Fine Gael will support this Bill. This is important legislation in the context of the issues the Minister of State alluded to, particularly regarding the dematerialisation of security certification. This has become an issue in recent times, with particular reference to our relationship with Britain. I am conscious that this is an urgent issue. The Bill also deals with the transposition of an EU directive on transparency and takeovers. The Bill gives us an opportunity to assess where we stand on investment, consumer law and the health and well-being of our companies. Today's economic climate is excellent. All the economic growth indicators are solid. We have warnings from time to time from the usual sources such as the Central Bank and the ESRI——
Investment Funds, Companies and Miscellaneous Provisions Bill 2006 [Seanad]: Second Stage (Resumed).
And Jim Power.
The Government has its own economist, Dan McLaughlin, but he does not warn people.
He does a good job and gets it right.
They are all going okay. The National Competitiveness Council, which the Government should heed because it is its own organisation——
It is an independent body.
It is an independent group that meets from time to time to assess our performance. The Taoiseach and the then Tánaiste were warned in December 2001 that Ireland was becoming a high cost location for business. The electoral cycle intervened in 2002 and the issues that were raised have not been addressed. In recent years, the solution for dealing with matters of direct and indirect cost problems in the economy was to establish a regulator. No matter where the problem was in the economy, regulators were established under the guise of enhancing competition.
Regulators have failed for one reason: no political perspective or direction has been given to them. It should have been given to them on their establishment so that they understand it is not just a matter of bringing new players into the market, but also ensuring that it does not grant increases in prices across the public utilities and local government charges on top of the existing high cost base.
We need to assess where we are going with the regulators that have been appointed and the policy remit that has been given to them. We do not need to look any further than the recent activities of the Commission For Energy Regulation. It has sanctioned 34% and 20% increases in gas and electricity prices respectively. At a time when wholesale prices on the oil markets are going down, these price increases have been suggested. The ordinary business consumer cannot understand it. The manner in which the CER makes its calculations often uses a historical cost base.
The Minister for Communications, Marine and Natural Resource, Deputy Noel Dempsey, stands idly by and sees no necessity to meet with the CER and seek to understand the rationale for approving these price increases. I ask the Minister of State to convey this view to the CER. I do not mind if he does so directly or indirectly. This House is not satisfied that the establishment of a Commission for Energy Regulation has been successful from the perspective of the consumer or the economy as a whole.
We were told that we would have to raise energy prices in order to encourage other firms to compete with the ESB in the provision of electricity generation. What kind of logic is that? At a time when small business people must be conscious of the competition they endure from eastern Europe and the Far East, our policy gives the regulator a free hand to increase costs irrespective of properly explaining the necessity for this to either the Government or the public. We require a trigger mechanism, politically as well as economically, for the Government to deal with this issue.
The Central Bank regularly preaches about the high level of personal indebtedness of our citizens. It talks of the irresponsible nature of people in taking 100% interest only loans from the associated banks and building societies. The Central Bank could do something about this in the morning if it wished. In conjunction with IFSRA, the Central Bank is the supervisory authority for dealing with the associated banks. The Central Bank and the Department of Finance set down banking policy. The Governor of the Central Bank regularly lectures on the dangers of holding high levels of personal debt. If there is, as expected, a further 1% rise in interest rates from the ECB, what impact will this have on disposable household income? If the Central Bank is so concerned about the irresponsibility of these practices, why has it not done something about it? This would ensure a soft landing if there were to be changes in the construction or property sectors.
The level of personal indebtedness is at a record high. We have moved from having a high national debt to having a high level of personal indebtedness. Citizens are still in debt, in an irresponsible way according to the Central Bank. The role and function of the Central Bank needs to be called into question if it is going to allow itself to be drawn into a debate about the fact that it has done nothing towards meeting the policy objectives regularly enunciated by the Governor.
The increase in the cost base of the economy caused by the indirect taxes and charges imposed by the Government since 2002 has been over the top. VAT was increased by 1% in the first budget after the 2002 general election. The Government also applied a 9% stamp duty rate, up from 6%, on commercial transactions in that budget. I know substantial revenue has been raised by this, but people have to trade and do business. They must now factor this into their costs. Enormous sums of money are required to keep small businesses going. In addition to those issues, the inactivity of regulators in introducing new competitors to the market and reducing costs has been striking.
I have been critical of the Competition Authority for some time. It exposed its own ineffectiveness as recently as this week when it allowed the Statoil takeover to take place by letting the time in which it had to make a submission expire. That is disgraceful action by the Competition Authority. Has the Minister called in the new chairman, Mr. Prasifka, and his team to find out the reason that happened? That action has effectively created a monopoly in petrol station outlets in this jurisdiction. There are many examples of companies being put through the rigours of the law by the Competition Authority for what appears, on the face of it, less dominance in the marketplace. What is in place now is effectively a monopoly in terms of the sale of petrol in forecourts throughout the country. The authority stands indicted on that matter and it should be deeply embarrassed about it.
In conjunction with my colleague, Deputy Lynch, I intend to invite representatives from the authority to the next meeting of the Oireachtas committee to ask them what went wrong, what they are doing about it and what resources they require, if resources are an issue, to keep up with the takeover issues mentioned, even throughout this Bill. Perhaps we should amend the legislation in that context to ensure nothing like that happens again, notwithstanding the incompetence of the Competition Authority on this occasion.
The Internal Market has enormous potential for Irish consumers. As an island nation, we are on the periphery of Europe but consumers here do not get the benefits of bulk purchasing, buying or selling available to consumers on the mainland of Europe. It is critical that the Commissioner, Mr. McCreevy, takes every opportunity, with the necessary support and impetus of the Government, to implement the trans-frontier trading and Internal Market services that can be provided much more freely than is available currently to us. If the Internal Market is brought to its logical conclusion, it will create difficulties, but it will set up consumers for a bonanza and it is up to Irish business, and the Government through its policy, to ensure we are competitive. It is a challenge, and I realise some vested countries here will not want that, but if we are serious about keeping prices down for consumers and business, we must take action in the Internal Market. Commissioner McCreevy has promoted the concept of completing the Internal Market in a number of areas as quickly as possible. He deserves the full support of this House in realising the potential for small businesses and consumers.
On the audit exemption, as the Minister of State is aware, I tabled an amendment in that regard in previous legislation and it was voted down. I am glad the Government has changed its mind and brought into line our own audit exemption thresholds with our neighbours in Northern Ireland and in the United Kingdom in particular. The Minister of State will be aware from his previous profession that there is substantial leakage of business from this jurisdiction into Northern Ireland because of the failure to implement the issue of increasing audit exemption thresholds. When I proposed such an amendment on Committee Stage of the Companies Bill, the then Tánaiste, Deputy Harney, appeared not to fully understand the leakage of business that was taking place. I am glad the Minister of State has now rectified that matter and brought it into line in terms of the competitive area in respect of those services, namely, the British and Irish markets.
The role of financial services in this jurisdiction has been enormous. I add my support and congratulations to the efforts made to make the Irish financial services sector in Dublin one of the leading such sectors in Europe and the world. The number of well-paid, good quality jobs that have been created in Dublin arose from the foresight in the late 1980s of the former Taoiseach, the late Charles Haughey, who did not get sufficient credit for it. Nevertheless, the support of the financial sector in bringing the necessary hedge fund companies into the financial services area has not only benefited financial services in Dublin, but there has been a trickle of employment into the various regions arising from the financial services dynamic created by that initiative. In my constituency and that of the Leas-Cheann Comhairle, there is an important employer, State Street International, which now employs up to 400 people in the city of Kilkenny. That is just one example of the considerable progress that has been made in bringing some modicum of financial services employment and understanding of this complex area into the regions.
We cannot be complacent about these issues, however, because there is keen competition from Belfast and Luxembourg. If foreign direct investment is coming to this jurisdiction, those companies do not see the difference between North and South of Ireland and Luxembourg or any of the countries in Europe. They see Europe as the location and we must be ever vigilant of making the necessary changes and be adaptable to ensure we have a strong financial services sector here. The Government must be conscious of that aspect.
On consumer protection, I have been critical of the Government about the lack of consumer policy in recent years. The Minister, Deputy Martin, decided belatedly that the National Consumer Agency should be established on an interim basis. He took his time about doing that because he did not appreciate the urgency of it. The previous Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Harney, did not see the need for it.
Shop around.
In an open market it is fine, in theory, to say we must shop around but Irish consumers are in a small market, often in areas where there is not much choice, particularly rural areas where the question of shopping around does not arise. If we are talking about the basic basket of goods on which people must survive on a day-to-day basis, the Government's policy of abolishing the groceries order was welcome but what it put in its place was critical. The Companies (Amendment) Act did not address the issues that would have ensured that the pockets of consumers benefited from whatever competition came into the food sector.
The Government's policy has put more money into the pockets of the large multinational companies and the major supermarkets at the expense of small suppliers and consumers. We have not seen the benefits of the notional figure trotted out by the then chairman of the Competition Authority, Dr. Fingleton, that there would be an annual saving of €500, on average, per household. That was nonsense but, unfortunately, the Government accepted his view without any analysis in terms of how that laudable objective would be achieved. We are all in the business of trying to ensure that customers have the highest possible disposable income and that they are not ripped off, but a theoretical notion of how that might be achieved was advanced by the Competition Authority and the Minister of the day accepted it without question.
Legislation must be introduced to ensure that the rebates and discounts available now to the large suppliers with financial muscle in this jurisdiction in terms of the purchase of food products are passed on to consumers rather than pocketed in higher profits. One multiple has boasted that it offers significant grocery price cuts on products previously covered by the groceries order, but it did not highlight the increases on products not covered by the groceries order. The overall budget available to the Irish consumer means that prices have increased by an average of 10% in the past year. That is because the Government would not listen to the advice it got on the issue from many quarters, including Members of this House who sit on the Government benches.
The Minister should consider amending the Companies Act to ensure greater transparency in the food sector and in price sensitive areas generally that are important to the household budget. We should amend the Companies Act to ensure transparency in turnover and profitability on the big multiples here. That was a recommendation in the report of the Joint Committee on Enterprise and Small Business which was not implemented. This legislation provides another opportunity to do so in order to know whether the price strategies of these companies are contributing to higher profits at the expense of the consumer. We know the companies' turnover in this jurisdiction, as well as the turnover of some private companies which are not obliged to release this information. From the information they release we can see the pricing areas on which we must focus in the interest of consumers.
Another area of consumer protection is the lack of information given to clients purchasing investment products. As an accountant, the Minister of State is aware of the plethora of policy proposals, including life policies or investment intermediary products, available to consumers. Little information is available to consumers before they sign on the dotted line and begin paying the premium, which is frustrating for them. As a former insurance intermediary, I was always conscious of the lack of information available to people who were not brought up in the culture of understanding investment, the stock exchange, equity investment and other factors that make up the return one should receive as suggested by the sales pitch. Insufficient information is provided and insurance companies should be required to give further information to clients on investment and to be transparent in explanations. Funds may perform well or badly and there is a minimum and maximum return on a fund, depending on performance. At a time when people have money to spend and as many SSIAs will be maturing shortly we must work to make more investment information available to clients. The differences between products are confusing and there may be hidden charges of which banking institutions or building societies are not fully informing customers. Analysis is required by IFSRA to demonstrate the difference between products so people can compare them and not be exposed to risk or hidden charges.
In the 1970s and 1980s, some financial investment brokers played on the weaknesses of ordinary people when they received a lump sum from the sale of property or road construction works being carried out. We cannot be overprotective of such a sum on behalf of people who wish to have a nest egg for retirement or for family members. There are too many examples of misappropriation of money. This Investment Funds, Companies and Miscellaneous Provisions Bill provides an opportunity to reflect on whether we have sufficient protection and information for consumers. For the people involved this may be a very important investment decision and may have a major impact on how they retire.
Fine Gael supports this legislation and understands the valid reasons why the Government is bringing it before the Houses. I will table some amendments, to which I have referred. I hope this legislation will provide an opportunity to demonstrate to the Irish people that the Competition Authority is awake to the consequences for consumers of investment funds and takeover bids. It will not stand idly by and allow such matters to occur without regulation. We also have a review of regulators, who regulate on behalf of the country, its citizens and customers and not on behalf of vested interests.
Before the debate Deputy Hogan told me he would not speak for very long. He feels passionately about this matter and has something most worthwhile to say that takes longer than five minutes to express.
He spoke a lot but did not speak for very long on the Bill.
It is a miscellaneous provisions Bill.
His contribution was of enormous interest to every consumer and for that he should be congratulated.
The Labour Party is broadly supportive of the Investment Funds, Companies and Miscellaneous Provisions Bill in so far as it is intended to resolve anomalies in company law and implement relatively minor, yet significant, changes to the legal framework in which business must be conducted. This is a technical Bill and the real detail must be scrutinised closely on Committee Stage.
As with all modern economies, it is vital that we work to ensure our corporate legislative framework can keep pace with the changes in business practice and keep Ireland competitive on world markets. The Labour Party also welcomes the transposition by this Bill of the EU transparency and takeovers directives, about which I will speak in more detail later.
The potential of the sections of this Bill dealing with the securitisation industry is important. The securitisation industry is a major sector of international financial business, and our current legislative framework is restrictive compared to our European counterparts. The success of the new financial services hub in the Dublin docklands, and of the business it generates across the country, will rest on the ease with which international financial services business can be conducted under Irish law. The securitisation industry is one of many where we must be sure we get the right mix of regulation for the protection of customers, most of whom are businesses, and flexibility of operation for businesses.
The owners of small and medium businesses will welcome the thrust of increases in audit exemption thresholds. Reducing bureaucracy and the regulatory burden on small businesses is a key element of Labour's enterprise policy. This move will bring us to approximately the same limits as the United Kingdom and to the EU maximum. Small businesses are the great drivers behind our economy. All companies started small. We must work to enable as many as possible to grow to become large companies, a matter on which the Government and Opposition agree. While we may wish for fewer companies to be covered by the audit requirements we hope more companies can grow to the size that will require full audits.
There is a minor anomaly in this section of the Bill, which we will examine more closely on Committee Stage. The Minister of State might consider it with respect to amendments he may make. New international auditing standards are to be implemented from now on in auditing of company accounts. Many small accountancy firms have a large proportion of clients who currently fall within the requirements for audited accounts, but would fall outside those limits after this Bill is passed. The cost to small accounting businesses of training up or outsourcing to meet these standards is quite significant, especially when one considers they will probably only need that knowledge for one financial year. The Minister of State should examine this on Committee Stage.
The dematerialisation of securities will bring us broadly in line with the rest of Europe, especially with regard to compatibility with the CREST system. However, there is some concern on this point. The explanatory memorandum released with the Bill suggests that dematerialisation will affect only securities of companies trading on a regulated market. I heard the Minister of State speak about this in his opening speech. It appears to the Labour Party and to all those it has consulted, among them very eminent corporate lawyers, that the provisions will apply to all public companies, including those with securities listed on IEX and AIM.
A more welcome aspect of this section is that we can be assured it will reduce paperwork. If only we could do the same for public representatives. The many members of the public who were stung by the Government in the Eircom flotation and now own shares in Vodafone as a result will be aware of the volumes of paperwork that pass through their hands in respect of minor changes in shareholdings, especially if they are reinvesting their dividends in the share purchase scheme. Under current regulations, additional share certificates must be issued every time a shareholder's stake is increased or decreased, even if the change only involves a single share. Under the changes proposed here, these alterations in shareholdings could be conducted electronically for those persons who wish it, thereby not only saving the small shareholder the significant inconvenience of securely storing valuable share certificates but also preventing the considerable environmental damage caused by printing and distributing that many share certificates.
When he discussed this Bill in the Seanad, Senator Quinn informed the House of the difficulties which he, an eminent and highly experienced businessman, had in reconstituting some of his shareholdings after a fire in his office. If an individual like Senator Quinn, who is an expert in the field of business and shares, could experience these difficulties, one wonders how a normal member of the public would fare. The creation of a system allowing for electronic versions of shareholdings would give those members of the public, as well as experienced shareholders and businesses, an additional backup should events such as those which befell Senator Quinn take place.
The transposition of the transparency directive is welcome. However, I question whether the Government will steer this Bill through all Stages by the transposition deadline in January 2007. This directive has been on the books since 2004. Why was it not transposed in the Investment Funds, Companies and Miscellaneous Provisions Act 2005? This is an important directive and it compliments the earlier prospectus directive and market abuse directive. It will bring an additional level of protection for small investors, in particular, who may not have the same research resources as the pension funds and larger investors. I also hope the Minister will be allocating some additional resources to the Financial Regulator to police this new provision, one which is obviously taken seriously given the inclusion of criminal sanctions.
The completion of transposition of the takeover directive will also be enacted by this Bill. However, as with far too many directives recently, this final part of the transposition is significantly past the deadline agreed by EU member states, including Ireland. The original transposition by SI 255 of 2006 was sloppy because it created two sets of general principles to be followed by the takeovers panel. This directive should have been completely and properly transposed by last May at the latest. Again, it was agreed in early 2004. As with the transparency directive, I would like the Minister of State to explain why this directive was not fully transposed earlier. If we continue to be so sloppy in respect of directives, we will quickly fall behind the rest of Europe in our corporate regulatory structure.
In respect of the provisions of the takeover directive transposition section of this Bill, Part 4, and the amendments to the Irish Takeover Panel Act 1997, I am glad to see the takeover panel will now be empowered to consider relevant EU law when ruling on takeover applications. However, the Labour Party has a problem with section 18 of this Bill, which would repeal section 9(11)(b) of the Consumer Information Act 1978, as amended, and has already been discussed by Deputy Hogan. Section 18 allows for the post of Director of Consumer Affairs to be left empty for more than six months. Surely a more suitable solution would be to appoint a person to replace the resigning director fully and appoint a new Director of Consumer Affairs until such time as the national consumer agency can be fully established. Continuing for an indefinite period with an interim acting director is unfair both on the person in question and on his or her staff and must necessarily weaken the Office of the Director of Consumer Affairs at a time when consumers need more protection than ever before. On a related point, I would appreciate if the Minister could tell me when he expects the national consumer agency to be fully established by statute. Can we take it from this section of the Bill that it is not envisaged this will happen in the immediate future?
The moving of this Bill again brings to the forefront a problem which has been of serious concern for some time. We are still waiting for the Company Law Consolidation and Reform Bill, which was promised several years ago. There are at least 15, and some estimate there may be more than 20, different pieces of legislation in the field of company law which businesses must bear in mind. The difficulties created by this and the necessary complexity of corporate legal issues that arise from time to time are a significant drain on resources, especially for small and medium-sized enterprises.
Consolidating all company law into one single piece of legislation would greatly simplify the matter for small business owners and directors. It would allow them to easily understand their rights and obligations without requiring them to have recourse to legal advisers on even the most minor issues. I am informed the company law review group, which was established by my colleague, Deputy Ruairí Quinn, when he was Minister for Enterprise, Trade and Employment, will soon publish the result of its extremely extensive investigation and attempt at consolidation of the existing body of corporate law. I hope the Minister of State will take this opportunity to assure the House that he will move this process forward to the introduction of a Bill to the House as soon as possible because it is clear to everyone that it is urgently needed. It will be a massive Bill with hundreds of sections and require intense and deep scrutiny by every party in the House. There is every possibility this Bill will be taken by the Labour Party in Government.
I wish to share time with Deputy Paudge Connolly.
The Deputy may do so.
I welcome the opportunity to speak on Second Stage. While there may be difficulties on Committee Stage, I hope to speak on Report Stage. A number of measures in the Bill will be welcomed across the House. The Green Party launched a paper this year which dealt with trying to ease the burden of regulation, particularly on small Irish businesses. I welcome the proposal in the Bill to raise the audit exemption limit to the maximum amount allowed in the EU. It is not a fundamental change because many small companies will still have to draw up their annual accounts and submit them to the Companies Registration Office and will still use accountants in this regard. However, it does reduce the cost somewhat. In particular, as the audit requirements become onerous each year, it makes it easier for accountancy practices dealing with those small companies not to have to go through unnecessary regulatory and bureaucratic control.
I was a small businessman before I entered the House and I found the relationship with my company accountant to be extremely beneficial and positive. The annual audit was one of the few occasions when I was probably pulled back to the nuts and bolts of what the business was actually doing and whether it was making money. It is very important to maintain and encourage this connection between the accountancy profession and small Irish businesses but it does not need to include regulated and audited accounts which more properly apply to larger businesses. The audit exemption limit of €7.3 million is an accurate reflection of the difference between small and medium-sized companies which might be forced to take on those.
I also understand and support the proposal in the Bill for the dematerialisation of the stock market share processing process within the Irish Stock Exchange and in our dealings with other international stock exchanges. It has been promised for many years. I remember approximately 30 years ago when computers started becoming commonplace it was stated we would have paperless offices in no time. It is remarkable how the quantity of paper used has increased rather than decreased since then. Dematerialisation makes sense and I welcome it. However, it must be properly managed and major security provisions must be included to ensure fraudulent or other improper behaviour cannot take place.
I welcome the opportunity provided by this Bill to transpose the European directive on transparency in business. On many occasions in this House I spoke on the wisdom, merit and effectiveness of having greater transparency and openness in business decision-making. This returns to what I stated about my experience as a small business person. Commentators may argue greater transparency is an imposition or breaches the need for a business to have confidentiality. I disagree. The more business and commerce is conducted in the broad open light of day, the better the quality of business and commerce which will be undertaken.
I will make my main comments on the provisions outlined in section 8 of the Bill, regarding the restriction of liability where non-equity securities are involved. This is the one element of the Bill about which I am cautious.
I welcome the development of the Irish Financial Services Centre. It has been a major success. Approximately 20,000 people now work there and traded finance amounts to approximately €4.5 billion net cash inflow. We must seek to continue, support and develop that. I attended an Irish Bankers Federation dinner at which the Taoiseach spoke. It was noticeable the Taoiseach made clear to the banking industry that the Government would provide whatever flexibility was necessary to ensure the continued success of the IFSC.
While I welcome that, I would sound a note of caution. Banking, re-insurance and asset management industries seek flexible regulatory and Government support. It is one of the criteria these industries use in deciding where to locate. We must make that provision and be responsive. It is extremely responsive to immediately change a provision of the 2005 Act which causes the financial services industry difficulty. However, we must be careful to ensure standards in the industry are at the highest international level. We must not be seen as an easy and attractive offshore haven of low taxes and a relatively light regulatory regime. In the long run, a successful and stable financial services industry is one viewed as based on a good, strong regulatory system rather than a fly-by-night operation where rules can be bent. Finance requires trust, and trust requires strong and effective governance and regulatory systems.
We have natural advantages, such as our time zone location, English language usage and our education system. For many years, Irish mothers urged Johnny or Mary to go into commerce or the bank. In hindsight, after 20 or 30 years, it was not bad advice to have given the young men and women now working in the Irish Financial Services Centre and elsewhere.
A number of recent events increased my cautiousness about a particular provision in the Bill, as did reading the consideration of new non-equity products in a series of articles in The Economist and a number of newspapers. Recently, The Economist stated phenomenal growth occurred in these slightly unusual non-equity securities. According to a recent article in The Economist, last year approximately $600 billion was issued in equities throughout the world, $685 billion was issued in standard bonds and loan volumes of the new innovative financial packages, which I want to see regulated, increased to $3.5 trillion during the same period.
An editorial article in The Economist stated central bankers and supervisors are increasingly worried about the risk to financial stability which may be lurking in the complex debt instruments dreamed up by the finance industry. It also states a major concern is a potential danger to regulated banks from the faceless institutions, such as hedge funds, with which they now do much of their debt trading. It is interesting to note these comments were made not in a socialist worker publication, but in The Economist, a publication at the heart of the free market and free capital movement.
The article also argued particular risk is involved with new innovative products such as credit-default swaps and insurance products. Two articles quote researchers at the European Central Bank as stating part of the problem with credit-default swaps is that they are used for speculation as well as hedging. The European Central Bank is also quoted as stating, "We have introduced a new product, "insurance", that appears to be used by people not looking for insurance. It is not the instrument[s] which [are] causing liquidity concerns but the way market participants may be using them."
A current debate in the financial regulatory industry is whether the provision of liquidity itself will be good for markets or whether allowing such unregulated access to liquidity will build up a significant risk in the event of a downturn in the markets which could lead to an extremely serious crash. We need only to look at the case of Brian Hunter, a Canadian hedge fund operator who made $100 million for himself during the first six months of the year. He made $2 billion on a gas play in the hedge fund markets during the first six months of the year and subsequently lost $5 billion in a week. That hedge fund was then in severe difficulty.
These products and their prospectuses are extremely complex. The companies involved are not like AIB, Bank of Ireland, Deutsche Bank or any other mainstream banks. They are new innovative financial companies offering prospectuses for new non-equity, non-traditional bond funding often in insurance and on a credit worthy note. That is the background to my concern on reading that section 8 appears to contain no liability other than the strict liability contained in the guarantee within such a prospectus.
I need to hear from the Minister what exactly are the implications of this and how we will place ourselves internationally. The Minister states in the absence of such a regulatory change, we may lose some of these new monoline insurance instruments and companies to other locations. I am sure that is also argued by the industry. However, we must be careful to protect existing jobs and asset management portfolios in the IFSC. We must not simply chase after the latest, newest, most liquid financial instrument. We must maintain Dublin's success and not always be at the edge or on the crest of the latest instrument. This market changes extremely rapidly. Suddenly, $30 billion is traded within a short period on new instruments which did not exist a year ago.
We must walk a difficult line between being ambitious, creative, innovative, flexible and ahead of the pack and being as prudent, conservative, cautious, above board and exemplary as is required in financing, so Dublin will not be seen as a place which will allow slightly riskier instruments than other capital markets. It is a thin line to walk but that is the only worry I have about this Bill. We may be putting ourselves in an attractive position in the short term to gain certain business, but if some of the hedge funds or non-traditional fund management systems run into difficulty in Dublin, it may damage other business we have successfully built up over the past 20 years and harm the reputation of Irish financial management. Funds of this scale would also have a significant global effect. I wanted to raise that concern on Second Stage. We are dealing with such complex funds and such a new industry that this must be teased out on Committee Stage.
Small business people welcome the audit exemptions in the Bill. It is a concern that our economy benefits from a number of industries, with property being the main driver of growth and enterprise. The IFSC is an example that shows we do not have to trade widgets to be successful internationally; we can trade services. It is disappointing, however, that the export performance of indigenous industry has been declining in recent years despite the efforts of Enterprise Ireland and the IDA. If we look at the Irish Stock Exchange, we have not been successful in developing new companies that raise capital to invest in new entrepreneurial activity. We are suffering from what used to be known as Dutch oil disease, where economies with access to a major industry, like oil, do not develop any other industry, weakening their economy. Something similar is happening here, because the over-emphasis on property for enterprise and growth has sucked entrepreneurial activity from the rest of the economy. That has placed us in an increasingly exposed position.
While we are correctly opening our stock market to more innovative systems with dematerialisation of the stock exchange trading system, I am concerned about the lack of Irish companies seeking to be listed on the exchange or in London to raise capital for new projects. Why are companies not seeking to develop wave and tidal energy, where we should have a competitive advantage? Why are Irish companies not trying to raise €400 million on the Irish Stock Exchange to invest in research in that area? Why are companies not investing in innovative food processes or other services where we could succeed? That is my concern regardless of the systems on the exchange.
I welcome this Bill, which proposes a number of sound, common sense amendments to company law. It is a pleasant change to come in and welcome amendments to the law.
The amendments are designed to increase Ireland's attractiveness as a place to invest and they entail the considerable improvement of our competitiveness. It is vital that Irish companies can compete in international markets while remaining competitive and participating more efficiently in international commerce.
Previously, I thought we were only losing low skilled jobs in the international market and that was where my concerns lay. I heard, however, on the radio yesterday of financial analysts, whom we would consider as highly skilled, seeing their jobs moving to India. An analyst here can earn more than €50,000, while in India he can be paid €10,000 and is considered exceptionally well paid. Such high skilled jobs can also leave the country. Before our concern was outsourcing — Fruit of the Loom in Donegal was a prime example. It destroyed our clothing trade and we lost many jobs in Buncrana.
In Cavan-Monaghan, the furniture trade was a major employer for many part-time farmers, with secure jobs available for many years. Now, that trade is being outsourced as well and more often than not, people from Monaghan have decided to move to areas with lower cost bases. These concerns affect us. One would have thought that it was only major multinational companies that would suffer at such a time, but small indigenous industries have also suffered. Effectively, they have decided to move manufacturing and purchasing to overseas locations, merely assembling the furniture in Ireland. Many of the big employers have disseminated their workforce.
The shoe trade was another major employer in north Monaghan but many of the shoe factories are closing because of cheap imports. Quality does not always matter; these manufacturers are producing a top quality item but they find it difficult. On a larger scale, beef is being imported into the country that does not undergo the same type of testing as our own produce. It is imported because it makes a profit and is attractive to the consumer, never mind the quality assurance procedures.
The exemption limits in the Companies Auditing and Accounting Act 2003 are totally inadequate and must be increased to a realistic level from the current level of €1.5 million. That sounded like a lot of money once upon a time but we are now dealing in euro and wages and costs have increased. The proposal to increase the exemption thresholds to the maximum permitted of €7.3 million for turnover and €3.65 million for balance sheets is progressive, although I would be concerned about those figures eventually becoming inadequate. The maximum permitted might be increased further down the line. We must look at our nearest neighbour. The British Government has already increased these thresholds, placing us at a competitive disadvantage, especially since we share a border with Northern Ireland. That is relevant to us and makes a lot of sense.
The standards of auditing are undergoing profound change, which has contributed to the need for a realistic adjustment of audit exemption levels. I know someone close to me in an auditing department and he is not the most popular person there. He went from website design to auditing and the greetings he gets have changed.
Been there, done that.
My son has just discovered that; it was one of the big shocks in life.
Small and medium sized companies were among the most adversely affected by the current low threshold figure, so this Bill is significant to them. The raising of the audit exemption threshold to €7.3 million will considerably lighten the regulatory burden on small and medium sized business that currently must conduct an annual audit, which is costly in terms of both time and money. It will also help to improve life for businesses and investors by dispensing with the need for red tape. Nevertheless, it does not dispense with the necessity to maintain good day-to-day books of accounts, as required by company law. It is important that records will continue to be kept for future examination.
Small and medium sized businesses are the driving force of the economy and one cannot overestimate the importance of a healthy business sector. Recently, when examining the type of employment available in my constituency I found the emphasis had shifted from small companies producing for the domestic market to firms producing goods for export markets. Approximately 55 companies in counties Cavan and Monaghan export to world markets, with 30 of them located in the former and 25 in the latter. Between them, the two counties account for 10% of exports by domestic companies, as opposed to overall national exports.
Companies in counties Monaghan and Cavan beaver away, quietly doing their business on the world market. Both have some large players, for example, Combilift Limited in County Monaghan which operates across the world and Quinn Life in County Cavan, household names that have moved into the world market. We should be proud of them, especially given that the local economy used to be dominated by small furniture companies, small farmers, etc.
Recent changes in the business sector in my constituency were achieved without much assistance from Government agencies and can be attributed to people taking a chance. I bump into people who tell me they have been in Shanghai, Bangkok, Australia and many other places marketing their products, getting out on the world stage and doing business. If that is the case in my constituency, I am sure it also applies to other constituencies. Many of those who operate successful companies have experienced a couple of company failures in the past. It is important that the House acknowledge these people.
The House should also spread the word that my constituency is an attractive location for investment. The people of both Cavan and Monaghan have a strong work ethic and are not afraid to take a chance. Outside companies should also be aware of the constituency's good transport connections, with access to open roads, ports and airports. For example, it takes me approximately 90 minutes to travel from my home to Dublin Airport, a commutable distance, particularly when one considers the length of time it can take to cross Dublin by car. South Monaghan can be reached from Dublin Airport in 45 minutes. On the Northern side, we also have access to Belfast's airports. We should shout about these advantages.
Small businesses will be assisted by the provisions of the legislation because they will not be required to employ professional accountants to audit their books at the end of each year. By nature, an accountant will examine a company's turnover and submit a price based on the time required for his or her audit, the level of turnover and other factors. Accountants also like accounts to be well prepared and maintained. As treasurers of clubs and so forth will agree, they, too, must have their books done by professionals. It is in the best interests of small companies to ensure their books are correct, meticulous and up to date.
Mandatory dematerialisation is another positive aspect of the Bill which will be welcomed by small business. The new provision makes it mandatory to hold in electronic form stock transfer forms and share certificates. This is the way forward. In a modern and progressive economy such as this and given its exposure to the global economy, it is essential to maintain and improve our competitiveness. Holding Irish securities in electronic form will be instrumental in reducing the costs involved in share dealing and should increase our competitiveness in this area.
To meet the challenges posed by the increasingly globalised and competitive world markets it is essential to maintain competitiveness. We must protect the interests of the small indigenous companies which drive the economy and, where necessary, change laws to keep them intact.
Many Irish equities are listed on Irish and United Kingdom markets. The greatest possible degree of harmonisation in dematerialisation in both markets would be in our national interest. It is vital that the Irish market is not placed at a competitive disadvantage with the UK and that electronic processing of Irish equities is carried out in line with best international practice. In other words, it is in our national interest to bring our auditing processes into line with those operated in the United Kingdom, our closest neighbour. Britain may be a close competitor but we have a good trading relationship and depend on it to take a significant amount of goods and services produced here. We must, therefore, work closely with the UK on these matters.
The elimination of paper share certificates will have a series of beneficial effects. Trading will be processed in seconds and dependence on snail mail will be removed. It will also improve Irish competitiveness in trading securities, considerably reduce the costs involved in paper trading and bring practices here into line with current UK practice.
The Bill also makes provision for the amendment of the Consumer Information Act 1978 to permit the temporary appointment of a director of consumer affairs. Legislation to establish a new national consumer agency was promised for 2005 after the Consumer Strategy Group recommended the creation of such a body in May of the same year. This provision is an ad hoc, stop gap arrangement and will result in consumers losing out on their rights. It is unfair to ask consumers to pay. I hope the establishment of a national consumer agency on a statutory basis will not be further delayed.
A further feature of the Bill is the provision to allow for the transposition of the European Union transparency directive. Directive 2004/109/EC relates to the exercise of voting rights by shareholders of companies, having registered their office in a member state and whose shares are admitted to trading on a regulated market. It will facilitate the cross-border exercise of shareholders' rights in listed companies through the introduction of minimum standards and ensure that shareholders, irrespective of their place of residence in the European Union, will have timely access to complete information and simple means to exercise voting rights at a distance.
I welcome the Bill, which will serve to improve the environment for business and share trading. It meets the needs of small business and investors and, as such, I support it.
I wish to share time with Deputy Martin Brady.
Is that agreed? Agreed.
I welcome the opportunity to address the House on the issues laid before us in the Bill. This legislation covers many changes needed to bring the regulation of business into the next century. In particular, it deals with our position as a market leader in asset-backed securities investment in Europe. It will ensure that we continue to hold a lead in financial services and will address some concerns which have been raised by industry experts.
The Bill should reflect the greater need for regulation of transparency in business which is all important. With the near removal of barriers in the trade of securities, the legislation takes into account the greater use of technology in the exchange of securities.
Ireland has been driven by a remarkable ability to persuade financial services companies to base their European headquarters here. While many observers attribute this development solely to tax incentives, the supply of great human resources and the talent of the Irish workforce have been major factors in this regard. It is vital in regulating business that we walk the fine line between ensuring business is correctly regulated and conducted in a transparent and ethical manner and ensuring it is not choked with unnecessary administration and regulations. Business does not always recognise that politics has its best interest at heart and our imposition of regulations is often resented. I hope this legislation will be taken in the required spirit to update and modernise our rules and regulations to reflect changing technology and a greater need to govern the information flow and transparency of companies.
I wish to deal first with the changes to the Companies Acts. I welcome the increasing of the audit exemption thresholds up to the maximum levels permitted by the EU and the new threshold for turnover of €7.3 million and €3.65 million for a balance sheet. This means we now catch up and pass out England which has a £2.5 million audit exemption, as well as the rest of Europe, which has an average exemption of approximately €5 million. The previous relatively low audit exemption limit was particularly significant when one considers that the auditor was obliged to report all company law discrepancies, including minor ones which were punished severely in the 2001 Act. I also welcome the ability to hold in electronic form securities of companies based on a regulated market. This merely reflects the manner in which securities are being traded in the modern era.
The Minister of State has said that dematerialisation will facilitate ease and speed of trading by investors, enhance the international competitiveness of Ireland for securities trading, reduce the current costs associated with the cumbersome process of managing paper-based transactions, and avoid the risk of an escalation of the current settlement costs for Irish certificate transactions that would occur if there was a successful implementation of dematerialisation of UK securities. Dematerialisation is being considered in the UK and has already taken place in other European countries such as France, Denmark, Sweden and Italy. It also exists in other competing world markets such as India, Australia and New Zealand.
This Bill will ensure more of the financial services industry can be based anywhere in Ireland that has good commercial broadband and telecommunications infrastructure. With the recent roll out of fibre optic in Gort, Loughrea, Ballinasloe and Athenry, I hope we will start to see financial services jobs in the west. Our road structure also has a part to play in this. Ireland is now a modern, highly globalised, credibly regulated, competitive economy. We need to ensure we retain our attractiveness as a place to do business and as a location for foreign direct investment. We will achieve this objective by committing ourselves to fostering the conditions which support enterprise and in meeting the challenges and opportunities of an increasingly knowledge-based, regulated, globalised and environmentally sustainable economy.
Dublin today is recognised as a global centre for financial services. It is ranked only second to London and ahead of Frankfurt in terms of asset-backed securities. The aggregate amount of asset-backed securities investments managed by Dublin-based investors has witnessed huge growth in recent years. In 1999, the aggregate amount of asset-backed securities investments was around €6 billion. This grew to between €30 and €35 billion in 2003. Today, the figure is at least €80 billion. These figures demonstrate the position and importance of securitisation in terms of the domestic economy and the tremendous strides made in recent times. The strong track record that Ireland has developed in the asset-backed securities sector is a result of many factors. These include a conducive business environment, a common law system and the presence of skilled personnel with considerable international experience. All of these factors, along with Government support, have fuelled this growth.
Existing developments in securitisation give us the potential to develop as a primary centre for specialist debt-financing products. Business regulation in the field of company law feeds into improvements to our national competitiveness through high standards of corporate governance. It brings about a stable and predictable environment in which entrepreneurs can establish businesses, investors can invest, creditors can lend and the interests of the employees, consumers and other stakeholders are protected. Ireland's economic future is inextricably bound up with the global economy through investment, trade, people and business. We have to be at the top of the game in every aspect that affects competitiveness.
Part 2 of the Bill contains a number of amendments to the Companies Acts 1963 to 2005, which increase the thresholds below which companies are eligible to avail of exemption from having to have their accounts audited, amend the powers of the Minister to make regulations dealing with the holding of securities of companies in electronic form, otherwise called dematerialisation, and which amend the provisions of the Investment Funds, Companies and Miscellaneous Provisions Act 2005 dealing with the circumstances where issuers of prospectuses for non-equity securities may be held liable in civil actions to parties who may have suffered a loss as a result of subscribing for the securities in question. The need to increase the audit exemption threshold for companies is seen as requiring priority treatment. This will have a significant impact in terms of lessening the regulatory burden on small business and is seen as a priority measure in terms of maintaining our competitiveness generally.
The Bill proposes to increase audit exemption limits for turnover and balance sheet totals, thereby allowing more companies avail of the audit exemption. The provision in this Bill increases the turnover limit to €7.3 million and the balance sheet total limit to €3.65 million.
I commend the Bill to the House.
I thank the Minister of State for bringing this important Bill before the House. I congratulate him for placing the emphasis on small businesses because these usually become large businesses. We have many examples of this in the Oireachtas, such as Senators Quinn and White who started in a small way and now own major businesses. In Deputy Connaughton's constituency, Mr. Pat McDonagh of Supermacs gave a talk to members of the Joint Committee on Enterprise and Small Business when we visited Ballinasloe. It was interesting to listen to him speak about the problems he encountered along the way.
The joint committee visited Ennis a few weeks ago and we met with people who set up small businesses. One person who started employing five people is now employing 80 people. We also met students and we asked them what they felt would hinder the setting up of small businesses. Everybody commented that the bureaucracy involved in setting up small businesses is horrific. One must drive all over the country to establish the assistance available. There are agencies all over the place. We should have a one-stop shop to advise people who want to set up a small business on grants available.
There is a perception that we are only interested in big businesses and foreign investors — who are given everything — and that we are not concerned about small businesses. That is not the case. What is really being stated is that the system is so cumbersome and convoluted and contains so many layers of bureaucracy that people immediately erect mental barriers and do not proceed with their businesses. I was informed by one woman that a friend of hers opened a small business and immediately received approximately 20 letters from the Revenue Commissioners relating to various matters. That can be extremely off-putting.
The provisions of the Bill involve facilitating business development and securing our competitive edge in key sectors where it has been developed. Where possible, we should ease the regulatory burden on businesses. That is already happening here, where a flexible, responsive and business-focused regulatory system is developing. This is vitally important because, as has been stated, like all developed economies, our economy depends increasingly on services as it moves away from basic manufacturing to higher upscaled manufacturing and services. If we do not have a system which will allow people to be flexible and respond quickly to changes in the marketplace, we will lose out. I believe we will continue to be successful but we must keep our eyes on the ball.
The Minister of State and his officials have listened carefully and responded to the concerns of small and medium-sized businesses. As stated earlier, I hope he will take on board the points I have made in respect of small businesses and how they are set up.
The legislation incorporates as many recommendations from businesses as fall under the remit of the Minister of State, and that is representative of the partnership-style of Government which has been so successful for our economy over the past ten years. The most welcome development in the Bill for small and medium-sized businesses is the raising of the audit exemption threshold to the maximum allowable under EU rules, namely, €7.3 million turnover, up from €1.5 million.
The Bill will ease the additional administrative burden of annual audits for thousands of businesses and create a parity in the audit exemption thresholds with businesses in the North, the United Kingdom and other EU states. Many small businesses, such as that established by Pat McDonagh in Ballinasloe, have extended their interests to the United States and other countries. That gives an indication of the importance of small businesses and the way they can grow and spread to other countries. This also affects voluntary and community organisations, which will be relieved of the time and regulation burden of being audited because they fall under the new threshold.
The roll-back of the regulation has a symbolic significance in that the process of more and more regulation will henceforth be tempered. The important message to business people who participate on business fora, committees, etc, is that they will be listened to. The report of the Small Business Forum, published last April, recommends that Departments should formally assess the merits of exempting small businesses from new regulations, or of modifying such regulations to make allowance for the special needs of small businesses. The forum was set up by the Minister for Enterprise, Trade and Employment, Deputy Martin, and chaired by the general manager of Microsoft Ireland, Joe Macri.
Raising the audit exemption threshold to €7.3 million will ease the regulatory burden and obligation on many small and medium-sized businesses to conduct a costly, cumbersome and burdensome annual audit. This was a key recommendation in the Small Business Forum's report.
The forum also pointed out that while there are advantages in obliging companies to undertake statutory audits, these advantages can be outweighed by the enormous cost of such an audit, which can sometimes amount to between €10,000 and €20,000. IDA Ireland is committed to developing the breadth and depth of the international financial services industry in Ireland. While continuing to market this country as a centre of excellence for transaction processing, IDA Ireland is also targeting other sophisticated revenue generating activities. Existing developments in securitisation give us the potential to develop as a primary centre for specialist debt and financing products. This is in line with lDA Ireland's strategy to drive the development of knowledge-intensive high-value investments.
Business regulation in the field of company law feeds into improvements to our national competitiveness through high standards of corporate governance. This brings about a stable and predictable environment in which entrepreneurs can establish businesses and investors can invest. Ireland's economic future is bound up with the global economy through investment, trade, people and business in general. We must be at the top of the game in respect of the transposition of the two EU directives, which will bolster Ireland's competitiveness and help us attract foreign investment in an ever more competitive global market. They will also help us to encourage people in Ireland, if they are given proper assistance, to invest and establish businesses here.
I commend the Bill to the House. I thank the Minister of State and his officials for the excellent work and research invested in it. This is an important Bill and it will prove of great assistance to small businesses. It will also help those who are considering establishing such businesses and encourage young people in this regard. In my view, that is the way to proceed.
Like previous speakers, my party and I welcome the Bill. There are many aspects to the Bill and one could refer to a large number of them in the context of the changes to which its enactment will lead.
The first matter to which I wish to refer is the increase in the audit exemption level. This has been a topic of discussion among those in the small industries sector for a couple of years. Everybody thought that it would have happened much sooner than has proved to be the case. The Institute of Chartered Accountants, which has access to greater expertise than that at my disposal, has been discussing this matter, in so far as the competitive aspect is concerned, for a long period
Everyone is aware that the Bill was introduced as a result of what happened in Northern Ireland and Great Britain. Once the authorities in the North decided to opt for a much higher exemption level, a great deal of business began to seep across the Border. The Government was aware of this for some time and I cannot understand why action was not taken much sooner.
It is important that Ireland should be able to match the best in the world. As far as its competitiveness is concerned, all is not well. As stated in the House on a number of recent occasions, Ireland dropped from fourth in 2000 to 21st this year in the World Economic Forum's global competitiveness report. Regardless of the scientific evidence one can produce or the political spin one can put on that, it is not a good position for Ireland to be in. A major slippage has occurred. One cannot state that it is directly linked to the subject matter to which the Bill relates, but it is a symptom of what is happening in this country. The Government and the Administration that succeeds it will be obliged to pay major attention to this issue in the next couple of years.
The National Competitiveness Council stated that Irish prices rose by 22% more than those in other EU countries in the years 1999 to 2003. That is an official statistic. Ireland is 20th in the World Economic Forum's global information technology report, which measures the technological readiness of countries, behind countries such as the US, the UK, the Netherlands, Sweden, Germany and Austria.
Members are aware that in February 2006, due to the Government's failure to deregulate properly the electricity market, Airtricity announced its departure from the Irish market.
These are not straws in the wind and legislators from all sides of the House must take note. As a result, costs for the small business community continue to rise at an alarming rate. For example, one can make comparisons with the United Kingdom. It is a huge trading partner for Ireland and shares the same language. The two countries have close business connections and have been interlinked for generations. The cost of electricity, insurance, landfill and broadband is 50%, 20%, 350% and 10% higher, respectively, in Ireland than in the United Kingdom. All such costs form part of small enterprise activity. It is evident that when Irish firms compete on the British or other markets, they do so with one hand tied behind their backs.
This raises the question of what can be done in this regard. While I cannot claim to be an expert in this field, I have begun to wonder who will regulate the regulators. For example, the Commission for Energy Regulation was established in a blaze of glory some time ago amid claims that this was the right way to go. However, many voters do not understand how the regulator could allow 20% and 34% increases in the price of electricity and gas, respectively, on the day before world prices of oil began to fall. I cannot understand this and I do not know whether the Minister of State can. Worse, this has a fundamental cost implication for all businesses and for small businesses in particular.
Given my dealings with the small business fraternity over the years, I have noticed that the people who break out in a cold sweat in the middle of the night are those who have their assets on the line. I refer to their houses and the last penny in their pockets. The Minister of State understands this point. Such people have put everything on the line that is considered to be important, such as their house, insurance etc. I have seen business men and women in a terrible state because their expectations regarding a particular investment were contradicted by the marketplace and they were left almost penniless. However, such people are responsible for building up this country and are the source of its prosperity.
As Deputy Martin Brady correctly stated, many people were lucky enough at the heel of the reel to become well known throughout the world for their particular expertise. I refer to the Smurfits of this world. However, in a manner similar to the world of professional golf, for every such success, there is no shortage of dead bodies on the ground. Against that background, it is incumbent on all Governments, present and future, to go out of their way for the men and women who put their neck out to keep the wheels of industry and commerce turning. Most business people I know personally believe that, for some strange reason, no Government understands the phenomenon I have just explained.
It would do no harm to revisit this issue in the fora that have been established. Ultimately, Members should do their best for those who are prepared to put their neck on the line. The nature of the game dictates there will always be failures. While such people may start out with a profit motive — I am not silly enough to believe they do so for charitable purposes — they take terrible chances. Although I might have taken similar chances when I was younger, I would not like to so do now and this is true for many Members. The world of industry is difficult, big and bad and when Members get an opportunity to discuss this issue in the House, they should not forget the central issue involved, namely, the steps such people must take and the environment in which they must operate.
I do not understand why it is impossible for the Commission for Energy Regulation to revisit its decision — I will refer to other decisions — once it became plain that the world price of oil was falling substantially and is likely to remain in this state for a number of months or perhaps a couple of years. A mechanism should be put in place that would allow the process to be wound back. I presume there will be no change in respect of the oil and gas cost increases, which poses a difficulty for small industry. Possibly, the next increase, whenever it takes place, will be held for a longer period than normal. However, this will do no good for small business people or industrialists who will be saddled with an unwarranted level of cost increase until the next decision is made.
Many people will ask serious questions for the remainder of the year regarding the regulator's rationale. Initially, no one took much notice because of developments on the world oil market. When the regulator took his decision, everyone accepted there was a reason for doing so at the time. At present, however, there is general acceptance that the basis for making that decision no longer exists. Nevertheless, it appears the Commission for Energy Regulation does not intend to do anything in this regard and will permit the current status to continue. This is a false premise because oil is no longer as costly as when the decision was made. When Members discuss the lack of competitiveness, this is a central issue that must be addressed this year and I hope someone will do so. Earlier, I questioned who would regulate the regulators. I hope this will be possible under this legislation.
I wish to raise another aspect of this legislation about which I cannot claim to have great personal knowledge. I will approach it from a different perspective. I refer to the proposed dematerialisation of the security certification. I understand this to mean that those records that were paper-based will be computerised. I see Deputy Fleming is present and I assume he will speak shortly. He and I served on the Committee of Public Accounts for a number of years. Indeed, he still serves on it and has always been an important member. I did not spend a single day at that committee without hearing of major problems emanating from the computerisation of existing records. This is true of all Government agencies that I encountered while serving on the Committee of Public Accounts. All cases created havoc and trouble, as well as costing the taxpayer much money. For several months, a stock answer at the committee went along the lines that the reason for a particular event was that computerisation was taking place, a new system was being introduced, no one was responsible, the hardware vendor had left — as had the person who bought it — and the system did not work. Before we knew where we were, the thing was in a hames, to put it bluntly. I will outline what I want to know. There were problems with electronic voting, of course. We have an awfully bad record in this country of doing this particular job. I hope we can do it better in this instance.
We are in very good company. We are in the company of the best brains — the whizz kids of the world. I refer to people in this country who deal with securities, for example. We are lucky to have financial services etc., here. I pay tribute to that sector of the community. I have always believed in it. I remember being in the House when it was introduced and, in fairness to Mr. Haughey, it was a step in the right direction. We have shown that Ireland can become a centre of excellence. It has become a centre of excellence in this regard and continues to be so. A great deal of the work that is done in this sector relates to this legislation.
I hope the changeover to the new recording system has been well thought-out. It has been used in many other countries for a long time. I hope there will not be any mix-ups this time. Such difficulties would be embarrassing and would suggest to people throughout the world that we were incompetent.
I would like to highlight a technical matter. I hope the Minister will refer to it when he is summing up. Does this measure have data protection implications? I assume a raft of legislation kicks in when records are computerised. I am sure national law is relevant in this regard, although I am not sure about international law. I remind the House that every time a proposal of this nature is introduced, we should know what we are doing, we should implement it properly and efficiently and we should ensure there is no egg on anybody's face by the time the process has been completed.
I want to talk about the functions of the Director of Consumer Affairs. I understand this is a technical matter. There is no director in place at present. This legislation provides for someone to hold that position until the National Consumer Agency has been established on a statutory basis. I have often wondered why the agency has not been put on a statutory footing long before now. I cannot understand that.
I do not intend to repeat the comments of some of my colleagues about the groceries order etc. People tried to convince me and my colleagues on all sides of the House that there would be a visible decrease in supermarket prices the day after the groceries order was abolished. That did not happen. I never thought it would happen. The concept of abolishing the order was right — I had no trouble with it. However, we have not replaced it with anything, as far as I can tell. It seems two vital sectors of society are being affected by the discounting which is taking place all the time. The abolition of the groceries order was supposed to be the best thing to happen consumers in the last ten years. However, all the figures show there has been a continual increase in the price of one's shopping basket. If one speaks to people with limited means, they will say how expensive their shopping is every Friday.
I do not have time to speak in detail about the manner in which consumers and primary producers are being squeezed. Inordinate pressure is being put on people at both ends of the spectrum. The real money is being made by middle men and retailers. I appreciate that retailers have their own trouble. Primary producers, such as farmers, are the last people to make money and consumers are the second last people to make money. The people in the middle are making money hand over fist. If the Minister responsible for this issue can bring some balance to it, it will be a good day.
I welcome the opportunity to speak on Second Stage of the Investment Funds, Companies and Miscellaneous Provisions Bill 2006, which deals with three or four broad issues. It amends the parts of the Companies Acts dealing with audit and dematerialisation. It imposes transparency requirements on the issuers of securities which are admitted to trading on certain markets. The miscellaneous provisions section of the Bill ties up a series of loose ends. That summarises the key issues dealt with in the Bill.
Many of the provisions of Part 3 relate to EU regulations. They have been included on foot of the requirement to transpose various EU directives into national law. I want to make a general comment about EU directives. The EU has to be careful. Ireland, as part of the EU, has to be careful. We are making a relentless effort to ensure there is a level playing field within the EU. As our focus is often on the internal EU market, we sometimes ignores the overall global market. While EU member states are important, they do not constitute the majority player on the world market. We need to bear in mind that there are other major players. We need to resist the efforts being made to bring each member state to the level of the lowest member state. Such efforts are being made by interests which do not have due regard to the outside world.
I would like to strengthen the point I am making by highlighting two cases I have observed over the last year. While there was some logic to the arguments which were made in both instances, the logic behind the final decisions was flawed. Some time ago, Ireland submitted a proposal to the EU to be allowed to provide further grants and forms of support to Intel, one of the biggest employers in the country. The EU rejected that proposal to a large extent on the basis that grants of a similar nature were not available in other member states. It was argued that if Ireland were to be allowed to make such supports available, competition within the Union would be distorted. By closing their minds in that way, those who made the final decision failed to appreciate that Ireland, as an open economy, and Intel, as a world player, were operating in the global marketplace.
The real problem with the decision to refuse Ireland permission to offer grants to Intel, which operates in Ireland, was that it will ultimately work to the advantage of companies outside the EU. The supports in question would have benefitted the Irish economy, Intel and the world economy. The failure to allow Ireland to make the supports available will help companies in places like the Far East, the Middle East and South America to make progress, with the assistance of state support from the governments in such areas. Ultimately, companies which are operating in the EU will be disadvantaged.
I would like to highlight another contentious case, which caused many people to jump up and down some years ago. I refer to Ireland's decision to offer tax concessions to the horse breeding industry. Attempts were made by some people to regularise the system by removing some of the concessions on the basis that such reliefs were not available to a similar extent under the taxation laws of other EU countries. The approach taken by the EU seems to be that if any member state has an advantage over other member states, the first thing that should be done is to eliminate that advantage. If we do that, however, we neglect the overall global picture. Ireland, which is one of the major players in the international horse breeding industry, is competing with the United States and Australia. If the EU puts Ireland at a disadvantage in that sector by forcing it to operate at the lower level of other member states, it disadvantages the entire EU within the global horse breeding market.
If we disadvantage individual countries or companies within the EU, we will ultimately confer benefits on the EU's competitors in other parts of the world. We must be careful of that. We are in a global economy and one can overstate the issue of fortress Europe. We deal not only with Berlin, but with Boston and many other places worldwide. We are in competition with many cities, not only those in the EU. As an open economy, Ireland has more to gain and lose by following the road of rules harmonisation within the EU without taking due cognisance of what is going on outside the EU.
I wish to address the issue of auditing, which is dealt with in section 6. It amends section 32 of the Companies (Amendment) (No. 2) Act 1999 by increasing the audit exemption threshold for turnover and balance sheet totals up to the maximum levels permitted in the EU. This will bring the new thresholds to €7.3 million for turnover and €3.65 million for the balance sheet. I understand this will come into effect in a few months time. The Minister will see if this is possible for financial years commencing on 1 January and will return to the issue on Committee Stage.
The essence of this is that we are exempting companies with a turnover below €7.3 million from the requirement of a statutory audit. The logic is that they are relatively small enterprises, especially in the retail sector where there may be high purchases and sales with a limited profit margin, the effect being low profits despite high turnover.
The issue of exemptions from audit for companies in the voluntary sector is one I would like to see included in this legislation and I believe this can be done if there is political willingness and willingness in the Department. I wish to refer to a letter I received from the office of the Minister for Enterprise, Trade and Employment on 31 December 2004. I wrote to the Minister regarding a small rural development company in Laois called the Sliabh Margy Development Association. I also spoke directly to the Minister in connection with the Mountrath amalgamated social employment scheme, of which I am a sponsoring member.
I have met the people involved in these organisations and I feel that this relates directly to the Department of Enterprise, Trade and Employment. I will deal with FÁS schemes first. There is a requirement, laid down by FÁS, that every FÁS scheme conduct an audit of its affairs. Many schemes have a turnover of around €300,000 and 90% of this consists of wages. Previously, this may have been unemployment assistance, disability allowance, lone parents' allowance and so on when those on the FÁS scheme were claiming social welfare. When people join a FÁS scheme they are paid through that scheme. Some 90% of money in most FÁS schemes covers wages and the balance covers insurance, materials and other overheads.
Under FÁS rules, schemes must be audited each year which I understand and accept as it is taxpayers' money. However, the Department of Enterprise, Trade and Employment requires that such schemes be managed by a limited company and the limited company is subject to a separate, independent audit, despite the fact that it is only a shelf company. There are no exemptions to this and the full cost must be borne. This is where complications arise.
It is ridiculous that a company with a turnover of €7.3 million will not require a statutory audit while a local FÁS scheme, with a turnover of €300,000, is required to have two statutory audits with two audit fees. We are trying to eliminate bureaucracy and are doing so for profit making companies, but are ignoring the non-profit sector and the community and voluntary sector.
Department staff suggested to me that this could be remedied if the company and the scheme had the same year-end, creating, effectively, one audit process. There would be a need for two certificates and perhaps a nominal fee. However, this is not realistic. When a new company is formed as part of a FÁS scheme, they may have the same year-end for the first year. The FÁS scheme may not run for a couple of months, however, and it might not resume until the following April. The FÁS scheme will then require an audit from April to March while the company, a separate legal entity, will adhere to the calendar year for the Companies Registration Office. It is neither possible nor practical in many situations for the two entities to have the same year-end. There is a legal requirement for two audits.
I will refer now to the letter I received from the Minister's office on 31 December 2004. I am pleased to have the opportunity to raise it here, even at this late stage. The letter stated:
The law providing for exemptions from the requirement for a company to engage auditors is contained in section 32 of the Companies (Amendment) (No. 2) Act 1999. One of the criteria that must be satisfied in order for a company to qualify for an audit exemption under the section is that a company to which the Companies (Amendment) Act 1986 applies. The Act does not apply to a variety of classes of company, including companies that are not trading for the acquisition of gain.
In other words, the exemption does not apply to non-profit organisations, but does apply to profit seeking organisations. This is daft. I would understand this if it was the other way round. The letter continues: "Audit exemptions are, therefore, never available to non-profit companies, irrespective of their level of turnover." I will come back to this in a moment. The letter further states that the Company Law Review Group is the standing body charged with reviewing these matters. I was invited to make a submission to the group, which I did in 2005, and I have not heard anything since.
The last paragraph of the letter states:
Any possible reforms of the audit exemptions would have to address the requirements of a wide range of non-profit companies that the law covers, such as community title management companies, management companies in housing estates, charities, sporting associations, development associations, etc. They would also have to appropriately balance any possible benefit from a reduction in compliance costs against the importance of ensuring accountability, especially where there are public funds involved.
As I mentioned, I am involved in the Sliabh Margy Development Association. The association sought to draw a £5,000 grant, through Leader, to conduct walks in the rural area. It was obliged, under the rules, to do this through a company. The association set up a company to carry out two transactions — one to cash a cheque and one to pay the people who put up the signs. The company then had to carry out a statutory legal audit. This is farcical — something confirmed by the letter from the Minister's office. We should treat the non-profit and voluntary sector more fairly.
That company, which existed solely to cash one cheque, also ran foul of the Companies Registration Office because, understandably, it was late with its annual return. I contacted the Companies Registration Office and received a small concession, but none was received from the Minister's office relating to the audit.
The Companies Registration Office wrote to me on 24 November 2004. It stated that it is required that the non-profit status of a company must be included in the memorandum and articles of association. It must be confirmed in the articles of association that no dividends will be paid and that, on winding up, all of the assets, which would otherwise be available to members, must be transferred to another company with similar restrictions. The outcome was that the company in question changed its memorandum and articles of association as a result of this suggestion and was allowed a waiver or refund of fees from the Companies Registration Office. I thank the Companies Registration Office for its help.
A standard planning condition now applied by many local authorities for new estates or apartment developments is that the open area be managed by a management company. I will give a practical example. Imagine a new estate consisting of 100 houses where the planning requirement is that the management company cut the grass and manage the open area. If the company charged each house €100 per annum for cutting the grass, there would be a turnover of €10,000 per annum. I envisage that more money will have to be spent on the audit fee than on cutting the grass. This is the thrust of the provision and it is a case of excessive bureaucracy.
I want to highlight this matter in the House and I have done so previously in correspondence. Section 6, in essence, is a pragmatic measure to help the profitable trading and business sector but in making this measure we are placing the non-profit and voluntary sector at a further disadvantage. The latter sector can include sports clubs, including GAA clubs, and also charities and many other associations. I want to see the flexibility afforded to the profit-making sector extended to the non-profit-making sector.
Will the Minister make available the information he received from the Company Law Review Group, which information he mentioned to me almost two years ago? How many companies are involved? I suspect many organisations are being caught by the auditing provision and at every annual general meeting attendees mutter and grumble that they must pay €1,500 for auditing. My local FÁS scheme must pay for it twice to satisfy the requirements. It has a turnover of €300,000, 90% of which is expended on wages. A few bob is spent on materials and the greatest remaining expense is the double audit fee. I ask that common sense prevail sooner rather than later.
On the increase in exemptions concerning the audit fees, will it be standard practice for the Revenue Commissioners to accept non-audited accounts from now on? Sometimes a company with a turnover of €7.3 million can have a very small gross margin whereas a company in the production sector can have a very high gross margin of a couple of million euro. Will the Minister of State confirm the rights of minority shareholders who might feel disadvantaged if they do not get audited accounts through the major shareholder?
Section 7 deals with mandatory dematerialisation, which effectively means that share certificates will be stored electronically rather than on paper. This is a fact of life in this day and age and it will facilitate and make easier trading by investors. It will enhance Ireland's international competitiveness in securities trading and will reduce the current costs associated with the cumbersome process of managing paper-based transactions. Dematerialisation has already taken place in countries such as France, Denmark, Sweden, Italy, India, Australia and New Zealand and I understand it is being considered in the United Kingdom, Belgium, the Netherlands, Spain and the United States. Section 7 is therefore very worthwhile.
Section 12 deals with the Financial Regulator. It states the Financial Regulator is the appropriate body in this area and that it may be free to introduce supplementary rules to enable it to fulfil its role. The Minister of State said in his speech that €80 billion of asset-backed securities investments are managed by Dublin-based investors. Will he tell us how much of this money is regulated by the Irish regulator? Companies must be registered in Ireland before they can be regulated here.
The question of the Central Bank arises under section 13. Consider the confidentiality provisions concerning information available to the Central Bank and Financial Regulator. The element of secrecy has been sacrosanct and intrinsic to the types of industries concerned worldwide but there are issues to be addressed in this regard, although not in this legislation. If the Central Bank identifies criminal fraud on foot of its knowledge of a company, it cannot notify the Garda Síochána, Revenue Commissioners or Director of Corporate Enforcement. I believe, however, that it can force the company in question to publish a relevant statement in its annual directors' report – this is one of the few requirements. It can notify the Financial Regulator that an issue has arisen but it cannot provide any details thereon.
The Garda, Director of Corporate Enforcement, Financial Regulator and Revenue Commissioners may all be investigating a major company, and may sometimes have representatives carrying out an investigation in the same company office, yet they are legally prevented from sharing information they have obtained on matters of public interest. There should be some mechanism whereby information relevant to another State organisation can be made available to that organisation while respecting the principle of confidentiality. It is not good enough that there is a provision for total secrecy in such circumstances.
Section 18 allows for the appointment of a person to perform the functions of the Director of Consumer Affairs. This is only a temporary measure but it is essential that it be included in the legislation to enable a person to continue to carry out that role until such time as the National Consumer Agency is placed on a statutory footing and in a position to make such an appointment.
I ask for a reassessment of the legislation in the Department to allow flexibility for the voluntary and community sectors, which are forced to carry out audits. Commercial organisations, which operate on a much bigger scale, will be exempt from the requirement to produce such audits.
I welcome the opportunity to speak on this very important Bill, which I support. Let me bury the myth that Independent Members are against everything, both inside and outside the House. We support sensible Bills and one does find Independent Members supporting sensible solutions to problems, as was the case during the debate on drug-related crime last night and as is the case today in respect of investment funds.
This debate is very important in so far as it impinges on business and investment. We do not seem to have had a proper debate on the direction business is going in Ireland. We are all very excited about and welcome the great wealth and resources that have become available over the past nine or ten years. However, the debate on creating wealth in this society is now over and it should now focus on how our wealth and extra resources can be distributed to those most in need. This is the key issue both in this debate and other broader economic, social and political debates.
It is not acceptable for a Minister for Justice, Equality and Law Reform to say we have loads of money and are looking for ideas on how to spend it when there are existing projects that deserve investment and support. I raise this issue because of its relevance to business and investment, which are dealt with in the legislation. There are also ethical questions to be dealt with. The reality is that, despite the great boom and the Celtic tiger, sections of business have become damaged, just like politicians, the church and other parts of society. We must face this reality and deal with it head-on.
The Minister of State said in his speech that the amendments proposed in this Bill are designed to facilitate business development, copperfasten our competitiveness in key sectors where it has been developed and ease the regulatory burden on business while facilitating the giving of full effect to EU directives we must transpose. I welcome this and the fact that the amendments are very strong. I welcome the Minister of State's assertion that we need to retain our attractiveness as a place to do business and as a location for foreign direct investment. We need to debate this because we do not always pay sufficient attention to our indigenous industries, including small ones, in the broader economic debate.
We must face up to the reality that, because of globalisation and the fact the world seems smaller, there will be a shift of investment to locations where wages are low and where wage bills can be cut by 50%. This shift has already started and we must ensure it does not affect our competitiveness.
We must be very careful not to allow business to dominate the economic and political agenda. We will welcome businesses' contribution and support their sensible economic policies but we cannot allow big businesses to set the agenda as they have done in other countries. In Ireland we have the right mix as regards the political system. There are strong public and private sectors working in partnership, rather than seeing each other as enemies within the broader society. I get annoyed when people, particularly in the private sector constantly push their private economic agenda to try to dominate and take over situations in which there is no need for their involvement. For these reasons this debate is very important.
As we talk about business and investments we should bear in mind that there is another Ireland outside the Dublin 4 stereotype of trendy yuppy Ireland. It is important to acknowledge that families still live in poverty, despite the economic boom. I have a number of suggestions as regards helping such families. I should like the emphasis placed on the most disadvantaged areas of this and other cities, which only come to our attention when some major disaster occurs at community level. I am not going to name the communities in my constituency or in other parts of the State again. They have enough on their hands as regards fighting negative publicity without politicians making matters worse. The reality is, however, that sectors of society are totally outside the whole political, social and economic zones and are not being looked after. We must target resources to help these people.
Coming up to the budget and while the Estimates are being prepared a number of sensible proposals might be put forward. Lower income families, for example, should be allowed to meet their essential food needs. A proposal was put forward by the Combat Poverty Agency for €10 million to support alternative sources of healthy food to increase the €20 in social welfare rates being sought and provide daily hot school dinners. When one looks at the detail, the cost of putting a nutritious and well-balanced meal on the table can account for between 40% and 80% of the weekly income of families living on social welfare. I ask the Government to extend the school meals programme to provide daily nutritional basic hot school dinners for an estimated 200,000 children from low income families. I should like to see an increase of the minimum €20 in social welfare rates and up to €12 for children per week, which are recommended by many people. These issues are related to employment, investment and the whole debate on the economy.
For example, parents with two children in receipt of €400 unemployment assistance per week spend a minimum of €170 on basic everyday food items such as cereals, bread, potatoes, fruit and vegetables, dairy products, meat and fish. That to me is good budgeting and I do not know how they do it. We need to face reality and assist people. The radical proposal to establish a €10 million fund over a three-year period to support community initiatives, providing alternative sources of healthy food for low income families, is based on the success of such initiatives in the UK and the emerging success of Irish initiative such as the South Hill food co-operative in Limerick and the Dublin food bank.
As we debate this Bill, it is important we start to implement the national action plan against poverty and social exclusion. I appeal to the Minister to look seriously at increasing the income of social welfare recipients, maximising the benefits for children in poverty, rewarding participation in the labour market, fostering equality in the tax system and protecting the living standards of the most vulnerable. This would be sensible economic planning and investment. I assume that if the tax-welfare budget package of €2.36 billion is similar to 2006, almost half of it will be devoted to welfare improvements, some 23% will go to supports for children and the remainder will be allocated to tax reductions.
My proposals seek to minimise the impact of this expenditure on labour activation and educational attainment. There is an opportunity to end poverty, social exclusion and use the next couple of weeks in the run-up to the budget to do something in this regard. While we talk about welfare increases and personal rates, it should be possible to increase the lowest rates by €20, the means-tested State pension and related payments by €18 and the contributory State pension by €15 per week. As regards the qualified adult allowance, I propose we increase the lower rates by €16 and the contributory pension rate by €13 per week. Increasing social welfare rates is the key mechanism for reducing poverty in Ireland. Cash transfers are currently 20% less effective in reducing poverty than the EU average.
Section 4 of the Investment Funds, Companies and Miscellaneous Provisions Bill provides for the laying of orders and regulations before both Houses of the Oireachtas and empowers either House to annul the order or regulation within 21 days. Section 5 provides for the authority to meet the expenses incurred by the Minister in the administration of the Act. When one digs deeper into the legislation one finds that section 6 amends section 32 of the Companies (Amendment) (No. 2) Act by increasing the audit exemption thresholds for turnover and balance sheet totals, up to the maximum levels permitted by the EU. The new thresholds will be €7.3 million for turnover and €3.65 million for balance sheet. This will apply to a company in respect of a financial year that commences not earlier than two months after the commencement of this provision. Section 7 amends section 239 of the Companies Act 1990, by providing regulations for the introduction of mandatory dematerialisation in electronic form. I am urging that the legislation be seriously looked at while we are being very supportive of it.
The purpose of Part 3 is to pass provisions which need to be enacted in primary law to ensure the smooth and effective transposition of the EU transparency directive on the harmonisation of requirements to disclose information about issuers, where securities are admitted to trading and a regulated market. The directive replaces and updates existing EU legislation in this area and is designed to enhance transparency on EU capital markets by requiring regulated market issuers to produce periodical financial reports on shareholdings in such companies that disclose major holdings. The directive also deals with the mechanisms through which this information will be disseminated and stored. It is due for transposition by January 2007. The provisions of Part 3 mirror similar provisions included in the Investment Funds, Companies and Miscellaneous Provisions Act 2005 in connection with the transposition of the market abuse and prospectus directives last year. Section 10 allows the Minister to make regulations under this Act for the purpose of implementing the directive and related permission level instruments, as appropriate.
As regards investment, employment and sensible planning, we must also provide for the employment of people with disabilities, an area that is often left out of such Bills. It has become noticeable over the last three years that the rate of unemployment among people with disabilities is extremely high, and this is not acceptable. There are many people with disabilities, middle-aged and elderly included, who are very able and talented and who have a massive contribution to make to society. This must be faced in the debate as we talk about investments.
At this morning's meeting of the Joint Committee on Justice, Equality, Defence and Women's Rights, there was a very interesting discussion about the sectoral plan that deals with the employment of people with disabilities. This is very important and should be linked into this debate as well. I note the National Consumer Agency currently works to address the needs of vulnerable consumers, including those with disabilities and where appropriate will work in partnership with and support initiatives being taken by organisations in this area. Other features raised in the sectoral plan discussions included embedding the mainstream context costs across a range of services provided by the Department and its agencies, compliance with Part 3 of the Disability Act 2005 regarding the provision of accessible services to people with disabilities and the protocol for interdepartmental working. All of this work is to be fully embedded within the Department's business planning guidelines in the context of further developing and expanding this process. Disability will also be taken into account in the Department's review of the business planning process to be undertaken later in 2006. While all these initiatives are very welcome, there is a number of serious concerns I wish to raise. The timeframes for the roll-out of various elements of the vocational, training and employment strategy seem to be very tight and slippage in one will tend to have a knock-on effect, thus delaying the entire implementation process. It will be crucial to structure the work programme in order to avoid this. For example, the Departments of Health and Children and Enterprise, Trade and Employment, have committed to establishing a working group to report to Ministers by the end of 2006 regarding the scope and arrangements for the phased transfer of appropriate employment services from the health sector to the Department of Enterprise, Trade and Employment. People using these services and their ancillary supports will comprise a substantial proportion of the proposed target group. A delay in this transfer could delay everything.
Research has repeatedly identified benefit traps as being a major impediment to people with disabilities taking up employment. I consider the proposal to collaborate with other key Departments and agencies to promote the removal of these benefit trap disincentives as being much too weak. This is further borne out by the fact that the only interdepartmental working arrangements proposed are those between the Departments of Health and Children and Enterprise, Trade and Employment. This is only a continuation of what is already in place.
I raise these issues because they are important to investment funds and general employment in the economy. When one looks at the details of employment rights and industrial affairs, including the labour inspectorate, one feels this will impact substantially on people with disabilities, most particularly if the training and employment strategy is successful in keeping more such persons in employment. This can be used wisely. There are many businesses in the IT and financial sectors that could employ more people with disabilities. They will make a massive contribution to society. People often talk of social inclusion — let us do something about it when we are planning for the State and the economy. This issue is part of today's debate.
While I welcome the proposed initiatives regarding entrepreneurship, this should have included a policy of promoting the excellent training programmes and other supports provided to community and voluntary organisations by the county enterprise boards. Deputy Fleming also referred to the community and voluntary sector.
Section 13 amends the Central Bank Act 1942 to include the transparency directive in the list of directives for which the bank has enforcement responsibility. This deals with confidentiality of information obtained by the competent authority and effectively prohibits its disclosure. It is an important section. Section 14 allows Ministers to cite, by provisional order, the markets in addition to regulated markets to which transparency laws shall apply. It is important that the requirements under the transparency directive should be capable of being applied to markets outside the directive's scope, such as, for example, the Irish enterprise exchange market or any new market that may be established in the future.
The Minister of State mentioned that Dublin is now recognised for securitisation and is ranked alongside London and Frankfurt. When one looks at the sums involved, which currently stand at approximately €80 billion, one will see this is crucial to the domestic economy. As society develops, we must not leave any sector behind. In this top class economy there is no excuse for leaving people behind.
In the course of my contribution I have mentioned the economy, enterprise, trade, employment, investment and the wider debate of how resources will be distributed. I also mentioned the specific targeting and inclusion of people with disabilities. I was elected on this mandate in Dublin North-Central. We must ensure these people are included and are part of the broader society.
St. Michael's House on the north side of the Dublin is an excellent service provider for people with disabilities. It currently has 296 people on its residential waiting list. Some 74% of these people are living on the north side of Dublin. St. Michael's House is looking for 70 new places per year to resolve this. That does not seem to be asking too much in this wealthy country and would be a wise investment for this or any other Government to make. St. Michael's House also has a deficit of €1.5 million and is under pressure to correct this. I urge the Minister of State to use his influence with his senior colleagues in Cabinet to help provide services for people with disabilities. The St. Michael's House project deserves our support. Senior Ministers have spoken about stamp duty and have said they do not know what to do with certain revenue. They need their heads examined. They should look at the real world where people are seeking help and support. They could also provide the resources to employ 59 additional jobs to assist this huge service provider in Dublin.
It is important to talk about investment for the future. I thank the nuns in Baldoyle who have made a major contribution to St. Michael's House in the past week or so; they sold property and land worth €30 million to the St. Michael's organisation for €100. I commend them on and thank them for this. There are times when church organisations are hammered in this House by certain individuals for things they did in the past and while it is right that they should be challenged, we must also acknowledge the contribution of religious organisations. St. Michael's House takes people with disabilities out of institutions. This is a good investment for the future, which creates a modern and respectful life for people with disabilities. I strongly support the legislation.
I compliment the Minister of State, Deputy Michael Ahern, and his Cabinet colleague, Deputy Martin, on introducing this Bill. It deals with investment funds, updates our position on company law and brings us into line with Europe. While part of this relates to dealing with European directives, it has also come about because of the country's success. This country has moved forward with such great strides that it is envied by democracies across the western world. We should not take for granted that these circumstances will remain in place no matter what happens. It would be terrible folly for people to believe this.
The most important factor in bringing the country to this level was strategic Government policy over a number of years that supported investment and enterprise and gave entrepreneurs the opportunity to create employment and wealth. This did not happen by chance but came about because senior figures at departmental and Government level created a playing pitch that allows the country to move forward in the manner we have seen.
There is another reality in that we cannot take for granted that that will be the case into the future. We do not have to reflect back too far to see what happened in this country. I am talking about the 1970s and 1980s. In the marts and fairs in the midlands and the west, people left their stock behind them in the towns because they could not sell them. They did not bother bringing them home. I remember coming out of the mart in Ballinasloe and seeing 17 calves on Society Street that nobody owned. Those are the facts about what happened in our country not many years ago.
Irrespective of what happens, we must not take for granted that the wealth available to the Minister for Finance today to look after the interests of our people, particularly those who are less well-off, will be readily available to him. That is not the case. Young people may not understand what I am saying but those facts must be stated. In the past ten or 12 years, this country has experienced an unprecedented level of growth, as much as 10% in some cases although it is down to 5% now. That is without parallel in Europe or the western world. There may be some examples in Asian countries whose economies do not have the transparency or democracy we enjoy.
That is a reality check for the Irish people when they go to the polls in May or June. I am not making a party political statement with a view to pointing a finger at any Opposition representative. I very much appreciate the constructive contributions of the Opposition spokesman on enterprise and employment, Deputy Hogan, who is in the Chamber, but some Members regularly make contributions in which they take for granted that the moneys coming into the coffers of the Department of Finance will continue to come in irrespective of Government policies. That is a myth.
This debate is about investment funds. We are talking about an increase of asset-backed security investments from €6 billion in 1999 to €80 billion today. Would any Member of this House say that happened by chance or that it fell our way because we are a little green island on the verge of Europe? That is not the case. It happened because many years ago people brought forward policies and legislation to underpin investment, set up the financial services sector by the Liffey, give entrepreneurs an opportunity to start their own businesses and provide security to people in terms of their investments. That is the reason it happened. The people at home and abroad have brought us to where we are today.
An additional 1 million people are working in this country. Why do people flock to our shores? Is it because they believe we are good for a cup of tea or will say hello to them on the street? That is not the reason. They are here because they can make money for themselves or to send to their families in eastern Europe, Brazil and elsewhere. Those people have fuelled our economy. They came here because our economy is able to absorb them and give them an opportunity, and they are making a return to our economy in the taxes collected by the Department of Finance. Deputy Finian McGrath said that the Government should give various benefits to people, but we can give nothing if the money does not come in. If the finances are not returned to Merrion Street, the Minister, Deputy Cowen, or the Government cannot give it out. The only way it can do that is if those in employment pay their taxes and by people investing and becoming involved in the further development of our country. That is the reality check I spoke about on which we must remain focused. I am concerned about statements made by some people, who may or may not be in Cabinet positions after the next general election, in terms of what they will do in that regard, but they can do nought if the money does not come into the Department of Finance.
The legislation before the House is welcome because it reflects where we are as a nation. It reflects on our success and our ability to become the envy of Europe in terms of opportunity in enterprise and employment. The circumstances that allowed that are as a result of good, strategic policies by excellent civil servants and Ministers over a period.
The provisions in the Bill are many but what is their purpose in layman's terms? They are to relieve the burden of regulations, facilitate business development, provide solidarity for our competitors and give effect to European Union directives. We are sometimes criticised because of our rush to meet EU directives but in the financial and investment areas, it is important we have a clean sheet. We have a clean sheet in the eyes of the world, and that is very important. If we are to keep up to speed as regards financial activity and investment, this legislation is necessary.
This country has an acceptable common law practice that always has been supportive of the business environment. We have the best entrepreneurs compared to those in any country worldwide. Ireland is a country to which other countries look up. I am a regular visitor to the United States. My family's background is in the financial sector in the United States. My father was the first of his generation born in this country and I have kept close links with the United States all my life. I am always amazed by the compliments paid to young Irish graduates and businessmen and women on the way they take on new challenges in IT, finance, business and enterprise. We should not be slow to compliment ourselves on the ability of Irish people in that regard.
Mention was made by some speakers of the voluntary sector on which I want to comment. Some years ago I became fearful that the voluntary sector would disappear and that people would not come forward to become involved in voluntary bodies and organisations because of our rush to live the high life in this affluent State. I am pleased to say I was wrong because Irish people are as concerned with and committed to the voluntary sector as they ever were. As many, if not more, people as before put themselves forward to act as committee members or officers of voluntary organisations. It is important that the State recognises and supports this voluntary effort.
The voluntary sector finds it difficult to deal with regulation and bureaucracy. In some cases small grants have become albatrosses around the necks of voluntary organisations. It is now a painful task to deal with a small grant from a State organisation. I refer to county enterprise boards and Leader boards. Voluntary people are involved in these matters yet the most qualified accountants and legal support people would be needed to assess and draw down grants. We have gone overboard on regulation in this area.
The Minister of State at the Department of Enterprise, Trade and Employment, Deputy Michael Ahern, keeps his finger on the pulse of his constituency. He would not be in this House for the past 20 years if that was not the case. We must examine how we treat the voluntary sector. We rush to support it with grants but we hamstring it when it tries to draw them down. Some years ago lottery grants were a simple matter for GAA clubs, soccer clubs and boating clubs. Now, the Office of the Chief State Solicitor has its claws in the process. The paper trail involved in drawing down a sum greater than €50,000 is unbelievable. These people are gardaí, county council members, farmers or secretaries and are involved on a voluntary basis. The must try to draw down money invested in a local hall, pitch or sporting facility. Such regulation is the way to hunt people out of the voluntary sector. We must be careful not to exclude people from this area. They will wonder why they should endure such hassle on a voluntary basis, with Departments piling regulation on organisations for a few euro that contribute to the common good.
This Bill is necessary from a national and European perspective. Today's generation must reflect on the future. Can we maintain and improve on the level of income with changed policies? People will realise that it would be very difficult to return to the days when Irish people were taking the boat and had difficulties. These dangers exist unless we maintain stability of investment, enterprise, and employment. Otherwise we cannot support what I seek, namely, that the less well-off will have a better return after the budget. This legislation gives us food for thought in that regard. I compliment the Minister for Enterprise, Trade and Employment, Deputy Martin, the Minister of State, Deputy Michael Ahern, and his officials. I commend the Bill to the House.
I thank all Deputies who have spoken. This is a technical Bill, covering company and consumer law. The provisions in the Bill facilitate business development and secure our competitive edge in key sectors. Our regulatory environment is a key component of our competitiveness and our international reputation. Where possible, we should ease the regulatory burden on business, as expressed by speakers today.
Deputy Eamon Ryan stated that we must provide flexibility to industry while keeping appropriate controls in place. A flexible, responsive, business-focused regulatory system has been the cornerstone of Ireland's development over the past 15 years. To ensure a level playing field it is also in our interest to give full effect to important EU directives. I appreciate the contributions of Deputies Hogan, Lynch, Eamon Ryan and others. Interesting points were made during the debate.
Deputy Hogan raised the matter of regulators but I do not accept all his points, specifically his claim about a lack of policy basis. I agree that we should debate the manner in which regulators operate. That is the basis of democracy.
I am glad the Minister of State agrees with me about regulators.
Deputy Hogan also referred to the Central Bank and the Competition Authority. These matters are of concern but do not concern this Bill. The Deputy also referred to the IFSC and the financial services sector. This underpins a number of provisions in this Bill. We must ensure the IFSC is controlled and maintains its reputation.
Changes sought by Deputy Hogan to ensure the benefits of competition are passed on to the consumer will be considered in the context of the consumer competition legislation, as opposed to this amendment which deals mainly with company law matters. Deputy Hogan mentioned that prices had risen by approximately 10% in the last year or so. Interestingly, another spokesperson from Deputy Hogan's party claimed during the summer recess that, based on a survey carried out by Fine Gael, the price controls which had come into operation had no benefits for consumers. When this survey was examined, it was revealed that none of the items covered ever came under the price control order so I hope the figure of 10% is not based on a similar survey.
It is based on figures from Government agencies.
Deputy Lynch highlighted the training of auditors who will only use information for one year. I would appreciate if the Deputy would contact my office to discuss the matter. She also highlighted directives which were not being transposed. In 2005, my Department transposed the prospectus and market abuse directives and also facilitated international accounting standards. In 2006, the takeover directive was dealt with and this Bill completes the suites of directives with the transparency directive. In addition, the Bill picks up on some points overlooked in the takeover directive and which needed to be tweaked. We are working our way through these directives very speedily and effectively.
Deputy Lynch also highlighted consumer issues and asked why we were introducing an amendment to appoint a person to the post of Director of Consumer Affairs for more than six months. The principal reason for making such an appointment is because it was considered that a competition, which is the normal procedure for appointing a director, would be impractical because it was intended to incorporate the Office of the Director of Consumer Affairs into the new national consumer agency. Deputy Hogan also asked this question. Deputy Lynch also asked when the national consumer agency would be established. It is expected the Bill will be published before the end of the year and that the agency will be statutorily established in early 2007.
Deputy Lynch also asked when the company law consolidation and reform Bill will be published. The company law reform group is preparing the heads of the Bill, which contains approximately 1,500 sections.
The Minister of State should tell it to take its time.
Deputy Lynch hopes the Labour Party will be in Government when it is enacted.
We will wait until we are in Government.
In the meantime, it is being moved forward and, hopefully, will be ready in the not too distant future. Perhaps Deputy Hogan might introduce it.
The Minister of State is thinking the right way.
Deputy Eamon Ryan raised the issue of the liability of a guarantor. Section 8 substitutes a new section for section 43 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005. Essentially, the purpose of this amendment is to limit the potential liability of a guarantor to the content of a prospectus in so far as it relates to the guarantor or the guarantee given by him or her. It is not an open-ended situation where a guarantor can be sued over issues outside the prospectus or the guarantee. This amendment will undoubtedly be discussed further on Committee Stage.
Deputy Connaughton raised the issue of the change to mandatory computer records and effectively questioned whether security could be guaranteed. Some companies are already operating in this manner since the uncertificated securities regulations were made in 1996 and no particular difficulties have been brought to my or my Department's attention.
Deputy Fleming highlighted issues relating to the types of companies which can benefit from the audit exemption. He quoted from a letter I sent to him two years ago in which I stated the matter was being considered by the company law review group. I raised the issue a number of years ago with my officials and the company law reform group. The group is examining the matter because there are a number of perspectives to be examined in respect of voluntary bodies. Where funds are involved, the perspective will differ from that of a family-owned company or a company with shareholders. This area needs to be examined because overregulation and the burdens placed on people working in a voluntary capacity, as Deputy Finneran noted, can drive them away. It is very important to achieve a balance and I hope this matter will be sorted out in due time.
Speakers have mentioned qualified accountants. There is a difference between a qualified accountant and auditor or accountant-auditor. The term "accountant" is being examined and hopefully in the not too distant future a definition will be produced to protect the public from people setting up as accountants who do not have the qualifications to make them competent in this area.
Turf accountants.
It is aimed at protecting the public. Deputy Fleming also asked about audits and the protection of minority shareholders. A total of 10% or more of a company's members can require that the company's accounts are audited. I do not know how the Revenue Commissioners will treat unaudited accounts but, from my experience of dealing with them, I am confident they have their own standards and procedures and will know whether the accounts presented represent a true and fair view and display the proper results.
Deputy Eamon Ryan commented on small and medium-sized enterprises and implied that Ireland depended on foreign direct investment and multinationals. Approximately 60% of companies in Ireland are small and medium-sized enterprises, in other words, enterprises with less than 50 employees, and the sector employs over 113,000 people. The gross national product projected for the coming year is approximately 5.5% to 6% and is greater than the gross domestic product, which reveals that indigenous companies are now making a greater contribution to employment and exports. In this light, it is important that our regulatory burden does not prevent our small and medium-sized enterprises from growing and developing and keeping our economy going forward.
Since this Bill was approved by the Government, a number of other issues have been raised with me which may require amendments to the Bill. Most of the proposals are in the area of company law. I will introduce amendments on Committee Stage for those proposals deemed to merit consideration by the Oireachtas.
The Investment Funds, Companies and Miscellaneous Provisions Act 2005 provided for the introduction of a new type of investment fund vehicle, the non-UCITS common contractual fund. Concern has now arisen in the funds industry regarding the availability of the protections of the Netting of Financial Contracts Act 1995, as amended, to the non-UCITS common contractual funds. My officials are examining the issue and, if necessary, I will table an amendment to the Netting of Financial Contracts Act on Committee Stage.
I thank all Deputies who contributed to this most useful and informative discussion. I hope I have clarified most, if not all, of the questions raised. A number of issues were raised on which we will reflect between now and Committee Stage.