Priority Questions

Credit Guarantee Scheme Applications

Dara Calleary

Question:

43. Deputy Dara Calleary asked the Minister for Jobs, Enterprise and Innovation the position regarding the loan guarantee scheme; when it will be fully operational; the reason for the delay in launching the scheme; the proposed interest rate regime; when he expects it to become operational; and if he will make a statement on the matter. [41821/12]

Before the clock starts, I take the opportunity to welcome Deputy Calleary to his new role as this is the first time we have had an opportunity to speak in the House.

As Deputies will be aware, the Oireachtas enacted the Credit Guarantee Act 2012 in July 2012. I signed a commencement order on 30 August 2012. Since the Bill passed, considerable work has been undertaken to prepare the scheme to go live.

This included training workshops conducted with the banks to prepare for the scheme, bilateral legal agreements negotiated with the banks to participate in the scheme, an accreditation process undertaken for banks to participate and the drafting of the necessary scheme under section 5 of the Act. Drafting of the primary legislation and the statutory instrument was complex and time consuming. Nevertheless, we have delivered on our quarterly commitments under the action plan for jobs in terms of the credit guarantee scheme.

With the consent of my colleagues the Minister for Finance and the Minister for Public Expenditure and Reform, I have now made the necessary scheme under section 5 of the Act. The scheme, which is SI 343 of 2012, was laid before the Oireachtas on 13 September. Officials in my Department are working on the final arrangements in conjunction with the participating banks and the operator of the scheme, Capita Assets Services. Launch of the scheme is imminent.

With regard to the interest rate, this will be a matter for the individual participating banks. As required under EU State aid rules, a premium will be charged by the State to companies availing of the scheme. This has been set at 2%.

I thank the Minister for his good wishes. I look forward to working with him.

I want to raise a couple of issues arising out of the Minister's response. The Minister has missed his target in terms of the assurance given on passage of the Credit Guarantee Bill 2012 at the end of the previous Dáil term that the scheme would be up and running in quarter three. We are now into quarter four. I cannot understand the reason all of the technical issues to which the Minister referred were not addressed while the scheme was being negotiated and all the heavy lifting was under way. Issues such as training, briefing of the banks and so on should have been addressed in parallel with the legislative process. The Minister knew, given the Government majority and broad support of the House for the legislation, that it would be passed.

I would like to put this matter in context. While this training, briefing of the banks and so on is under way, the reality in terms of lending on the ground is stark, as set out by the Central Bank in its report of September last. I know there is an understanding in the Minister's Department of the seriousness of the lending situation. However, I fear this is not properly understood in the Department of Finance. They are either blind or ignorant of it. Gross "new" lending was down one third in the first quarter of 2012 versus the last quarter of 2011. Only Greece has refused more small business loans than Ireland during that quarter, with one in four businesses seeking credit in Ireland being refused in the past six months versus one in 28 in Greece. It is constantly stated that Ireland is not Greece. However, small businesses seeking loans would get an easier hearing in Greece while there is a continual faffing around here in terms of the introduction of the loan guarantee scheme.

I am incredibly concerned that it is being left to the banks to set the interest rate.

It is a scandal.

Has nothing been learned that the banks are once again being put in the driving seat of a scheme put in place to guarantee the future of small businesses? I do not need to tell the Minister or his officials that small businesses around this country are creaking at the seams. There is hay rolling down streets for the want of access to finance by businesses. The Minister need not bother reading out the statistics supplied to him by the Department of Finance in regard to the Credit Review Office. Businesses on the ground are not getting finance. If they are, they are getting it at penury rates and conditions and only in respect of the re-financing of existing working capital. As such, this lending cannot be defined as new. While people are being trained and we are negotiating interest rates, businesses are laying off people and are unable to create jobs or access whatever demand exists.

When will this money be in the pipeline and when will a business be able to apply for money from the scheme? Is it fair to say it will be quarter one of 2013 before moneys are released under this scheme?

My Department has launched two new credit schemes. While these schemes were considered by the previous Minister, he did not deliver them. My Department has delivered two new instruments, the microfinance scheme which was launched last week and the loan guarantee scheme which will be, as stated in my reply, launched imminently, which means within the next fortnight.

There are huge problems in terms of bank lending. We are seeking to introduce schemes to assist where the system is not working. It is important we give a break, through the provision of microfinance, to those wishing to start up a business. We are also seeking to introduce a scheme for loan guarantees.

To answer Deputy Calleary's point, the banks are still those who give the loan. Where a loan has been turned down the credit guarantee scheme is applied, and in return for this guarantee we charge a 2% premium on top of the rate which would otherwise have been provided to the lending. Our scheme is to intervene where people are turned down wrongly because of a system whereby the bank rejected the risk on the grounds of collateral or because of the sector. This intervention is very targeted.

As the Deputy stated, I accept wider issues exist with regard to banking. We need to get to grips with banking and no State scheme can fill the gap whereby banks must take primary responsibility. They are who are responsible primarily to deliver credit to a small exporting economy and they must deliver it.

Job Creation

Peadar Tóibín

Question:

44. Deputy Peadar Tóibín asked the Minister for Jobs, Enterprise and Innovation if he is on track to create the additional 100,000 extra jobs as committed to in the action plans for jobs. [41824/12]

Ireland suffered a fall of more than 300,000 in the number of people in employment in the three years to March 2011. The private sector experienced the brunt of the job losses, with the construction sector alone losing 150,000 jobs in the period. To reverse this trend and deliver our target of 100,000 extra jobs by 2016 will require a major transformation in the economy. The new economy which we must build will be based on enterprise, innovation and exporting. For the Government to promote this transformation will require progress on a number of fronts, including improving competitiveness, improving access to finance, embedding a jobs agenda within the necessary fiscal consolidation, taking strategic action to facilitate growth in sectors with significant potential and improving the capacity to convert good ideas into good jobs.

The action plan for jobs seeks to integrate work across the whole of Government to deliver the focus on employment. Actions are delivered in accordance with stretching timelines. The progress we have made in our first 18 months in office is encouraging, but there is a long way to go. Employment in export oriented companies supported by the agencies under my Department has increased by a net 10,000 in the past 18 months. This is in sharp contrast to losses of 45,000 among such companies in the previous three years.

It is particularly encouraging to see that exports from indigenous companies have been growing even faster than foreign direct investment and reached €15.2 billion in exports in 2011, the highest level ever.

In spite of continued job losses in more traditional sectors such as construction, and financial, insurance and administrative activities, we are seeing stabilisation in the level of private sector employment. However, the downgrading of growth forecasts in most of our trading partners will create a particularly challenging environment for the next 12 months. We are working on the preparation of proposals for the action plan for jobs 2013. I have had a number of consultative meetings and invite submissions for consideration for the strategy.

I understand how difficult a job it is to chair these events but will it be possible to ask a supplementary question after this one? I will do my best to ensure time remains for it.

We have four minutes to deal with a supplementary questions and replies.

In the past four years Ireland has lost more jobs per capita than any other western country since the great depression. This is a phenomenal indictment of the Government's policies and those of the previous Government. A total of 87,000 people emigrated last year, which is more than the number that sat the leaving certificate last year. Emigration and unemployment are the burning issues in Irish society today. The action plan for jobs was launched last February, 12 months after the Government came to power. At the time, the Taoiseach stated he would create 100,000 additional jobs. In this period alone, 33,000 jobs have been lost net so the Government is already at -133,000 given its promises. In this period, the Government has seen long-term unemployment increase from 50% to 60% and the jobs free action plan is the micro-management of the Department rather than what is needed, which is macroeconomic investment in the State.

We need significant investment if we are to tackle the major burning issue of our generation.

A total of €1 billion was given to unsecured bondholders by this Government yesterday. Would that money not have been better spent on Irish people seeking jobs? What real changes will the Government make to resolve what has now been an epic failure on its part with regard to job creation?

For the record, AIB paid the bond yesterday.

Yes, but it was money that went into the Irish State.

I thank the Acting Chairman for allowing the supplementary questions. I wish to make it clear that we are undertaking a massive transformation, as Deputy Tóibín pointed out. Construction collapsed and 60% of employment in this sector was wiped out. A total of 160,000 mainly male employees became unemployed. There is a huge job to create a new economy that will absorb people from the sectors that, as we know, are in decline. They grew too big and the policy that supported them was not sustainable. We know that about banking, construction and so on. So we have to create the new economy that builds the opportunities. That is what we are doing. Last year, the IDA had the best year in a decade. It created the most new jobs in a decade and had the lowest level of job losses for a very long period. International investment in Ireland has returned and we are seeing a jobs dividend from that. As I also pointed out in the reply, we have reversed the dramatic collapse that was occurring in indigenous export-oriented companies. That has been reversed and Enterprise Ireland companies are now growing employment.

We have seen a huge turnaround but I do not underestimate the scale of the challenge. It is a huge challenge and we are working on it with determination. The merit of the action plan for jobs is that every year, every Department focuses on what changes can be made this year to make a practical contribution to the target. That is the approach we need to take and that is the one we are implementing.

Deputy Tóibín, very briefly.

Yesterday, Spicers Bakery in Navan closed its doors. It has been in operation since 1834 and survived the Famine, the Black and Tans war, two world wars and every recession in between. It has not survived the policy of this Government. A total of 70 jobs in the bakery have been lost over the past two years. It seems that in respect of this entire sector, Spicers Bakery is symbolic of domestic enterprise in Ireland. This sector has been ignored and is suffering from Government policies.

A total of six net jobs were created by Enterprise Ireland last year. What did the Minister do to stop Spicers Bakery closing down? If it was a foreign business operating here, one would have had a task force and a number of agencies already in place seeking to retrain those workers. This is an example of 1,400 other businesses that close down on a monthly basis in this State.

The Minister, very briefly. He has 30 seconds.

The Deputy has got it wrong. The food sector is one of the sectors that is doing very well. If one looks at the employment numbers within Enterprise Ireland, it has grown by something like 4% in the past 12 months. This is a sector that is growing and it is building its strength on innovation, new green products and breaking open new markets. If one looks at the data, one will see that Irish food companies are winning markets in China, India and all across the globe. This is a sector that is being developed. Of course, as in any sector, some parts of it do well while some parts do not do so well. That is inevitable. I cannot stop the sort of change that has occurred. However, overall, food as a sector is doing very well.

Sick Pay Scheme Expenditure

Mattie McGrath

Question:

45. Deputy Mattie McGrath asked the Minister for Jobs; Enterprise and Innovation if he will comment on the views of the Small Firms Association that proposals to pass on sick pay costs to the employer will cost jobs and restrict future recruitment; the steps he has taken to ensure that such jobs are protected [42021/12]

Dara Calleary

Question:

46. Deputy Dara Calleary asked the Minister for Jobs; Enterprise and Innovation if he will respond to the continuing concerns of thousands of small businesses here regarding the Minister for Social Protection's proposal for a mandatory sick pay scheme; if he has carried out an impact assessment on the effect that a mandatory sick pay scheme would have on small and medium enterprises in terms of additional costs and impact on employment; and if he will make a statement on the matter [41822/12]

I propose to take Questions Nos. 45 and 46 together.

Earlier this year, the Minister for Social Protection, Deputy Joan Burton, who has policy responsibility for the sick pay scheme, held a consultative meeting to discuss potential changes to the scheme in Ireland. The meeting was held in the context of the growing cost of, and dependence on, State-funded sickness benefit schemes and the need to examine ways to address these issues.

I have received a number of representations from employers' bodies expressing concerns that a statutory sick pay scheme could add to the costs of doing business and impact on job creation. I am also aware of the views of the Small Firms Association on the matter. These submissions have argued that absences in the private sector are already low by international standards and by comparison with the public sector. They have also pointed to the increased costs that would be involved, particularly for smaller employers. These submissions have also been sent in as part of the consultation phase.

Any formal proposals for changes in the sick pay scheme would be a matter for the budgetary process, which will be considered in due course by the Government, taking all factors into account. All Ministers are aware of the need to create a supportive enterprise environment in order to facilitate economic recovery and achieve the objective of having 100,000 more people at work by 2016, as committed to the action plan for jobs.

In our action plan for jobs, we seek to make reforms that improve the competitiveness of enterprise and I am aware of the dangers of any policy that could be seen to damage that competitiveness.

Any formal proposals for changes in the sick pay scheme would be a matter for the budgetary process, which will be considered in due course by the Government, taking all factors into account.

All Ministers are aware of the need to create a supportive environment to facilitate economic recover and achieve the objective of having 100,000 more people at work by 2016, as committed to in the action plan for jobs.

We all share the Minister's wish to improve the competitive nature of enterprise. The difficulty with the proposal is that the Minister for Social Protection has form. Last year, she pushed through substantial changes to the redundancy rebate payment system. She justified this on the basis of the argument that large companies can afford to make the payment. Nobody disagrees with that but when I asked for a breakdown of the payout from the redundancy fund over a number of years, I was told by the Minister's Department that the figures were not available. Therefore, the Minister did not know how many large or small companies were involved. She made the decision completely ill prepared. I fear she will do the same again. She clearly does not like the business sector and has, since she entered her Department, produced a range of policies that are anti-business. We depend on the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, to defend the business sector against this.

The Minister, Deputy Richard Bruton, referred to the SFA. Its figures suggest that 88% of businesses will be affected by cash flow changes if the Minister for Social Protection, Deputy Burton, proceeds with her plan. Some 69% of businesses said it would restrict recruitment. Despite all the talk of job creation and the action plan, the proposed measure would restrict the creation of new jobs. Some 61% of firms indicated the proposal may lead to job losses. The decision is in the Government's court and it could have a negative impact on jobs.

In case the Minister for Jobs, Enterprise and Innovation would like us to believe employers do not pay their share he should note that in 2010, employers paid €5 billion towards the social insurance fund. This is 75% of the total contribution. Does the Minister agree that €5 billion is a very substantial contribution from employers generally towards the fund, and that increasing the contribution will, as said by the SFA when reflecting the views of its members, potentially add to the unemployment problem and hamper cash flow within companies?

Deputy Calleary knows that budgetary decisions are collective decisions taken by the Cabinet. There is a consultative process and the Minister is open to consultation and giving groups the opportunity to make submissions. The groups have made submissions which, as the Deputy knows, signal that within small businesses, the absence rate is but a little over 2%. This is contrasted with the figure for the public service, where it can be 5%, on average. Clearly, there are germane issues. The Minister for Social Protection, Deputy Joan Burton, is concerned about the drift into long-term reliance on sickness benefits. This is an important policy issue and we need to have a debate on how the problem can be contained.

These matters will all be weighed up by the Government when making decisions. I agree with the Deputy that we can ill afford anything that would add to competitiveness problems for business. We need to remain competitive and to solve many issues. We need to see emerging from this debate a sensible set of proposals that can restore our economy and public finances.

We all agree there is a danger of dependency on illness benefit but the Minister is still dodging the question on the rate in the public sector by comparison with that in the private sector. Is the problem far greater in the former than in the latter? In asking this, I am not pitting one against the other but pointing to the nucleus of the problem.

The Minister for Social Protection, Deputy Burton, stated the proposal will not affect those businesses with fewer than 100 employees. Can the Minister for Jobs, Enterprise and Innovation confirm this? While I know he cannot comment on budgetary proposals, it seems many of his colleagues around the table were commenting on another proposal from the Department of Social Protection, namely, that on child benefit. I ask the Minister for Jobs, Enterprise and Innovation to indicate that he, as Minister responsible for jobs and business, will fight for the interests of businesses against a Minister who clearly does not care about the business community.

Decisions by the Cabinet will be taken collectively and we will consider the evidence. No Minister comes to the table with a view that is closed.

These issues will be debated and we will take decisions in due course. This is the approach that any Government must take.

I am acutely conscious of the needs of business to remain competitive. We must promote employment and be wary of anything that would add to its cost. We need to approach this issue collectively following the assessments of the evidence that is submitted. This is the Government's approach and a collective decision will be taken.

Local Enterprise Offices Remit

Peadar Tóibín

Question:

47. Deputy Peadar Tóibín asked the Minister for Jobs; Enterprise and Innovation if he will outline when the new local enterprise offices will be established and operational. [41825/12]

I congratulate Deputy Calleary on his appointment to this important area of responsibility.

Micro and small businesses are crucial parts of our economy. Ensuring more such businesses can start up, expand and export is a key pillar of our plans for jobs and growth. For this reason, the Government has decided to implement an ambitious reform of the delivery of services to small and micro businesses. This will include the development of a new small and microbusiness division within Enterprise Ireland as a centre of excellence in the provision of supports to that sector; the dissolution of the county and city enterprise boards, CEBs, and the transfer of their functions, assets and liabilities to Enterprise Ireland; the establishment of local enterprise offices, LEOs, to provide a high quality, innovative, one-stop shop support service for small businesses within local authorities and early access to services provided by national bodies; the integration of key local authority business services into the LEOs; and the promotion of a local environment in which enterprise can thrive.

Not only is it important that this restructuring be conducted as a priority, we must also ensure the new model is fit for purpose. A high level implementation working group chaired by my Department is progressing the range of issues involved, including a focus on functions, structures and staffing, all of which will form the basis of a detailed and ambitious service level agreement between Enterprise Ireland and the local authorities. A project plan is in preparation that will set out clear milestones and timelines for implementation. I intend to complete the process as rapidly as possible.

In tandem with the work of the implementation working group, my Department is engaged with the Office of the Attorney General regarding the detailed primary legislation that will be necessary to implement the new arrangements. My ambition is to give administrative effect to the new structures as soon as possible and in advance of the formal enactment of legislation. To this end, I plan to deliver a series of significant interim milestones during the transitional arrangement. These are in preparation.

The beginning of the jobs plan states that governments do not create jobs. That is certainly true of this Government. The majority of the State's employment is found in small to medium-sized enterprises, SMEs. Some 2,200 new businesses open every month. However, 1,400 businesses also close every month. Whenever we discuss this issue with the Government, it tells us that steps forward are being taken. While there have been some steps forward, for example, in terms of foreign direct investment, there have also been major steps back. On balance, the latter worsen the State's unemployment situation.

Last week, the Oireachtas Committee on Jobs, Enterprise and Innovation received evidence from the Irish Exporters Association, IEA. Like us, it has seen a vacuum develop within the supports for SMEs. The city and county enterprise boards, CEBs have been in a state of chaotic limbo since Mr. Batt O'Keeffe was the Minister for Enterprise, Trade and Innovation. The evidence to the committee suggests this situation is costing jobs.

I do not mean this personally, but there is a vacuum in this area because there is a vacuum in the Department. Ineptitude in the Minister of State's small enterprise section is allowing a critical sector that is heavily dependent on job creation to flounder. We are dealing not only with significant economic challenges, but also with a lack of leadership on the part of the Minister of State. The Government has been in power for nearly 18 months, yet he was unable to provide a date for when the new regime would be in place. Will he show some leadership today and indicate the date on which the regime will start?

Much work has been done and the role of county enterprise boards is still very effective. I attended the national ploughing championships last week and I noted a certain number of start-up businesses getting on with their enterprise. There have been closures but there are also some very high-potential start-up businesses. There has been an establishment of the first-time exports division and the microfinance fund will be rolled out through county and city enterprise boards. This is about the evaluation and management of enterprise in every sense and potential in the market.

It is important to note that the new interim milestones relate to the determination of local enterprise offices and accommodation plans; this is taken with enterprise officers on the ground, the centralisation of services and roll-out of services for small companies. The backbone of the economy is made up of small enterprises, and these take in manufacturing as well as high-potential start-up companies. All these are doing exceptionally well. I have been all over the country meeting the people in all these companies. Enterprise Ireland has a very focused working plan and this was not a simple shift from county and city enterprise boards. The working group has formulated a strong level service agreement that will establish a one-stop shop for business.

With regard to the timeframe, the legislation has been formulated, as I noted in the initial reply, and it will go the Attorney General. I expect the local enterprise offices will be up and running in the second quarter of 2013.

The Minister of State mentioned a number of bureaucratic changes but the fact is that with the interaction of businesses at the coal face, and where it counts, the exporters' association has indicated that chief executive officers have not been replaced in county enterprise boards and there is considerable inertia in the system. Companies and small businesses are paying for this. Currently, confidence in being able to do this job is seeping away so will the Minister of State give some timeframe to small businesses in order to end this inertia?

I disagree that there is inertia.

That is coming from the enterprise boards.

There is a big commitment from within the enterprise sector, and even in the county and city enterprise boards, to be effective on the ground. The advisory groups are dealing with business people who are coming in, and there is an allocation of budget for each county.

That is not the view of the county enterprise boards.

That is the view I have from meeting the people involved. The restructuring process will tackle the local enterprise office process that has operated since 1993. The microfinance fund will be operational and people with an idea can go to a local enterprise office and seek up to €25,000. In the short term that will be operated by enterprise offices.

The next question is in the name of Deputy John Browne but he is not in attendance so we will move on.

It has been nominated to me.

I thought Question No. 58 would be taken with Question No. 48. It is very similar and both questions concern youth unemployment.

I have no objection to that.

The Minister is responsible for the groupings. Does he feel up to answering both of the questions together?

Unfortunately, the grouping has already been determined. These are taken in order as people have won priority. I must answer them in order. This question is specifically about the youth guarantee and the EU Presidency, and therefore it has not been grouped with other questions on youth unemployment. Questions that relate just to youth unemployment have been grouped.

The Deputy could ask a supplementary question anyway.

The Minister might accept a supplementary question.

That is fine.