Dara Calleary
Question:88. Deputy Dara Calleary asked the Minister for Jobs, Enterprise and Innovation if he has had any recent meetings with RGDATA; and if he will make a statement on the matter. [18972/13]
Priority Questions
Retail Sector
I am acutely aware of the importance of the retail sector in the Irish economy. The combined wholesale and retail sector in Ireland employs 273,000 people which is one in every seven working in Ireland at the end of 2012. The sector also supports employment in other related services such as transport and logistics. A number of bodies represent different parts of the retail sector, with RGDATA representing independent family-owned grocery shops, convenience stores, forecourt stores and supermarkets.
I launched the first of AIB's series of outlook reports for the SME sector on Friday, 19 April. It is a very detailed report on the retail sector. As that report was focused on the retail sector and undertaken in conjunction with RGDATA I met with the director general of RGDATA at that event and on numerous other occasions. In addition RGDATA was part of the local jobs alliance delegation which met with the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, in September 2012.
In addition, a representative of RGDATA, the Retail Grocery Dairy and Allied Trades Association, sits on the high level group on business regulation, which I chair, so we engage regularly on issues relevant to the retail and small business sector through that forum, including the meeting on 30 January last. RGDATA has been active in making input in many areas affecting the business climate and many of the reforms introduced by the Government have responded to these concerns.
In recognising the importance of the retail sector to the economy, the Action Plan for Jobs 2013 contains several measures aimed at supporting the sector. We are currently introducing new initiatives including the rationalisation of 25 retail licences and provision of a single retail licensing system which will cut down on regulation; promoting a proposed competitive voucher scheme to assist retailers to go online and strengthening the Credit Review Office to deal with problems in getting access to finance.
Additional information not given on the floor of the House
There will also be the integration of local authority business support into a stronger local enterprise office to support the emergence of a better local environment for micro and small businesses. In addition, the Government has committed to establishing an interdepartmental group to undertake a short examination of possible further measures to assist the retail sector, which could, for example, be considered in the context of the budget or the Action Plan for Jobs 2014. The group will comprise key Departments and will consult with relevant stakeholders across the retail sector as part of its work. RGDATA will be one of the representative bodies which is consulted as part of that examination of the retail sector.
I acknowledge the work the Minister of State is doing in tidying up the licensing side of matters. Concerns have been expressed by RGDATA and other small business organisations about the practices adopted by AIB and Bank of Ireland regarding banking charges. For example, there has been a 165% increase in lodgment fees by AIB, the State-owned bank to small business. I know of a practice by Bank of Ireland, one I suspect also used by AIB, of designating certain days for lodging coin and others for lodging cash. As an experienced businessman, the Minister knows a small business will not know what day it will have to lodge notes or what day, coins. Has the Department expressed concerns to the banks about these kinds of decisions? The banks are making day-to-day business banking more expensive and more awkward. Has the Minister had any interaction with the banks on this? Is the RGDATA report quoted by the Minister earlier sponsored by AIB?
Yes, it is a joint report.
Many concerns have been raised about the quadrupling of the charge for the handling of every €100 to 14 cent. I plan to raise this issue with the banks. It, as well as cheque clearances, is a significant charge for a small business’s bottom line. I am disappointed they raised the charges for handling cash. Representatives from AIB and Bank of Ireland will attend the advisory group on small business, which RGDATA sits on too, to discuss access to credit. This matter can be raised with them as a follow-on question.
The report on retail trends launched last week by RGDATA pointed out how there has been a seismic shift to discounters. It found that three out of four retailers are seeing consumers buying more items on special offer. Up to 57% of retailers experienced a decrease in turnover between 2011 and 2012, while 16% reported an increase. A key finding from the survey was that half of those who took part in it plan to improve or expand their business in the next three years while one out of five expects their business to be taken over by a family member.
I intend to raise the issue of increased bank charges and stacked up hidden costs for small businesses with the banks at the next advisory group meeting.
It would be better if AIB did fewer glossy reports telling us what we know and took business seriously to give them a fair pitch in financing day-to-day business. What is happening is ridiculous. The banks are doing the bank robbery and robbing business. As the Government is the prime shareholder in AIB, will the Minister point out forcefully that these practices are not helping the growth of the economy and are actually destroying businesses trying to create jobs?
Credit Availability
Peadar Tóibín
Question:89. Deputy Peadar Tóibín asked the Minister for Jobs, Enterprise and Innovation the initiatives taken by his Department to address the market failure of bank lending to small and medium enterprises; and the cost to date of these initiatives. [18627/13]
My Department has introduced a range of targeted initiatives to support an additional flow of credit into the economy by filling gaps where specific market failures exist. The credit guarantee scheme and the microenterprise loan fund are among those initiatives.
The credit guarantee scheme has been live since 24 October and is intended to address market failure affecting commercially viable businesses. It provides a 75% State guarantee to banks against losses on qualifying loans to firms with growth and job creation potential.
A total of €299,981, including VAT, has been paid to the operator of the scheme. The cost of the scheme will be partially offset by receipts from the 2% premium paid by borrowers. To date, loans of over €3 million have been issued under the scheme, as a result of which over 200 jobs are expected to be created or maintained.
The second initiative is the microenterprise loan fund which was established by Government and began operating at the beginning of October to improve access to credit for entrepreneurs and micro-enterprises and to facilitate the growth and expansion of viable businesses.
The State provided a grant of €10 million in 2012 to Microfinance Ireland, the company established to administer this scheme. I can report that the cost for 2012 was €461,000, which includes once-off set up costs of €278,000. To date, applications of over €2.5 million have been made under the scheme and €700,000 has been approved, as a result of which over 110,000 jobs are expected to be created or maintained.
In relation to the cost of both schemes, Exchequer gains in terms of employment sustained and created, savings on welfare payments and increased direct and indirect taxes have been calculated at over €20,000 per job. On this basis I am satisfied that both schemes are more than balanced by the potential benefits.
In addition to these initiatives, the seed and venture capital scheme, the Innovation Fund Ireland and the development capital scheme are helping Irish companies, including SMEs, access funding in the current difficult environment.
It might be noted that I tabled a number of questions to the Minister on the stimulus package and the jobs likely to be created from it. I also tabled questions on legacy debt for small businesses but his Department decided not to answer those and they were forwarded to the Department of Finance. I ask the Minister to request that these job-centric questions be answered properly by the Department in future.
I am in the same boat, so to speak. We tabled questions about legacy debt for the Department of Finance also. They are specifically tailored for this Minister.
One of the major breaks on this economy is debt overhang and the ability to access credit. It is one of the reasons we in Sinn Féin have insisted time and again that stimulus by the Government is necessary. In other words, when private investment is paralysed, the State must invest. There is no doubt in my mind that the Government will come around to that view but the issue is how long it will take it to do that and the damage that will be done in the interim.
It is important to state that the Government has given a number of responses with regard to credit but we should examine the size of the problem. The Minister has put €64 billion of our money into the banks. Fiona Muldoon from the Central Bank of Ireland has stated that 50% of €58 billion of impaired debt is due to the small and medium enterprise, SME, sector. If construction is taken out of that, we are talking about at least €8 billion, or 35%, of SME debt which is impaired. It is impossible for those healthy businesses to survive. Spicers in Navan, for example, had a functioning business, a product that would sell and a customer base but, unfortunately, it had diversified into property and the entire business was sunk.
We have asked the Government time and again to deal with this issue through the banks, the organisations that got the money, but it has refused to do that. It has brought forward a number of smaller projects and funds which make up €200,000 here and €2 million there but do not come near the billions of euro hampering this economy. What has the Minister done to get the Economic Management Group to go to the banks to get this issue resolved?
I understand the Deputy's frustration but there are issues that are not dealt with by my Department. The presentation of a stimulus package, whether it be PPPs, infrastructure funds or whatever, is not the responsibility of my Department.
The Deputy could table a question and receive a response from the Minister for Public Expenditure and Reform. The situation is similar with regard to impaired loans. I know the Financial Regulator is talking about setting targets for the small business sector in the same way as targets have been set for mortgage holders in terms of dealing with problem loans. However, responsibility for that lies with the Minister for Finance. I am not being obstructive; that is just the situation.
I agree we must be innovative in the way we create a stimulus. If we tot up all the access to funding schemes for SMEs the Government has put in place, that will amount to €2.5 billion. Much of that is now funded from the NPRF. In addition, the Minister for Public Expenditure and Reform has a €2.25 billion stimulus scheme in place, through PPPs and other capital programmes and NAMA has indicated that it is investing €2 billion in its property folio. These are ways - off the balance sheet - for providing a stimulus and the Government is committed to creating opportunities for job creation.
The questions tabled, which I answered, related to the cost of schemes our Department has sponsored and I dealt with that.
May I put another supplementary question?
Sorry, we have run out of time. I remind the House that the time for supplementary questions and answers is limited to four minutes. The reason I announce there are two minutes remaining is to provide a guideline on the remaining time available.
EU Directives
Maureen O'Sullivan
Question:90. Deputy Maureen O'Sullivan asked the Minister for Jobs, Enterprise and Innovation if he recognises the importance of the EU accounting directive as a game changer for the entire relationship between Europe and Africa; if he will push for the best possible standards of chapter 9 of the directive under the Irish EU Presidency; and if he will make a statement on the matter. [15825/13]
I am pleased to say that a preliminary first reading agreement was achieved on 9 April last by the Irish Presidency of the Council on the draft EU accounting directive, which we had set as a priority during the Irish Presidency and which is an important item of EU legislation. The EU Committee of Permanent Representatives approved this preliminary agreement at its meeting on 17 April, thus preparing the way for adoption of the accounting directive on the basis of the present text.
The directive is important in that it updates the EU's accounting legislation and provides for simplification and administrative burden reductions, in particular for small and medium enterprises. It is one of the final outstanding parts of the Single European Market. Also, under specific provisions of this directive, at chapter 9, information on the revenue streams which governments in resource-rich countries around the world receive from European companies active in the extractive industries and in the logging of primary forests, will require to be provided by the industries in question. As a consequence, the populations of these countries will have this information available to them. This acts as an accountability mechanism vis-à-vis the governments in question.
In the accounting directive, natural resource companies - large companies and public entities - will be required to report all payments in excess of €100,000 to governments and local authorities in the countries where they operate. This information will facilitate accountability of both companies and governments to citizens of mineral rich countries regarding the contracts that they undertake. It will increase transparency of the moneys that oil, gas, mining and forestry companies pay to governments and local authorities. Under the reforms, companies will need to publish total payments for each country in which they operate and for each project, taxes on profits or production, royalties, dividends, bonuses, related fees and payments for infrastructure improvements. There is no exemption for disclosing these details in countries where this may breach local laws.
The provisions of the accounting directive will take effect in the European Union two years, at the latest, after its adoption.
My question was submitted just before that directive was signed. I acknowledge the work the Government and officials have done to support the accounting directive. This is something NGOs and civil society have been seeking for some time. The EU Commissioner, Michel Barnier, has said that local communities in resource-rich countries will finally be better informed about what their governments are being paid by multinationals etc. for exploiting oil and gas fields, mineral deposits and forests. This directive must mean more than that they will be better informed, because these communities are losing out big time. They should see the benefits of the resources in their countries.
Some $1 trillion disappears without trace from developing country, abetted in the main by multinational companies evading taxes. The disappearance of these moneys is also supported by corruption on the part of officials. This issue has been called the ugliest chapter in global economic affairs since slavery.
Will Ireland build on what has been achieved in the directive, particularly in chapter 9, to create and support greater transparency in country-by-country reporting?
Absolutely. I thank the Deputy for her commendation of the officials in my Department, who have done a great deal of work. As she probably knows, painstaking work is required to get these things over the line. I will convey her remarks to my officials. It is clear that abuses have developed in this area. The NGOs have been extremely exercised about it, and rightly so. The directive creates a charter for transparency. I understand that similar provisions are included in the Dodd-Frank legislation in the US. We are beginning to see a commitment on a broad global basis to having more transparency in this area. I hope that reduces the sorts of abuse mentioned by the Deputy.
An effort needs to be made at UN level to highlight the issue of tax justice and to tackle the illicit movement of taxes from particular countries. Did the Government support the inclusion in the review clause of additional sectors, such as telecommunications and construction, that could be included in the directive? While I accept what is being done with regard to oil, gas and mineral reserves, I think similar efforts could be made in other areas. It is interesting that at a recent climate change conference, President Higgins outlined some figures to demonstrate the extent to which multinational companies dominate particular sectors, such as the food sector, in the developing world. There is great scope for action to be taken in this huge area. There is great scope for Ireland, as a well-respected country, to do more to build on what has been done with regard to tax justice.
I will have to get back to the Deputy on the wider sectors she mentioned. I understand there has been broad-based support from the Council, the Parliament and the NGOs for what has been achieved here. One always has to get all of one's supporters together in order to get an item such as this through. I know my Department was keen to deliver this and I congratulate those involved in getting it across the line. I will get back to the Deputy on her supplementary question.
Economic Competitiveness
Dara Calleary
Question:91. Deputy Dara Calleary asked the Minister for Jobs, Enterprise and Innovation his assessment of the recent Forfás report, The Costs of Doing Business 2012; if he has prioritised any of the issues highlighted; and if he will make a statement on the matter. [18971/13]
A Forfás report that was published recently, The Costs of Doing Business in Ireland 2012, indicates that business costs have decreased significantly in recent years, with overall prices in the economy falling back to levels last experienced in 2002. This is an important report in the context of our need to continue to build an export-led recovery. It examines the relative importance of different areas of cost for different sectors. The improvement in business cost competitiveness has been driven by dramatic reductions in property-related costs, in terms of purchase and rent levels, and falling prices across a range of professional and business services. We have also seen relative improvements in labour costs in Ireland, which fell by 0.9% per annum between 2008 and 2011. By contrast, labour costs in the euro area increased by an average of 4.6% per annum in the same period. While these improvements are welcome and indicate that we are moving in the right direction, we must continue to focus on actions to promote further cost reductions across the economy. The report advises that over half of recent cost competitiveness gains are attributable to favourable exchange rate movements. The report also indicates that upward price pressure is beginning to emerge in some areas, while rigidities persist within the economy.
The report highlights the fact that Ireland is still out of line with our key competitors on a range of business inputs. Despite the reductions achieved to date, labour costs remain relatively high and are over 6% above the euro area average. Energy costs remain a cause for concern, particularly for the SME sector, with Ireland as the fourth most expensive location in the euro area for electricity. Waste costs in Ireland are higher than those elsewhere in Europe. Despite the recession, legal service prices are 11% above 2006 levels. The report shows that Irish consumer prices are 12% above the euro area average. This is a significant indirect cost for business because it puts upward pressure on wage expectations. Another issue highlighted in the report is the impact on our competitiveness of labour taxation. The marginal rates of income tax are 52% and 55% for employees and the self-employed, respectively. This is higher than in many of our competitor countries. In addition, these rates commence at a relatively low level of income. Tax rates of over 50% on average incomes damage inward investment and entrepreneurship and can act as a disincentive to work. It was in recognition of this issue that I said the Government must continue to keep its promise by avoiding further increases in the burden of taxes on work if we are to sustain and accelerate the transition in our economy and the jobs recovery that has begun. We must begin to reduce the income tax burden as soon as possible, starting with hard-pressed families on average incomes.
Additional information not given on the floor of the House
I draw a comparison with our nearest neighbours in the UK, where one pays 20% tax up to approximately €37,000 and then a marginal rate of tax of 40% on income up to €175,000. The contrast highlights the mistake, in my opinion, of previous Administrations, under which 80% of fiscal correction was made through increases to income tax. The Forfás report makes a number of recommendations aimed at further improving our cost competitiveness position. Part of the Action Plan for Jobs has been the development of proposals each year that can improve our competitiveness. This report will be a valuable input into developing further proposals. Forfás is undertaking detailed work in areas such as licensing and regulation, ease of doing business and wider measures that would enhance competitiveness. This is intended to develop proposals that can be enacted in the years ahead. The implementation of these actions, combined with the Government's broader agenda to enhance productivity, will play a key role in improving our competitiveness and realising our ambition of making Ireland the best small country in the world in which to do business.
Electricity costs for SMEs in Ireland are now among the highest in the euro area and the fourth most expensive behind Cyprus, Malta and Italy. The cost of credit for new loans to Irish enterprise exceeds costs in the euro area for a range of loan types from the banks, but also from a State scheme, the microfinance scheme, which at over 8% is far higher than many euro projects. A warning contained within the report, as the Minister will have read, is that Irish consumer prices are 12% above euro area prices. What we are paying for food in particular is far in excess of the average in the euro area, which, in itself, is an indirect cost for business.
The Minister mentioned 2002. Between 2002 and 2006, in particular, the consumer price index and costs rocketed. It was very difficult to do anything after costs had gone up but the Minister now has the chance to intervene before those costs begin rising again. It will be difficult to lower the consumer price index unless we tackle the cost of our utilities - for example, our excessive water costs. In light of the Forfás report, has the Minister brought specific concerns or plans to the Government with regard to our utility costs and the cost of banking in Ireland? With regard to the agencies within his Department, has he any proposals for controlling the consumer price index, particularly the cost of food, at a time when labour costs have come down and people are being paid less while the cost of living is actually going up?
As the Deputy knows, the Government has a series of initiatives in the area of water and waste which are designed to produce a more cost-effective and efficient delivery of water and waste to the industrial sectors. The report seeks the rapid implementation of those. In the case of electricity, while the Deputy might be better tabling a question to the Minister with responsibility for energy, I understand the ESB has been implementing a process of cost reduction. Some of the disadvantage is in the fuel mix we have. No doubt the ambition to diversify sources of fuel is an important aspect of long-term delivery of cost-effective electricity.
In the area of consumer prices, I have beefed up the Competition Authority, which will be merged with the Consumer Agency later in the year, and I have put additional staff there to look at areas in which there is potential or real abuse of competition. I am determined to see effective implementation of our competition legislation. The issue with regard to banking is one we can discuss and I acknowledge the point that has been made.
Forfás also points to the difficulties arising in the property sector, particularly the lack of availability of high-quality office space and the implications this has for enterprise. Is this something the IDA is dealing with or aware of? Are there specific proposals in this regard?
The IDA is very much aware of this and its chief executive, Mr. Barry O'Leary, has pointed out that there are now potential scarcities in respect of high-quality office space for new developments in Dublin. The issue is whether the margin is there for speculative building and whether it is willing to do that at this point. I know the IDA has, in certain cases, lodged and obtained planning applications in areas in which it feels the issue of property opportunities could hamper development. The IDA is very alert to this issue and will pursue it in every possible way.
Company Closures
Catherine Murphy
Question:92. Deputy Catherine Murphy asked the Minister for Jobs, Enterprise and Innovation his views on the closure of an ocean energy research company (details supplied) in County Kildare which had received funding from Enterprise Ireland; and if he will make a statement on the matter. [18359/13]
As Minister for Jobs, Enterprise and Innovation, I regret any job losses. It is an unfortunate reality that businesses can find themselves in difficulty for a wide range of reasons. The company in question was an ocean energy research project in the pre-commercialisation stage of development. The Deputy will be aware that policy responsibility for energy research falls within the remit of the Department of Communications, Energy and Natural Resources.
The ocean energy development unit established in the Sustainable Energy Authority of Ireland in 2009 is charged with co-ordinating the relevant activities of State agencies and initiating other measures to promote and develop this sector.
Companies in the early stage development of ocean wave energy projects are assisted by the SEAI. Where appropriate, Enterprise Ireland works with its colleagues in the SEAI to assist companies in the commercialisation of a validated technology. In such cases, Enterprise Ireland's role is to assist the promoters to develop their business proposition, including their funding strategy, and make introductions to Irish and international seed and venture capital funders.
I understand from the Department of Communications, Energy and Natural Resources that the SEAI was liaising directly with the company prior to its closure. I also understand Enterprise Ireland made itself available to meet the company to discuss ways in which it could be of assistance. Unfortunately, it was not possible to prevent the closure of the company.
Notwithstanding the unfortunate closure in this case, ocean energy research remains a priority area for the Government. This is reflected in the Action Plan for Jobs 2013 under which the Department of Communications, Energy and Natural Resources has committed to finalising the offshore renewable energy development plan and related strategic environmental assessment and natural impact assessment. This will provide a clear framework for marine renewable energy project development.
The company about which I am talking - Wavebob - is well known. I realise it is piloting this technology which the Minister included in the Action Plan for Jobs and Delivering Our Green Potential. Several documents have been produced by bodies connected with the Government. The NESC produced a document on the Climate Change Bill in which it stated Ireland's offshore wind energy resources offered a significant export opportunity. When we are talking about frontier technology, it is clear that it takes time to develop. Significant expertise has been built up by this flagship company. I accept that it was in the development stage, but does the Minister accept that it is very short-sighted not to retain the expertise built up in this company over more than a decade? It appears there were significant delays before the SEAI made a decision, which was part of the problem. Does the Minister also accept that the loss of this frontier technology company costs us connections with other parts of the world in which there is a significant academic input into such work? I question whether the Government is really serious about ocean or marine energy projects or whether it is just ticking boxes. We all accept that it will take time to develop such projects, but when one loses a company with more than a dozen years of experience that has been able to leverage European and US funding, in addition to Irish funding, it does not bode well for the future in terms of the focused approach required. I would like to hear about the Government's response about an area in which large numbers of jobs could be created and a new export industry could be created.
The Deputy is raising a very large question in terms of the development of ocean energy resources which is, more properly, the area of my colleague, the Minister for Communications, Energy and Natural Resources. As I said in my initial reply, this sector has significant potential. It is also one in which the risk is very high. When allocating funds, any State body must do so in the knowledge that funds are limited and seek to support technologies that show the best promise. Criteria will be set for the allocation of funding. In this case, funding was provided for Wavebob by the SEAI and Enterprise Ireland - over €1.8 million was invested in the project. It is not the case, therefore, that there was no willingness to support it during the development phase. From my Department's perspective, a commercial business plan must be presented before Enterprise Ireland would be willing to make a further investment.
That is the ultimate test. Many technologies are being tested and developed and in some cases are in successful test-beds. The development of a coherent strategy for ocean technologies is about seeking to create an environment in which technologies can be tested. However, this does not mean every single case can be successfully supported in all circumstances. While it is regrettable that this case did not meet the criteria for the allocation of additional funding, this is inevitable in an area such as ocean technology in which the technologies are wide-ranging and the risks are clearly very significant.
That was a good question, but we have run out of time and must move on to other questions.