been constructive. I will not agree with all of the criticism, but there are some ideas on which we can work and others on which we are already working. If Deputy McGuinness brings forward a policy I will read it line by line. I am sure he and Deputy Calleary will work hard on it. If we can implement some changes or good ideas, we will do so. The Action Plan for Jobs is an open process to which every Deputy and person can contribute.

Since coming into office this Government has had a clear focus on supporting enterprise in Ireland, particularly micro enterprises and SMEs which make up over 99% of businesses in the enterprise economy in Ireland and account for almost 70% of people employed. It is often missed that the majority of our businesses are SMEs. The Government's stated aim is the delivery of 100,000 new jobs by 2016. Recent CSO figures indicate that since the launch of the Action Plan for Jobs in 2012 an extra 90,000 jobs have been created in net terms and we are well on our way to reaching 100,000 extra jobs during this year, a full 18 months ahead of schedule. All of us knew that was an ambitious target. Many said it could not be achieved, but it has been and shows the dedication of people in business in the private sector to job creation when they are encouraged and given policies with which they can work that make it easier to create sustainable, enterprise-driven jobs.

This was the ambition we set ourselves because we were convinced that with the whole of Government working together, and in partnership with industry and workers, we could reverse the collapse that previous policy choices had created. We knew when we started out on the action plan process that the recovery would have to be export-led and that our success would be driven by our ability to compete on the international stage. Every region has seen its jobs numbers increase. Jobs that depend on the domestic sector, like construction and retail, are also now adding numbers. Exports from Enterprise Ireland assisted companies were at record levels in 2014.

The outcome of that conviction, and the policies that underscored it, is that in 2014 both IDA and Enterprise Ireland had record years. Combined, they created a net additional 15,000 jobs which, in turn, support a similar number in support services and related sectors. This is making a real impact all over the country. Notably, Enterprise Ireland, which looks after Irish-owned exporting companies, added over 8,000 of those new jobs. This means that Irish companies are right at the heart of our recovery, working side by side with our international colleagues.

However, the Government's strategy has also placed central importance on Ireland's locally trading businesses, as reflected in action plans in recent years. The most obvious manifestation of this was the launch in 2014 of the nationwide system of local enterprise offices, LEOs, which are embedded in local authorities. The establishment of LEOs means that all categories of business, including sole traders, micro businesses and small and medium sized companies, have access to Government supports and advice. Enterprise boards did great work in the past but were not allowed to work with all types of companies. Not everybody can get grant aid, but there are extra supports for companies that need them.

At the time it was said, and it was mentioned this evening, that it was wrong to put the LEO concept into place and that local authorities were not enterprise-facing but we are trying to change that. Local authorities and many other State bodies had to become enterprise-facing and develop an understanding of enterprise. We are making a difference because all of our Departments are part of the Action Plan for Jobs process. Every Department is getting a feel for jobs and what it is to be enterprise driven. Most important, local authorities are now working with that process. They have to lead the way, through LEOs and under the policy direction of Enterprise Ireland, to change the local environment and make it easier to create jobs. They are working on that and are achieving their goals, but the long-term results will be even better.

I see it in Meath, which has become very enterprise-facing and much more approachable for small, medium, large, international and local companies. I was in Limerick today and saw how city and county councils have become enterprise-facing and are working locally to drive real change and results. I was delighted by what I saw. That happened because there was a change in local structures. The enterprise boards have changed. I have said, and will say again, that there was an opportunity to improve local authorities, which is happening and is a positive change in terms of enterprise and creating jobs.

The restructuring means that people thinking of starting or expanding a business in any part of the country can access the full range of State supports provided by different Government bodies, for example, local authorities, Enterprise Ireland, Revenue, the Department of Social Protection, the Credit Review Office and training bodies, in one easily accessible location within the local authority. The annual results for LEOs, published just last week, show that at the end of 2014 total direct employment among the 6,058 LEO client companies stood at 31,326. The results also show that a total of 7,305 new jobs were created during 2014, in gross terms, and taking into account losses, a net increase of 4,012, or 14%, in the numbers of people at work in these enterprises. The policy changes are working and delivering.

These results show that the new system is performing extremely well, with over 4,000 extra jobs in supported companies in 2014 and job growth in every county. The LEOs will continue to be a crucial part of our plans to deliver sustainable full employment and to accelerate job growth in every region of the country.

The Action Plan for Jobs will again be the Government's main focus for delivering for the SME community, and it has the needs of small business at its core. The objectives and actions set out in the plan are designed to have specific impacts in terms of jobs, exports and start-ups, access to finance, market penetration, innovation, access to talent, and efficiency of public sector interaction with business.

The Action Plan for Jobs is a whole-of-government initiative under which all Departments and agencies work together to deliver on the agreed action points for each year. The whole-of-government approach is key. Every Department has a role and over 60 agencies have to be involved and do their bit. In the past, that did not happen. As has been said here, many Departments did not really understand the needs of businesses and how difficult conditions can be. The majority of businesspeople do not get easy money and work very hard for what they get in order to survive. It is important that this message is received in every Department. Most Departments recognise that now and realise they must, where they can, make it easier for businesses to survive and thrive.

Since the Action Plan for Jobs process was started in early 2012, almost 1,000 individual actions have been implemented by 16 Departments and dozens of State agencies to support job creation. In late January, the Government launched the Action Plan for Jobs 2015, the fourth annual plan in a multi-year process. It details 382 actions that will be taken by 16 Departments and over 60 State agencies that will support job creation. The process is about making it easier for enterprises to create jobs, grow, survive and scale up. This was not always possible because we were not really enterprise driven; we were thinking of construction and selling houses to one another. As the Minister, Deputy Richard Bruton, has said on many occasions, we do not get rich as a nation by selling houses to one another but by exporting and trading with other nations. That is what we are trying to concentrate on and it is why we are seeing success.

Some of the actions in the plan are quite simple and basic. Others are quite constructive and new but even the basics must be done. We recognised on entering office that the basics were not put in place to make it easy to start or run a company or small business. We are trying to make it easier as we go along. While there are more improvements to be made, the process is constantly evolving. New actions can be submitted by any Deputy. If they are worthwhile, we will take them on board. It does not matter who submits them. If they are good for business, they will fit into the plan. The Government is taking a range of further measures, including the development of regional action plans, to ensure economic recovery and job creation are spread right across the country and that all regions can achieve their potential.

Among the headline measures to be delivered in 2015 through the Action Plan for Jobs are regional enterprise strategies, to be rolled out shortly across the country, including competitive funding initiatives worth up to €250 million, aimed at encouraging stakeholders in each region to co-operate and develop projects to support enterprise and job creation in their area. This is to encourage a regional approach. We can benefit by having counties working together. Another measure concerns entrepreneurship, with new measures to deliver on ambitious targets for job creation by start-ups, including a new SURE tax incentive to provide funding for people starting businesses and a start-up Gathering, to be held in Ireland during 2015. There is to be increased focus on job creation in the domestic economy, including measures to support the retail, construction and agriculture sectors. Awareness is important. There is a need to promote increased awareness among businesses of Government supports available to help them through a campaign centred around www.actionplanforjobs.ie and other initiatives. Deputy Calleary referred to using the Revenue Commissioners. I totally agree and have said the same myself. We are actually examining the proposal in the Department. One of the first meetings I was at as a Minister of State involved my bringing to the table what we had discussed at a committee meeting, namely, the concept of Revenue sending messages to businesses regularly. Every week we get a little message from the HSE, the message of the week. That is an approach we could use to get the message out. We are taking on board the use of Revenue and trying to determine how we could implement the proposal. The Deputy is correct that most people in business are swamped with information and are so busy trying to get the job done that they might miss the opportunity to avail of a support that might suit them. We have tried to target them. The Deputy’s idea has been talked about. It is good and is certainly one we will work on.

This year's action plan continues to focus on competitiveness and places renewed emphasis on encouraging new start-ups and growing companies of scale. It also introduces new approaches to deliver on balanced regional development. One of the core ambitions for the Action Plan for Jobs is to stimulate the domestic economy and generate employment in the locally traded sector and to build an indigenous engine of growth that drives up the export market share of Irish companies. Whether operating in agrifood, retail, tourism or construction, these important firms will be supported over the next 12 months in a variety of ways, including direct investment, support to begin trading online, focus on attracting greater numbers of overseas visitors, and ongoing implementation of the Food Harvest 2020 strategy.

The National Policy Statement on Entrepreneurship in Ireland was launched in October 2014 and is the culmination of work carried out since May 2013. The statement represents the first time a Government has published a comprehensive national strategy for entrepreneurship. It is an important strategy and it is important that the Government recognise it. I am glad it is being supported by all parties.

The key target contained in the plan is to double the jobs impact of start-ups in Ireland over the next five years, from 93,000 currently. In order to deliver on this, we must increase the number of start-ups by 25%, representing 3,000 more per annum; increase the survival rate in the first five years by 25%, which will result in 1,800 more survivors per annum; and improve the capacity of start-ups to grow to scale by 25%. It is a question of starting, surviving and scaling up. That is what we are about in the plan and strategy.

In Ireland, we have great entrepreneurs but, as the Minister has said, we just do not have enough of them. We all agree on that. There is an onus on us all to do what we can to increase the number and improve the culture that fosters entrepreneurship. Given that two thirds of all new jobs come from start-ups, it is crucial that we examine our policies across government to ensure they are aligned with our ambitions in this area. While some of the recommendations need input from the business sector, there is much that the Government can do to incentivise, support and promote, and to encourage more people to start businesses. That is what the policy statement will deliver. Tomorrow, we will attend the student enterprise awards and see more of the entrepreneurial culture. There are over 16,000 people involved. The initiative has been a feature for a number of years. It is a really positive development for the country and will certainly contribute to entrepreneurship in the future.

This policy statement sets out the Government's strategic objectives as a facilitator within the Irish entrepreneurship ecosystem in key areas that impact on entrepreneurs and start-ups and it signposts the direction policy will take in the coming years.

The Government has brought renewed focus to access to finance and, more recently, finance for growth for our scaling SMEs. The onset of the international financial crisis and the problems with our national banking system have created a tough financing environment for our SMEs. No one is denying that; we all recognise it. The culture has improved but we constantly want to improve further. The Government is aware that our SMEs have traditionally tended to be overly reliant on banks and bank loans. Through the annual Action Plan for Jobs process, we have driven a range of policy initiatives and new programmes to support SMEs accessing finance from both bank and non-bank sources. The enterprise committee has done a lot of work on that issue and has made some good suggestions that have been implemented to try to widen the range of non-bank sources. Over 90% of SMEs are dependent on traditional banking methods. That is not a balance we wish to continue with and we must rebalance as we go along.

This annual process is supported by a cross-Government and agency SME State bodies group, which brings together all the relevant State officials who work together to deliver on this crucial agenda for our SMEs. The policy initiatives and new programmes include the establishment of the Strategic Banking Corporation of Ireland, providing up to €800 million in funds for SMEs; the development of an innovative tool for supporting SMEs online to provide an individual with details of and a contact point for all the possible Government business supports available; the launch in 2012 of the microenterprise loan fund, which is run by Microfinance Ireland; and, more important, the review of the microenterprise loan fund, with new changes to be launched in 2015, including the removal of the requirement for a bank refusal. Other initiatives include the launch of the credit guarantee scheme in 2012, with Bank of Ireland, AIB and Ulster Bank as participating lenders; and the review of the credit guarantee scheme, with a new credit guarantee scheme 2015 to deal with refinancing where banks are exiting the Irish SME lending market and extending the maximum length of the guarantee from three to seven years. With regard to the latter, work on further changes to the primary legislation is well advanced and this will broaden the range of products that can be guaranteed and broaden the providers beyond licensed banks, in addition to increasing the level of the guarantee. Any other changes to the scheme would require analysis to ensure a market failure was being met and would have to be scrutinised from both State aid and legal perspectives. Further initiatives involve improvements to the offering of the Credit Review Office, which saw its limit increase to €3 million, and the transition of the National Pensions Reserve Fund to the Irish Strategic Investment Fund. This will help with scale, in respect of which it will be key. There is expertise to ensure the money is spent wisely in the domestic market, and this can lead to major job creation. Yet more initiatives are the rolling out of the national information campaign on late payments and the prompt payment code of conduct portal, and the commitment by Enterprise Ireland of €99.5 million to a number of funds under the seed and venture capital scheme for the period 2013 to 2018, which aims to leverage an additional €300 million from the private sector, making over €500 million in funding available to SMEs.

With regard to the current position on bank lending, the Department of Finance, through its SME credit demand survey, has reported that 86% of businesses surveyed had their credit applications approved. With regard to the cost of credit, this survey showed that only 1% of businesses that did not request credit felt it was too expensive to borrow.

We all hear stories about the cost of credit here compared to the cost in our European partners and we are constantly working on it. Notwithstanding this, the Government, through the Strategic Banking Corporation of Ireland, SBCI, is taking action on the cost of borrowing for business. Its business model is based primarily on the on-lending model that has been operating successfully in countries such as Germany and Spain. SBCI is a wholesale funder which works with various on-lenders to minimise the overhead expense of the operation and leverage the existing networks and capabilities of on-lenders for the benefit of SMEs. SBCI will ensure access to flexible funding for Irish SMEs by facilitating the provision of flexible products with longer maturity and capital repayment flexibility subject to credit approval; lower cost funding to financial institutions which is, and must be, passed on to SMEs; and market access for new entrants to the SME lending market, creating real competition. SBCI has begun delivering products through Bank of Ireland and AIB.

A fair, efficient and competitive tax system is essential for economic growth and job creation, and in each budget the Government has introduced we have worked to improve the economic situation for business and people in Ireland. I will highlight some of relevant tax initiatives the Government has taken. The tax changes for workers introduced in budget 2015 equally benefit all those who pay income tax and or universal social charge, regardless of whether they are self-employed or PAYE workers. Significant improvements have been made to the employment and investment incentive, increasing the amounts of investments raised by small and medium-sized companies under the incentive, which provides an essential alternative source of funding for SMEs. This is an attempt to simplify the process and make it easier. We will shortly launch the start-up refund for entrepreneurs initiative whereby those interested in starting a new company may qualify for a tax refund on income tax paid in previous years to invest in the new company. This simplifies a measure which existed previously, but not everyone knew how to use it. We are trying to make it easier for businesses to access support systems. This is also the case with the JobsPlus scheme which has been discussed at various meetings. We are trying to simplify the supports to create jobs in businesses.

The start your own business initiative was introduced in budget 2014. Budget 2014 increased the cash receipts basis threshold for VAT to €2 million. Given the importance of the tourism sector to the Irish economy and the crucial roles tourism-related services play throughout the country, the 2011 jobs initiative introduced a 9% VAT rate, which has proved hugely successful. It has been very beneficial and has certainly led to major job creation. To assist the construction sector we introduced the home renovation incentive in budget 2014, which has brought great benefit to people in their homes and has helped those working in local companies access work and get back into the system. Of course the Government will consider addressing the historical disparities that remain in the tax system between self-assessed and PAYE workers, particularly those at lower levels of equivalent income, as part of our deliberations for budget 2016 subject, of course, to having the required fiscal space.

Social protection plays a crucial role in the functioning of our economy and in supporting our SMEs and our people. As well as our Action Plan for Jobs, the Government's Pathways to Work strategy has certainly been a success. It is designed to reduce the numbers on the live register and ensure people are not left behind. Previous recoveries left the long-term unemployed behind and they never got a chance to catch up. The logic behind Pathways to Work is to ensure people are job ready and as close to work as they can possibly be, so when jobs become available they are able to get them and do not miss out on an opportunity. I do not blame anybody, but in the past people got left behind. This cannot and will not happen this time. SMEs are being encouraged to recruit using measures such as JobsPlus, which is a simplified cash support for a business to employ somebody on the live register. It is quite simple and certainly reduces the cost in the early years of employing somebody and helps deal with training. Intreo offices work closely with the local enterprise offices to improve recruitment off the live register by SMEs. Not enough companies have engaged with Intreo offices, but those which have used the service are very complimentary of it. The Intreo offices exist to find talent on the live register and this is what they do. They are doing a good job and we need to encourage their use and get the word out.

In terms of raising awareness and communications, the Department of Social Protection undertakes advertising and awareness activities to ensure that all members of the public are made aware of their rights and entitlements and that they are kept informed of significant changes and improvements in schemes and services as they occur. We need to get the message out there louder and clearer to businesses. Information on the full range of social welfare schemes and services is available from the Department of Social Protection, Intreo offices, the local office network and the nationwide network of citizen information centres. In addition, many people access information on the websites of the Department of Social Protection and the Citizen Information Board. We need to get the message out to businesses about the many supports which can help their staff and the businesses to create jobs and win new jobs.

In September 2013, the Tánaiste and Minister for Social Protection published the third report of the advisory group on tax and social welfare on extending social insurance coverage for the self-employed. The group was asked to examine and report on the issues involved in extending social insurance coverage for self-employed people to establish whether such cover is technically feasible and financially sustainable, with the requirement that any proposals for change must be cost neutral. This is an issue which many Deputies of all parties have raised for a number of years. We all want to see such supports increased if it is financially viable to do so. It has been examined in the report. The group found that the current system of means-tested jobseeker's allowance payments adequately provides cover to self-employed people for the risks associated with unemployment. In this context, the group noted that almost nine out of every ten self-employed people who claimed the means-tested jobseeker's allowance during the three-year period from 2009 to 2011 received payment. This message can be lost. Many business people do not realise they are entitled to claim the allowance. I know it is not a nice system to go through and the amount may not reflect the amount of money they had earned and I accept many people choose not to go through the means-tested system. The independent report shows those who did go down that route received the support. Consequently, the group was not convinced there was a need for the extension of social insurance for the self-employed to provide cover for jobseeker's benefit. The group found that extending social insurance for the self-employed was warranted in cases related to long-term sickness or injuries, which possibly reflects many of the messages we receive about people being unable to keep their businesses going after an accident. To this end, the group recommended that class S benefits should be extended to provide cover for people who are permanently incapable of work, because of a long-term illness or incapacity, through the invalidity pension and the partial capacity benefit schemes. The group further recommended that the extension of social insurance in this regard should be on a compulsory basis and that the rate of contribution for class S should be increased by at least 1.5%.

In general the current system of social insurance operates on a mandatory basis and therefore contributors pay PRSI contributions at the rate appropriate to their PRSI class. Allowing people a facility to opt in or opt out at their own discretion could lead to the selection of bad risks. The whole principle of social insurance is social solidarity, whereby everybody pays in and, if needed, cover is available. We must ensure there is a safety net and that those who choose to go into business realise it is there. We must all work on making this clear. Most business people who suffered during the bad times were shocked to realise they could not receive supports when they needed them. We must get the message out that they can go through the means test system. There is an onus on all of us to improve the system if we can do so.

In developing the Action Plan for Jobs 2015 we have embedded an assessment framework that links its objectives and actions to impacts, and which provides a better sense of the direction of progress and helps ensure that actions effectively contribute to the over-arching objective of increased employment. We are introducing closer monitoring of impacts to measure performance and to test areas of opportunity against international benchmarks in the areas of job creation, start-ups, market penetration, innovation, efficiency of public sector interface with enterprises, cost competitiveness, finance and investment and access to talent. In addition to work under the Action Plan for Jobs and measures contained in the budgetary process, the Government has ensured that ongoing dialogue with the small business sector is in place so that businesses and Government can work together to identify necessary actions to support SMEs in Ireland.

Raising awareness among SMEs and entrepreneurs of the range of the State-funded supports available remains an ongoing challenge for the public policy system. I touched on this earlier as did previous speakers. We must improve this message and get the word out. We will ensure a continued emphasis on implementing a comprehensive and integrated communications strategy involving the widest possible range of stakeholders in the public and private sectors. This will include facilitating more formal mechanisms for structured, ongoing engagement between Government and SMEs, including the advisory group on small business, the high level group on better regulation and the retail forum. These are opportunities to bring about change, as is the committee system which is the best place for us to work on policy and analysis and make changes. We must strengthen this link. We are also using new and existing communication channels to promote the positive experience of individual SMEs and industry partners of participation in State-sponsored initiatives, notably the network of 31 local enterprise offices.

Maintaining an ongoing dialogue with the SME sector in this way can also encourage two-way learning, provide a forum to consider policy solutions, and build trust in the policy development process.

An earlier speaker referred to urgency. We have a duty, through agencies and Departments, to move at a greater pace when matters are urgent. Industry sometimes needs quicker changes. Over the years we have done so in the Action Plan for Jobs. In some cases, we have taken Government agencies and Departments out of the way and let people do what they do best. We are also trying to cut red tape and improve the timeline. There is always a difference in the timelines of businesses and Departments. We accept that and there are sometimes genuine reasons for it. Where there are no genuine reasons, we must eliminate delays.

Last month marked four years since the Government came to office. It is important that we take a moment to recognise where we started from as a Government. At that time, we faced an unprecedented economic, political and social crisis, the economy was in free fall and our banks were on the verge of collapse. Unemployment was heading for 20%. Everyone was saying so at the time. The first time we referred to 100,000 jobs, people laughed at us and said we could not achieve it and that it could not be done. It was Government-aided, but the private sector answered the call and engaged with us through the new system of the Action Plan for Jobs to create jobs. Almost all of the extra jobs that have been created are full time and they are real jobs. It is important that people have a little hope. I get disappointed when Deputies from different parties suggest that these are not real jobs. They are real jobs and Members should recognise that. I recognise there are not enough jobs for everyone, but where there are real and good jobs, we should build on the success and the hope factor and not knock it. They are not all labour activation schemes. There is little difference between the number of labour activation schemes now and those in the good times. These are real jobs and we should recognise that. We can all recognise things we are unhappy with and the need to scale up, but we should also recognise where there are improvements that are beneficial to the country and that we want to build on. We are well ahead of the target and we are trying to build on it. We hope to reach full employment in 2018.

The economy is growing, unemployment is falling and the confidence of our people and businesses is returning. Our focus now as a Government is to secure the recovery and ensure that everyone feels the benefits of it in their daily lives and in their pockets. We will ensure that our economy is built on a solid foundation of sustainability, with a clear enterprise focus that supports enterprise and jobs. That is the difference, as the clear enterprise focus to support enterprise and jobs was not there in the past. Enterprise-driven jobs that would last forever were not guaranteed. When there was an international crisis, it hit us badly in Ireland because we had not created enough enterprise-driven jobs that would last through good and bad times.

As a Government, we will continue to maintain our focus on assisting SMEs in establishing themselves, scaling up and exporting in order to ensure that they continue to drive our economic recovery and create further jobs. We will continue to work hard to secure the recovery and ensure that the fruits of our efforts are felt by all of our people. We have set ourselves strong and measurable goals for our economy, for employment and for the public finances for the years ahead and we are implementing the policies that will achieve those targets.

Deputy Pearse Doherty

I propose to share time with Deputy Michael Colreavy. Cuirim fáilte roimh an rún. Tugann ár bpáirtí tacaíocht do chuspóirí an rúin atá os ár gcomhair.

There can be no recovery in our society without the support of our SME sector. Seventy percent of people employed in Ireland are employed in the SME sector. That is an incredible statistic, which should put in sharp focus where most workers work. Last year, a tiny number of jobs were created outside the greater Dublin area. Since this Government came to power, four people have left for every one job created. Those in the west and north west are all too aware of the regional imbalances, which have been made worse by the complete collapse in capital investment that this Government seems to pride itself on. The potential jobs in rebuilding our infrastructure are not being created, while our infrastructure crumbles, unless one thinks of Irish Water as a good example of State capital investment.

It has been a characteristic of this economy for decades that our entire industrial policy is predicated on attracting foreign direct investment to the State. FDI plays a huge and essential part in our economy, but it is only common sense not to put all our eggs in the one basket. Ultimately, multinationals will go where their profits can be maximised. In this day and age of modern technology, multinationals are freer than in the past to move at short notice to new bases. Increasingly, the economic statistics of the entire State can be distorted by the FDI sector. This was clear with last year's growth figures, where contract manufacturing made up half of the growth, an anomaly as reported by the CSO.

SMEs, on the other hand, are tied to the local community and will remain so. We are grateful that this is the case. They are the core of the real economy and the bedrock on which all economic development must be built and maintained. We could be forgiven for asking where are the special tax deals for SMEs. Does the Government roll out the red carpet for SMEs or bend the rules when asked? If we are to have a fair recovery, our economic policy should maintain a strong attraction for FDI but also give due importance to SMEs.

I agree with the proposal in the motion to begin a process whereby the self-employed can voluntarily sign up to the social insurance system and avail of jobseeker’s benefit and illness benefit. It is something my party has long called for, and in my time in the Seanad I articulated the point time and again. There is certainly a disparity in tax treatment between PAYE workers and the self-employed, but that does not mean the self-employed are necessarily disadvantaged in all cases. A much wider range of allowances are available to the self-employed, and that must be factored into any discussion on taxation of PAYE workers and the self-employed.

Where Sinn Féin has differed from the cosy consensus of Fine Gael, Fianna Fáil and the Labour Party is that our economic vision is about building a sustainable economy, not simply rebuilding the house that collapsed. We do not believe in trying to rebuild on flimsy foundations. We believe in real growth in the Irish economy and a fair recovery. It is not a sudden conversion to the idea of growth that the Government is embracing. We did not wait years for growth but made it clear our policies would have brought it about. The effect of Sinn Féin’s policies would have been to boost, not reduce, consumer demand. It was about putting money back into people’s pockets, money that could be spent in local businesses and the local economy. Over the past seven years, since the crisis began, the biggest factor that has hurt SMEs and the self-employed is the austerity policies peddled by Fianna Fáil, Fine Gael and the Labour Party, which reduced domestic demand and took many businesses to the wall or put them under severe pressure.

Our party favours progressive policies that would support our SME sector. Specifically, we have argued for the abolition of upward-only rent reviews. If Labour Party Deputies were in the Chamber, they might remember the policy. Without any evidence, we were told that this raised constitutional issues, but we have advice to the contrary. In the case of the IBRC liquidation, these property rights that the Government spearheads could be overridden for the common good. For city centre shopkeepers in particular, the problem has not gone away. Small businesses, including the mortgage holders of IBRC, are now in the hands of vultures. Some SMEs cannot establish who owns their loans now. That is the esteem in which this Government holds SMEs.

The cost of electricity and other utilities is a major weight on SMEs. A cap on these costs should be considered for a period. A more progressive rates system, something Sinn Féin has called for over a number of years, should be on the table. Nobody argues that a flat tax on income is equitable, yet when it comes to business rates, we expect an SME to pay the same rate as a multinational or a branch of a large supermarket chain, for example. These are just some of the proposals we published last year in our Putting SMEs First strategy. There are many others, such as a Border corridor zone that would have an impact on businesses in that area as a result of fluctuating currencies and differing laws and regulations on either side.

We have mentioned procurement, an issue Deputy Mary Lou McDonald has been raising for many years in this Chamber.

Acting Chairman (Deputy Jack Wall)

The Deputy has one minute.

Deputy Pearse Doherty

The Government has the opportunity to direct some of the €16 billion spend to small and medium-sized enterprises. However, we see that the contrary is the case, and many SMEs are ruled out of bidding as a result of the archaic rules that apply to that type of procurement.

Our Putting SMEs First policy document contains ten proposals the Government could implement. I could compare the title of that document with the Government's initiative on SMEs, which might be called "SMEs - an Afterthought". Where is the Government plan to allow everyone to have an e-business platform, for example? We know how much businesses are losing as a result of them not being e-mobile. The Government motion is remarkably lacklustre in even pretending it is acting to help our SME sector. It consists only of references to documents and statements without any supporting evidence. It is an insult to that sector. We need to step up to the mark and to prioritise this sector as it has 70% of the jobs in this State. We need to do it with a full analysis of the figures and with a full understanding of the taxation models that apply for the SME sector and the PAYE sectors.

As Fianna Fáil Deputies said earlier, there is no harm in somebody earning over €100,000. People who take risks should be rewarded. However, we must ask ourselves in these straitened times whether we want to give tax cuts to those individuals, to lift more people out of poverty or to help those self-employed people - the chippies, the plumbers and the people who provide services in rural communities and who are hardly making a bob, never mind €100,000 a year - by taking away some of the punitive measures that same party introduced, such as the household levy and its plan for water charges. Our focus is clear. It is about putting more money into people's pockets and ensuring that money is put into the pockets of those people who are hard-pressed in society, the people who will spend every penny they have in the economy. When they do that, it ensures that the self-employed and small and medium enterprises can continue to employ themselves, make a living for themselves and continue to ensure they have a role in rebuilding society from the ground up.

Some of the remarks I have heard today are lacking in ambition and in vision for the sector, but I welcome the fact that the focus on this sector has been brought to the Dáil Chamber tonight as a result of Fianna Fáil's motion. It is badly needed. We have discussed time and again, at the finance committee and in the Dáil, the importance of FDI and the 12.5% rate, but there is no due regard for the thousands of people who have become self-employed, who do not have the safety net of the social welfare system, who have been promised that for many years and who still have to rely on idle words from the Government in the twilight of its time in power. As I said, I agree with the spirit of the motion, although I do not agree with everything Fianna Fáil has said tonight. Some of it is misguided in terms of the facts, but there is a fundamental need to ensure that supports and safety nets are there for the self-employed and SMEs, that public procurement is opened up to SMEs, that Government assists the self-employed and SMEs to get online so that we can compete in an international market, and to ensure that money goes back into the pockets of those who need the money, so that they can spend it in the economy, which will be a boost to the self-employed and to the SME sector.

Acting Chairman (Deputy Jack Wall)

Deputy Colreavy has one minute.

Deputy Michael Colreavy

Just one minute?

Acting Chairman (Deputy Jack Wall)

Yes.

Deputy Michael Colreavy

In the north west of Ireland, owners and-----

Acting Chairman (Deputy Jack Wall)

My apologies to the Deputy. There are four minutes left. I was depriving him of three minutes.

Deputy Michael Colreavy

In the north west of Ireland, owners and employees of small and medium-sized businesses smile ruefully when they hear the oft-expressed opinion of Government spokespersons that the economy is growing and employment is being created. They look around at closing shops, pubs, cafes and commercial businesses, or see businesses barely surviving on hope of improvement, and they wonder when their economy, the real economy, will begin to improve. They see previously self-employed people who paid tax and social welfare in respect of their employees now virtually destitute with the closure of their businesses. They clearly see a picture that is at odds with the picture being painted by Government in the run-up to an election.

As I have only a few minutes to speak on this, I will confine my remarks to the need to radically reform the business rating system and utility costs for business. The system for calculating business rates is causing untold damage to small businesses throughout the land. The system is regressive, it is not linked in any way to profit or income, it is a notional figure that bears no relationship to reality and it is strangling small businesses. I know several small businesses in Sligo, Leitrim, Cavan and Donegal that are simply unable to continue because the rates burden added to the already heavy water and waste collection charges cannot be met from the reduced customer footfall to their businesses. What is the sense of developing new incentives when the current illogical Government finance extraction schemes are sucking the life blood from these enterprises?

Utility costs are a major impediment to the development and growth of SMEs in Ireland. The Forfás Cost of Doing Business in Ireland report, released in 2013, highlighted the significant costs facing SMEs and affecting their competitiveness and that of the State. It found that Ireland is the fourth most expensive country in the euro area for diesel. Electricity costs for SMEs are the fourth highest among the 15 countries in the euro area. Waste costs remain high, particularly landfill fees. While the cost of a bundle of telephone calls is relatively competitive, Ireland is expensive in terms of broadband costs, particularly when broadband quality is considered. International research shows that the Internet contributes up to 6% of GDP in advanced economies and most of the economic value created occurs outside the information technology sector, with 75% of the benefits captured by companies in more traditional industries. The research also found that the Internet created 2.6 jobs for every one lost due to technology-related efficiencies. Broadband is considered an essential infrastructure priority for enterprise growth.

Fairness dictates that businesses need to be better supported and penalised less in all regions. To do this, all regions need to have a strong infrastructure base enabling them to compete, as well as to attract and retain investment and jobs. Since the liberalisation of the telecommunications market, private investment has been driving the roll-out of broadband infrastructure and services nationally, and internationally. Just as with other types of infrastructure provision, population density is a determinant of the cost of delivery and potential returns.

Does the Acting Chair want me to finish off with one minute to go?

Acting Chairman (Deputy Jack Wall)

The Deputy's time is now gone.

Deputy Michael Colreavy

Will I move that the debate be adjourned until tomorrow?

Acting Chairman (Deputy Jack Wall)

No, there are still two more speakers.

Deputy Stephen S. Donnelly

When it comes to the self-employed, this Government, along with the last Government, is guilty of rank hypocrisy. On the one hand, the State says to people that it wants them to be entrepreneurial and innovative, that it wants them to set up new companies, to take risks, and to employ people, and that they are the backbone of the economy.

We hear this all the time. When I came into politics four years ago we heard it all the time from the previous Government. They said they respected and admired entrepreneurs and the self employed, and that they should go for at. At the same time, the State, this and the previous Government, says it will tax the self employed at a higher rate than PAYE workers.

A self-employed person earning more than €100,000 pays 4% more tax than a PAYE worker, a self-employed person earning €50,000 pays 11% more and a self-employed person earning €15,000 pays nearly seven times more tax than a PAYE worker. As every Deputy knows, a self-employed person who has taken the risk and done what the State said, is afforded a fraction of the social protections a PAYE worker receives. We all know this because we are all trying to help self-employed people whose businesses have gone to the wall during the recession. It is hypocrisy. The State tells people to go out, set up businesses, take risks, invest their own money and try to employ people, but states, "By the way, we are going to tax you more and God help you if you fail". It is not good enough. There are 324,000 self employed people in the country, 100,000 of whom earn less than €50,000. The Government can introduce two policies within a matter of months. In the budget, it can equalise tax treatment, and in the Social Welfare Bill that accompanies the budget, it can equalise social protections.

Deputy Thomas Pringle

I will concentrate on the PRSI and social welfare treatment of self employed people. As the motion stated, there are approximately 350,000 self-employed people in the country. Many of these are working in jobs that would traditionally have been employee jobs but, because of moves by the employers, are on contracts for services and have become de facto self employed although they have no control over their incomes and potential for earnings. One of the most difficult aspects of the recession to deal with at the height of the financial collapse was trying to explain to formerly self-employed people that they were not entitled to any social welfare or social protection when their businesses had failed and they were looking for a safety net. It took a long time for the Department of Social Protection to come to terms with it and ease the burden on them and their ability to access jobseeker's allowance, which is a means-tested payment. Finally, it acted and made it slightly easier for the self employed to access the payment. Self-employed people should have a right to social protection and should pay the additional contributions to ensure they have the right to access social protection under the PRSI system. In 2012, I drafted legislation to give this right to self-employed people but, unfortunately, due to the archaic rules of the House, it was ruled out of order on the grounds that an Opposition Deputy cannot introduce legislation that might increase taxation.

Tonight's motion calls for voluntary contribution system to be introduced for self employed people. However, a voluntary system will not work. We already have a voluntary system of PRSI contributions for self-employed fishermen whereby they can pay an additional 4% contribution voluntarily and avail of limited social protection benefits. Over the years it has been in operation, an average of seven to nine self employed fishermen have availed of it, and this is because it is voluntary. Nobody volunteers to pay tax, even though they may benefit from it in the future, and PRSI is seen as a tax. However, social protection should be extended to self-employed people under a compulsory system, and this is vitally important. We should recognise that self-employed people are less likely to become unemployed due to the nature of self employment. Given that they also employ people, we should have a favourable PRSI system that provides benefits for them.

Debate adjourned.

The Dáil adjourned at 9.05 p.m. until 9.30 a.m. on Wednesday, 22 April 2015.

Dáil Éireann díospóireacht - Tuesday, 21 Apr 2015

Self-Employed and the SME Sector: Motion [Private Members]

Dáil Éireann díospóireacht -
Tuesday, 21 Apr 2015