The next item is a discussion with Mr. Danny McCoy, director of policy, and Mr. Pat Delaney of IBEC. I draw attention to the fact that while members have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable. I invite Mr. McCoy to make his presentation.
Business Regulation: Discussion with IBEC.
Mr. Danny McCoy
I thank the committee for giving us this opportunity to meet its members. Economic regulatory affairs are of prime concern to the executives of IBEC and, in particular, its members.
I apologise on behalf of Mr. Kieran Crowley who was due to attend today but was unable to do so as a brother-in-law of his died overnight.
I will give a view on this matter, while Mr. Delaney, a member of the high level group on business regulation, will go into more detail.
The State places significant additional costs on enterprise through regulation and administrative requirements. While in the main regulation is exercised with a positive spirit and good intentions, the costs, if inappropriate, can be damaging to competitiveness and reduce Ireland's attraction as a location for foreign direct investment. While we concede that many of the regulatory and administrative burdens on business are necessary, sufficient consideration must be given to the additional costs requirements impose on enterprises. In that regard, we acknowledge that there is a greater level of awareness at State level of the importance of minimising the regulatory and administrative burden. The work of the high level group on business regulation has been significant in this regard. We note that its first report published during the summer made a substantial number of recommendations which were fed into its deliberations by the business community.
We are positive that the Government has set a target of achieving total savings of 25% in administrative costs, which are calculated to amount to €500 million. That is significant. For a society that spends so much on trying to reduce the time spent in commuting to work, it is not wise to waste the time saved in unnecessary administrative form filling. The more efficient and better co-ordinated approach to administrative requirements will pay dividends to all. The value of the savings identified over the past year has been estimated by the higher-level group at €20 million - just 4% of the target. Progress will have to accelerate rapidly if the final target is to be achieved by 2012.
There are several initiatives currently in the pipeline which offer significant potential to accelerate reduction in the administrative burden. Mr. Pat Delaney might discuss some of these with us. I note that the ongoing work between the CSO and the Revenue Commissioners examining the possibility of sharing some information fields collected from enterprise offers potential for considerable administrative savings. We would certainly encourage that trend.
A related project of this work is the unique business identifier whereby companies would have a single identity reference number for all contact with statutory agencies. The business community is keen on this but it is important that it is right first time because if it is not or if it is incomplete this in turn will add to further costs. In passing, one of the elements of administrative savings that is important for business is geographical identifiers. These can be another aspect in terms of the administration of delivery and getting things done that we would like to note in the context of the unique business identifier.
It is clear businesses find it frustrating to be required to provide the same or similar information to different statutory agencies. Any measures to reduce this type of administrative duplication would be most welcome.
Improved use of e-Government tools also offers the potential to reduce the burden and the statistical reporting requirements on business. There is considerable scope and opportunity for increased use of on-line questionnaires and electronic application forms which would reduce the time required to complete them. As a business organisation that deals with members, we use such tools and have found the rapidity at which we can get good and accurate information has more than recouped any initial outlay in terms of investment in such e-commerce - in this case, e-Government, tools.
While it is clear that we are talking about the quantity of business regulation, there are also issues surrounding quality of which we must be mindful. This is an ongoing process, but there must be further improvements to maintain the good business environment. We acknowledge that Ireland is a good business environment, and in many ways in contrast to competitors. However, others will look to our model and try to replicate that. Perhaps recent years have seen some less than stellar thought-through regulation without the necessary prior assessment of impact. The introduction of the regulatory impact assessments, RIA, offered the potential to address this difficulty, but thus far the progress has been poor. We stress that the RIA process must become more open and transparent and new regulation should be subject to full quantification of potential costs and benefits.
As the committee will be aware, it is important to make the distinction between administrative costs and regulatory costs. The regulatory impact assessment is a tool designed to look at the costs and benefits and the details of it. Administrative costs can also be addressed by models used internationally such as standard cost models for which we believe there is considerable potential, particularly at a European level from where the 25% target has come. Consideration should be given to the fact that these are not mutually exclusive, but the difference between a regulatory impact assessment and the use of standard cost models for administrative burdens are rather exclusive of each other.
Employment regulation is also an area that has been reviewed in recent years. It remains imperative that business continues to have the flexibility required to adapt to changes in market trends. Any regulation that seeks to hinder the ability of businesses to react to a changing business environment must be strongly resisted. That is a particular concern to us in the current market.
Following are the recommendations we would push through any channels we can bring to bear on this. First, the work on the unique business identifier should be completed as quickly as possible - with a caveat that it is important that it is right first time and done properly - to achieve significant progress in reducing the burden. This will be a major step forward for Ireland.
We recommend improvement in the use of e-Government tools. Those which are already available have demonstrated their worth. As individuals, we all know from our daily interactions that e-commerce works well with the State, that it is a joy and that there are savings to be made. This is replicated to a major degree in a business context.
We stress the importance of the regulatory impact assessment, RIA, approach. We do so notwithstanding the emphasis placed on the regulatory burden. In the current context, there is just as much emphasis on the administrative burden. The use of standard cost models offers a great deal of potential for Ireland, but these two should not be confused, particularly as they operate in tandem. The important point is that as one tries to strip out administrative savings, this has the potential to unleash a great deal of efficiency in the public sector with regard to work practices, manning and those costs to which we are currently being obliged to face up and drive out. There is much win-win potential in tackling this matter.
We welcome the opportunity to address the committee. I thank members for their time.
Mr. Pat Delaney
I underpin a great deal of what Mr. McCoy stated by benchmarking the Government against the principles of necessity, effectiveness, proportionality, transparency, accountability and consistency set out in the White Paper, Regulating Better. The business community would not have an issue in signing up to these principles. We accept that every developed society needs regulation. However, it is the scope, extent and cost of such regulation which are at issue.
I refer to the piecemeal efforts made. The high level group on business regulation is taking a micro approach. It is taking specific recommendations and considering how they might be made more efficient and effective. This has resulted in cost savings of €20 million. When, however, one sets this against the €500 million plus which, it is suggested, administrative burdens, red tape and bureaucracy cost businesses, the saving is extremely small.
The regulatory impact assessment process has become something of a toothless tiger. The intentions behind it are well founded and the prospects for its success are very good. However, it is not being implemented in the way that it should. The Intoxicating Liquor Act 2008 did not undergo an RIA. Had the legislation been imposed in the way intended by the Parliamentary Counsel, it would have had the capacity to impose a capital bill of over €200 million on the retail sector.
We would like to see a continuation of the dialogue on how we might reduce costs, particularly those imposed on small businesses. If members were to speak to the representatives of a company which employs eight people, they would discover that one of those employees spends half of his or her time completing forms that must be sent back to the Government. There are 300,000 small businesses in Ireland which employ similar numbers of individuals. In that context, members should consider the number of man hours and management time wasted in completing forms.
I have in my possession an information note from an entrepreneur who runs a business and wishes to indicate how he feels about these issues. He states that between 2% and 3% of GDP is used up in the time spent on completing forms. He also indicates that the VIES quarterly submission relating to his small exporting company takes two hours to complete. This submission requires that VAT numbers for and the value of every sale made in the relevant quarter be listed. There is also a stipulation that no VAT number can be entered twice and that the value of sales under each customer number must be collated. In addition, INTRASTAT information must be submitted monthly and requires collation of VAT by country on overseas purchases. The form relating to this takes approximately 30 minutes to complete. The individual in question must also submit a VAT 3 return every two months. The latter takes one to two hours to complete. At the end of the year, an annual VAT 3 return which requests a breakdown by VAT rate - this is not sought in the bi-monthly submission - must be completed.
If we are serious with regard to encouraging efficiency and effectiveness in the business community, particularly in the small firms sector, it must be recognised that, from the cost perspective, the imposition of such burdens is enormous. Due to the fact that we do not use a standard cost model, we cannot identify the competitive impact on Irish business. There appears to be a reluctance at departmental and Government levels to engage in dealing with this matter.
I wish to comment on the general principle of a risk-based approach to regulation. Many regulations are introduced without taking account of the risk involved. They do not consider the likely outcome of the implementation of the legislation.
On new legislation, I mentioned the RIA. Simplification and efficiency are most likely to come through increased use of IT. We are not happy that the use of IT in providing information to the State is at the level required.
It is imperative that the Government addresses the issue, but measured against the principles it set out of itself, namely, that the standard cost model should be used to determine the real current impact of legislation. While the work of the high level group on business regulation is important and proactive, it needs to be extended.
I thank Mr. McCoy and Mr. Delaney for their contributions. On attracting foreign direct investment, IBEC says regulation is expensive but it also says the quality of business regulation must be first class to act as a platform to attract investment. How is one balanced against the other? Is there a need for valid fine regulation on the world stage and for Ireland to be a leader in that regard?
On the question of the CSO and the Revenue Commissioners, I am concerned because the CSO has always operated as a strictly confidential organisation. Information given to the office is given in the knowledge that it will be not be used for any purpose other than economic tables and future Government planning and that it would not be used with the Revenue Commissioner information. Perhaps Revenue information will be given to the CSO to enable it to have better models and better information. I would like IBEC's view on that.
Commercial sensitivity is an issue in the context of supplying information to the CSO and the Revenue and the Government being allowed to use it. Is business in Ireland too commercially sensitive? If it was more open would the economy work better with people having a greater knowledge about what is happening, increased competition and more effective and productive use of all resources?
Employment regulation has been reviewed. Does IBEC feel the Lisbon treaty and, in particular, the implementation of the Charter of Fundamental Rights, will have an influence on employment regulation? I refer to compulsory negotiation agreements where unions are involved in wage negotiations and so on.
Does the high level group have ideas on how to reduce the expenses to which Mr. Delaney referred and take responsibility in that matter? The cost of regulation is 2% or 3% of GDP, which equates to plus or minus growth in the economy. If that could be done away with, the economy would grow this year.
It would be interesting to receive a more comprehensive and detailed analysis of the costs, not only in money but also in time. Sanctions and fines apply if VAT information exchange system (VIES), (INTRASTAT) and VAT-free forms are not completed correctly. There is, therefore, a definite cost. We all recognise the need for these forms but they incur a cost. More comprehensive detail of the costs involved would be welcome.
Mr. Delaney said some regulations made by Government are not subject to risk analysis. Could he give some examples of that?
I welcome Mr. Delaney and Mr. McCoy and thank them for their presentations. This committee is concerned with better regulation. We want to make all the necessary substantial savings. We agree with the approach of the high level review group and we hope those savings of €500 million can be made by 2012.
We look forward to making early recommendations for the reduction of unnecessary form filling and paperwork in every Department and state agency. A root and branch examination of Government agencies and regulatory bodies may be required to bring about a reduction of between 25% and 30%. We are keen to see progress in this. I have no quibble with what Mr. Delaney and Mr. McCoy have said.
I thank the Mr. Delaney and Mr. McCoy for their presentations, most of which I agree with. This issue has also been raised in other committees. I have discussed it at the Joint Committees on European Scrutiny and Enterprise, Trade and Employment as well as in the Dáil Chamber. There is some suspicion as to how the 2012 targets were set. I am not convinced the methodology for reaching those targets has been fully thought out. Five or six months have passed with no real action on this. We will need to increase our pace if we are to achieve the targets. We have simply undertaken to implement the European targets here. They have not been fully thought out by Government or by us. There is a duty on all of us to decide how we can make progress. It can be done but the figures to date are not high.
Does IBEC have a list of the legislative measures that affect its members and that could be simplified? Everyone has his or her version of what could be done. I am sure the Government has some ideas. IBEC must have a list of measures that could be changed quickly. Could that list be sent to members? We could then help to progress change. Excessive regulation does not simply lead to loss of profits, it makes Ireland uncompetitive compared with other countries. When we visit other countries, we can see the progress they make in energy saving and in other areas. They are ahead of us in removing red tape from their systems. We are behind other countries in the development of e-Government. We have not yet introduced the digital signature, which could save money and needs to be driven at Government level. This committee will push that development.
Has IBEC assessed the compounding cost of regulation? If red tape imposes a cost on a service provider that cost is passed on to other businesses and a knock-on effect is created. We are under estimating the cost of unnecessary regulation. Could Mr. Delaney or Mr. McCoy comment on this?
Does the problem arise from regulation or from its over-enforcement? We seem to get excited by European regulations and their implementation. Other countries take a more relaxed approach. They nod their heads in agreement, but do not get carried away with regard to enforcement. Does IBEC see this as an issue?
The European Union is trying to make progress on the matter. In recent months in the Joint Committee on European Scrutiny we have noticed a cutback in red tape regarding proposed legislation, particularly to do with small businesses. We have also noticed an effort being made to adjust existing regulations for smaller companies. Is that the way to go? Should we have less regulation for smaller businesses because costs for them would be higher or should regulations be the same for all businesses?
I agree a unique business identifier is necessary, but I go further and say we should have a unique identifier for people also. Business and personal data collection costs a significant amount, but much of the data collected is not used. If it were, we would have better planning and initiatives. We need to examine this area. Business and individuals want to see results when data is collected. Otherwise, what is the point in collecting it? We must prove to people that it is collected for a reason. We must not just scrutinise the regulations but also the manner by which we collect such data.
Several Bills have been passed since we noted the need for regulatory impact assessments, but these assessments have not been carried out or had any impact. We have set up two or three new State agencies but the enabling legislation has not gone through a regulatory impact assessment, RIA. The RIA is a tool and we must use it. It is probably a job for this committee to ensure we push the issue further.
We have not made enough progress in e-banking. Another committee is doing a study on the issue, but what are the views of IBEC? Although e-banking may be costly in the short term, will it provide us with reduced costs in the long term?
I welcome Mr. Delaney and Mr. McCoy. We all have the same agenda and nobody on the committee disagrees with the views expressed. There is consensus also with regard to our contribution. The key issue is that economic recovery comes mainly through small businesses, as has happened in other countries. Therefore, we need to identify the key factors that will drive the recovery.
One of the key factors in the local government area is planning. For example, a person in Drogheda wanted to open a bookmaker's shop in the commercial area, which I thought was great because it would offer greater choice. He submitted his planning application but it was held up for over six months because of the objections of a competitor who appealed the matter to An Bord Pleanála. This illustrates the planning difficulties in setting up a business in a commercially zoned area. Why is planning permission required for a change of use within an existing commercial area? There should be no need for this bureaucracy when one is just changing from business A to business B, unless there are issues with regard to increased traffic or other similar issues.
Perhaps we should have a one-stop shop within clearly defined commercial areas, areas that have been defined with the support of local authorities and the business community. When we draw up development plans, we should define business areas where people can set up their business. Dublin has a one-stop shop for planning in the Dublin Port area. If one chooses to go to such a one-stop shop for planning permission for a business or commercial venture, there is no appeal process to An Bord Pleanála, but there are clearly defined parameters in terms of size and type of business. This is a much quicker way of setting up a business and getting to the starting gate as quickly as possible. Locally and nationally, there is room for new thinking and for reducing red tape. I am reminded of the Halifax advertisement which declares, "We hate red tape". Everybody hates red tape. If we are to drive the recovery, we will need to be much more decisive in assisting businesses to set up, change and move with the times. For someone to be held up for six months in setting up something simple like a bookie's shop is a joke. While I do not know what contacts we have with the Oireachtas Joint Committee on the Environment, Heritage and Local Government, if we are serious about the matter, we should be able to tackle such issues. Someone with a business idea should be able to get straight into it without having to deal with red tape.
Many of the points relevant to the contributions of Mr. McCoy and Mr. Delaney have been covered. We have talked about the foreign direct investment, FDI. Is it possible to identify the areas in the economy where undue costs are being incurred owing to over-regulation? Are we talking about the manufacturing sector, the tourism sector, the retail and commercial sector, or the general services area? I am reasonably familiar with the agriculture sector, for which I am sure the witnesses delegates have no particular responsibility. It is subject to an enormous amount of costly regulation.
Regarding State agencies, local authorities, health and safety bodies and the HSE, can we quantify changes? There may be minor - or perhaps not so minor - administrative changes that need to be made in these areas that would leave the business environment more attractive and profitable for those starting or already running businesses that provide valued employment.
While much of what the members have stated is in tandem with what the delegates outlined in their opening statements, perhaps they might expand on them.
Mr. Pat Delaney
I wish to respond to Deputy O'Dowd on the issue of local authorities and the impact on competition. This is not unusual. In some circumstances where the local authority is the planner, regulator, price fixer and provider of the service, there is only one outcome - it impacts on competition and is unnecessary.
Deputy Kirk made a point about foreign direct investment. A programme was undertaken by KPMG for the financial services industry to identify unnecessary regulatory rules and their impact on companies planning on setting up here. The report identified them as FDI barriers. More importantly, certainly for the manufacturing sector planning is an issue. The cost of building a plant in Ireland is an issue. There is also the issue of customer regulation.
Regarding our regulated sectors, food, telecommunications, medical devices, pharmaceuticals and chemicals, we must consider the enormity of the regulations imposed on such companies. I take the point that Ireland needs to be best in class. We are not asking for less regulation. We are asking for better regulation that will make us more efficient, effective and economical. In many cases the equity issue is the key - certainly for small businesses. Such businesses are affected to a higher degree than large businesses because of the overhang of legislation and the necessity for them to comply.
Deputy English asked whether we should have different rules. Small businesses do not want different rules. They are seeking a level playing pitch. That is what companies want. They want the same rules to apply everywhere. As a society, we need to do this. If they are worth having, we ought to apply them.
Something interesting happened in the United Kingdom a few years ago. On the administrative burden side, a review was carried out of the number of forms companies needed to complete. It was decided to carry out what was called a "with or without" test to establish what was accomplished in filling in a form and what would be lost by not having it. The net effect of completion of the exercise was the abolition of more than 3,000 forms in the UK. I mentioned the sunset clause earlier. We often encounter "regulation creep". Regulations are imposed on top of existing regulations, for no reason other than to reflect the requirements of modern society, without taking away from what is already in place.
We were asked about the CSO. It is not necessarily a bad thing that companies are statutorily required to provide information to the CSO. Companies must comply with the VIES and INTRASTAT arrangements, which are a part of the system.
I do not have a problem telling the committee that the Revenue Commissioners have led the way in trying to reduce the burden of regulation on business, and the costs associated with it. They were the first to introduce information technology systems such as the Revenue on-line system. They give proper information, advice and assistance to their customers. They get close to their customers to make things easy for them. That is really what their work is about.
The business community wants requests for information to be made just once. It believes such requests should have a purpose. Information should be used for the benefit of the company and society as a whole. The process should make businesses more efficient and effective. It should ensure that the economy and the market work better for everyone.
In the long term, it is hard to see how the high level group can examine better regulation without considering the cost implications of it. The only way to examine the cost implications of better regulation is to put in place a standard cost model that compares how the Irish economy is doing with how the economies with which we are competing are doing. Such a model provides all the information on how Ireland is stacking up by comparison with competitor countries. This country's reluctance to engage with such a model is unique. Nobody has suggested that the standard cost model is a bad idea. While everybody agrees that it is the right way to go, we do not do it.
We do not really know the full extent, in cost terms, of the administrative burden in Ireland. We are aware that it has an enormous impact in terms of time. Everyone cannot be wrong. Business people do not whinge for the sake of it. We are aware that regulation protects us as well. It is all we have to fall back on when all else fails. It makes the market work. The more simplistic it is - the easier it is to apply - the better.
I wish to speak about the concerns raised in respect of enforcement. The natural response seems to be to create another regulator. At what stage can one say a market is regulated? We never seem to see the end. The job of the regulator is never done. The market should be deemed to be regulated after a certain period. It should work so efficiently that it is perfectly competitive and does not need to be regulated further. All the rules should be in place and understood by everybody. The question of enforcement should be the only remaining issue at that stage.
The establishment of the high level group is the second attempt to do something worthwhile at a minor level. The group will try to prove conclusively that when one approaches each regulation on its merits, it is possible to do something to change regulation or legislation, or to reduce the cost of regulation. The proposed figure of €20 million seems little when compared to the administrative cost of €500 million, or 2% of GDP, which was mentioned earlier. It is a start and no more than that. It is conclusive evidence that this process is worthwhile. If the agencies of State, such as the Departments that are responsible for future regulation, engage in regulatory impact assessment in advance of such regulation, we should know its cost implications.
We need to take an overview of existing legislation. We have highlighted certain areas of legislation and brought them to the attention of the group. We can make enormous progress in the key area of licensing. If it were possible to renew work permits on-line, the costs and overheads to which certain sectors are exposed at present would be reduced.
We are not looking for less regulation - we are looking for better regulation. We can ascertain whether our regulation is better by comparing it to international standards. The model used by the international community - the standard cost model - is accepted by the EU as the key cornerstone of regulation. We should take a similar approach.
We must use as benchmarks the principles set out in Regulating Better, which is a very good White Paper. I will repeat them. They are necessity, effectiveness, proportionality, transparency, accountability and consistency. Is regulation necessary, transparent and effective? Is it proportionate vis-à-vis large and small companies? Consistency and accountability from the State to the customer are also important issues. If we have an understanding and expression from Departments of State and the Government in general that we have a shared view on this matter and can join them to make this happen, we will be much happier. If the correct approach is taken, the costs will disappear from the system.
On behalf of the joint committee, I thank Mr. McCoy and Mr. Delaney for their attendance. We intend to pursue this matter and will contact IBEC for further information and discussion.