JOINT COMMITTEE ON ENTERPRISE, TRADE AND EMPLOYMENT debate -
Tuesday, 10 Nov 2009

Employment Schemes: Discussion.

Chairman

I again welcome before the joint committee someone who is familiar to members, namely, Mr. Frank Ryan, chief executive of Enterprise Ireland. I also welcome from Enterprise Ireland, Feargal Ó Móráin Uasal, executive director, and Mr. Niall O'Donnellan, head of investment services. From the Department of Enterprise, Trade and Employment, I welcome Mr. Vincent Landers, principal officer, and Mr. Niall Egan, assistant principal, labour market activation policy section, and Mr. Rory McCloskey, assistant principal, enterprise and development unit. We sought everyone who had anything to do with a spark of enterprise and everyone is present today. Hopefully, members will all be enterprising and innovative in every way by the end of the meeting. I thank the officials for their attendance.

I draw witnesses' attention to the age-old warning they almost could recite by themselves but which I must state anyway, namely, the fact that while members of the joint committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect 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. Normally members do not have any problems in this regard.

The joint committee will hear the opening statement from Enterprise Ireland first, followed immediately by that of the Department. Members then can put questions to both sets of officials in the same session. In fairness to both parties, the joint committee acknowledges receipt of a comprehensive presentation. Mr. Ryan is aware from previous meetings that it probably would be best for all concerned were he to summarise it as best he can. A summary of the Department's presentation also would be the best approach. Asking and answering questions across the committee room floor probably is the best way in which to impart and receive information. Perhaps the representatives from Enterprise Ireland and the Department will listen carefully to the ideas expressed by members today and will bring them back with them. Perhaps from this meeting an acorn seed might drop and an oak tree might develop. I invite Mr. Ryan to make his presentation.

Mr. Frank Ryan

I thank the Chairman and members for the opportunity to attend this afternoon and contribute to the joint committee's work. I thank the Chairman for introducing my colleagues. It is important to state at the outset that Enterprise Ireland's prime purpose is to drive export growth in indigenous companies, which is the primary engine of supporting and creating jobs.

The Irish economy faces some serious challenges in the immediate term. What is also clear is that the global downturn has initiated a renewed resolve to build a sustainable Irish economy for the future. Businesses in the manufacturing and internationally-traded services sectors are experiencing severe difficulties in current circumstances notwithstanding the fact that many have viable products and services and sound business models. Companies across the broad range of sectors are facing challenges in accessing finance, unfavourable exchange rates and a drop in domestic and international demand for their products and services. In some areas these issues are exacerbated by individual sub-sector challenges, such as those facing the construction and food industries. Sustaining their businesses is the single biggest issue facing many of our client companies.

The answer to Ireland's challenge is a return to the export-led growth which drove the economy forward in the foundation stages of the boom. We should focus on the point that more indigenous enterprises than ever before are regularly exporting to international markets and that in 2008, Irish enterprises grew their exports despite the downturn. I assure the joint committee that Enterprise Ireland is intent on supporting the indigenous enterprise base by strengthening and sustaining companies of strategic importance and through working intensively with enterprises with sustainable business plans to try and maintain employment.

I will mention briefly some points on Enterprise Ireland's client base for the benefit of the committee and with its permission will move on to the section on viable but vulnerable companies. We need to strongly support viable but vulnerable exporting companies that are experiencing difficulties because of the current economic climate. The enterprise stabilisation fund, ESF, was established by the Government to support these companies. Finance of €100 million has been allocated to the fund to the end of 2010 and client companies of Enterprise Ireland, IDA Ireland, Údarás na Gaeltachta and Shannon Development across all sectors within manufacturing and internationally traded services are eligible to apply. Finance is available, primarily in the form of preference shares, to support eligible companies in the development and implementation of a business plan that will map out the actions to enable them to survive and reposition. Such viable but vulnerable companies require normal banking facilities such as access to overdrafts for working capital, term loans for fixed assets and leasing for equipment and so on.

Ensuring that such facilities continue to be present is a critical condition of Enterprise Ireland support under the ESF and in this regard the working relationship between Enterprise Ireland and the banking sector is strong. The requirements for such facilities have been increasing under the pressure of tightening credit terms and reduced sales but have been offset by companies' cost-cutting and reduction of activity. As of last week, 126 projects were approved for a total of almost €53 million under the enterprise stabilisation fund. The 126 approvals are divided between Enterprise Ireland and Údarás na Gaeltachta with 120 and six approvals, respectively. Enterprise Ireland companies were approved for support of €50.7 million, which will aid those companies in maintaining and growing employment. Enterprise Ireland has developed a close working relationship with the main Irish banks lending to the SME sector and has articulated its clients' views and experiences in respect of access to credit. This has involved the secondment of a staff member to one of the banks.

The Government's temporary employment subsidy scheme aims to protect vulnerable but viable manufacturing or internationally traded services enterprises or both that are currently engaged in exporting. This scheme provides direct employment support as it assists companies to maintain their full-time workforce. To date, 453 applications for a total of 7,478 individual job subsidies have been approved. The number of committed jobs associated with these applications is 35,283. A further number of applications are in the final stages of assessment, which will be completed in the near future. These actions are contributing in a real way to the task of securing productive companies and the jobs associated with them.

Many of Enterprise Ireland's established SME companies have remained on a growth path despite the downturn in the global economy. These companies are engaging in market and product development, productivity projects and so forth to achieve growth. Traditionally, such projects are covered out of cash flow and banks did not envisage financing such riskier ventures that are not directly asset-backed. In the current situation, however, to maintain such projects requires some external finance, be it loans or equity and the trend to date is that companies are not spending as much on such projects.

I will conclude with an overall comment. Total financial payments to companies in 2008 amounted to €100.3 million. This included €30.7 million in share capital investment, €55.1 million in research and development, training and other capability building support, and €14.5 million in capital and employment support for capacity expansion. Enterprise Ireland made financial payments of almost €165 million direct to its client companies in the 12 months between 1 October 2008 and 30 September 2009. This direct support to businesses does not include payments made by Enterprise Ireland to other supports such as venture capital funding, infrastructural projects such as, for example, community enterprise centres, funding to third level institutions and other third parties. Enterprise Ireland is focused on delivering the maximum possible support to client companies to sustain them.

On my behalf and that of my colleagues, I again thank the joint committee for inviting us today. We would be pleased to respond to any questions members may have at this time.

Mr. Vincent Landers

I thank the Chairman and members for inviting me to address them today. I look forward to answering as many questions as possible on the subject matter. I will try not to repeat some of the details mentioned by Mr. Ryan, so I will skip through some of the presentation. I preface my remarks with a general comment on action undertaken in the broader labour market in terms of trying to return people to and support them at work via the reskilling, upskilling and training agendas. Since the end of last year, the Government has taken several measures to double the capacity in the job search support, training and work experience programmes for the unemployed. To date, more than 130,000 places have been made available through FÁS for the unemployed. In addition to existing training, education and work experience places, the principle new employment interventions are the employment subsidy scheme, ESS, which Mr. Ryan addressed, the work placement programme and the enterprise stabilisation fund, ESF. These labour market activation measures focus on job retention.

The ESS was launched on 6 August by the Tánaiste in the context of rising unemployment to help employees to retain their jobs while assisting employers in retaining productive capacity. The scheme's purpose is to support the maintenance of vulnerable jobs, thereby helping the economy to retain its productive capacity, employees to retain their jobs and employers to retain the labour, knowledge and skills of the workforce, which supports a faster return to sustainable growth. In addition, the scheme will help to ensure that economic and fiscal stability is promoted by avoiding the cost of statutory redundancy payments and the longer term economic and social cost of social welfare. The scheme applies to vulnerable but viable companies in the manufacturing or internationally traded service sectors that are engaged in exporting.

Yesterday, the Tánaiste announced that 7,478 jobs are to receive direct support under the ESS. As a result of the scheme, companies have committed, as part of their applications, to retaining 35,283 jobs. A further number of applications are in the final stages of assessment. The Tánaiste confirmed that, given the lower than expected uptake in the scheme, she intends to proceed with a second call with broader criteria. Details of a second broader call for applications with extended eligibility criteria open to both exporting and non-exporting firms will be announced shortly. The second call will, therefore, be open to many companies that were not eligible to apply for the first call.

Regarding the work placement programme, keeping people close to the labour market while they are unemployed is essential in ensuring that they are able to keep their skills updated and will be in a position to avail of employment opportunities when they arise. To respond to this need, the Tánaiste and the Minister for Social and Family Affairs, Deputy Hanafin, launched the work placement programme earlier this year. It will provide 2,000 individuals who have been unemployed with a six-month work experience placement. There are two streams, each consisting of 1,000 places. The first stream is for unemployed graduates who, before this year, attained a full award at level seven on the national framework of qualifications and who have been receiving jobseekers' allowance for at least six months. The second stream is open to all other unemployed individuals who have been receiving jobseekers' allowance for at least six months. Under this stream, 250 places are being ring-fenced for those under 25 years of age.

The scheme has been designed to allow participants on both streams to continue to receive their current social welfare entitlements from the Department of Social and Family Affairs for the duration on the programme. In light of the difficulties with uptake among providers and unemployed persons, a review of the eligibility conditions of the work placement programme is under way. It is examining the eligibility conditions from both a provider and a participant perspective, is expected to conclude shortly and is examining ways to facilitate easier access to the scheme for both participants and providers.

Regarding the ESF, the Government approved an amount of €100 million for the years 2009 and 2010. Under the scheme, Enterprise Ireland may provide up to €500,000 to viable companies with robust business models that are facing difficulties as a result of the current economic environment. The fund supplies direct financial support to internationally trading enterprises that are investing in cost reduction or other measures to gain sales in overseas markets. The level of funding is determined based on the specific needs of each company and taking into account the specifics of the business plan, level of internal and external funding available to the company and the potential benefit to the Irish economy.

In general, the policy of the Department is to ensure that the limited industrial development budget is focused on delivering the maximum possible value added to the State. It has long been established that this is best obtained by targeting companies engaged in manufacturing, internationally traded services and those with a high potential to reach foreign markets quickly. The provision of assistance to indigenous companies that are not and will not be export oriented generates significant levels of displacement, dead weight and market distortion. Therefore, our resources are focused on the companies with the greatest export potential.

On behalf of the Department, I thank the committee for inviting us today and I look forward to answering any questions.

Deputy Leo Varadkar

Are we to ask our questions on the presentations together?

Chairman

Yes.

Deputy Leo Varadkar

There must be a significant dead weight cost involved in the ESS, although our guests do their best to avoid it. To a large extent, the Department is subsidising jobs that will not be lost in any case. Have our guests estimated the dead weight cost and what measures are in place to avoid it? It is always easy to suggest that, if we give employers money to take or keep people on, we will somehow create or save jobs. From past international experience, we know that this would not be the case. Instead, we would be subsidising jobs that would have been created or saved anyway.

The scheme's poor uptake by employers is interesting, but not surprising. If there is no market, business, customer or work, employers will not take people on no matter how much they are incentivised. The Tánaiste has suggested that she intends to broaden the remit of the ESS to other employment. What does she mean by this? Is it a move outside of exporters to other manufacturing sectors?

My next question is as much for the Department as it is for Enterprise Ireland. Has replicating the German Kurzarbeitergeld scheme been considered? Instead of laying ten people off and keeping ten, an employer could retain all 20 on the basis that they work part time with State-subsidised training during the time they miss. In some industries, there may be a strong case for this approach. Have there been any studies in this respect?

The issue of 130,000 FÁS places is often trotted out by Ministers and civil servants, but it is misleading, as the majority of those places are six-week courses, night classes or part-time courses of dubious benefit in terms of acquiring jobs. As with much relating to FÁS, the pressure has been on to increase numbers to make it seem as though something is being done. Some 200,000 people present a considerable challenge, as their only qualifications are in construction. They will need two-year, full-time training, not six-week courses or on-line courses. That 130,000 places have been created gives a false impression.

When the work placement programme was first announced, it seemed like a good idea. I am disappointed that only 102 people are participating. What is the reason for this slow progress? Is it the unavailability of placement, the inability to find employers to take people on or that people have not signed up? Is there a case for a broader scheme on the scale of a graduate internship? Many graduates who cannot find jobs could fill the gaps emerging in the public service, namely, in education, health and so on. They could work for 20 hours per week and undertake masters' degrees or training in the other 20 hours. There would be war with the unions were such an idea considered, but there is a strong case. Has any work been done in this respect? If we cannot find private sector employers to take people on work placement, could we not use the public sector instead of leaving graduates on the dole?

Mr. Frank Ryan

I will ask Mr. O'Donnellan to answer the questions on the ESF and Mr. Ó Móráin to answer the questions on the ESS.

Mr. Feargal Ó Móráin

The Deputy is right concerning dead weight. It is an issue with which we struggle all of the time. Every development agency tries to ensure that it does not support activity that will occur anyway. One can never be absolutely certain, but we have various internal measures and our executives are assessed. When one is dealing with large numbers in, for example, the ESS, this becomes more difficult because one does not have time to do an in-depth analysis.

We dealt with the issue in two ways. Part of the assessment criteria require the companies to submit a business plan, cashflow statements and so on, to illustrate that they were under pressure. In that way people assessing them could form a judgment as to whether they were vulnerable but viable. Both requirements are there because the other side of dead weights is to give money to companies which are about to go out of business. In the way the scheme is structured a significant number of the scoring was allocated to an assessment of the business plan.

There was a second way in which it was dealt with. Members will be aware the scheme is structured so that while we are supporting approximately 7,500 jobs, employers had to commit to a larger number of jobs to get paid. Indirectly, therefore, we are supporting 35,000 jobs. The way the scheme is structured is that if the employers do not retain the number of jobs they said they would they do not get paid. We are spreading the risk, as it were, not over 7,000 but over 35,000 jobs. It is a way in which the dead weight issue is being addressed.

With regard to the poor uptake, obviously it is hard to know why people do not apply for schemes. However, one significant factor was the requirement that companies should have a minimum of 30% of output being exported. We know from the enquiries we got that many companies found it hard to meet that requirement. They might export 20% or 25% but not 30%. That was a significant barrier. As was clear from the Tánaiste's press release yesterday, the eligibility criteria are being expanded so that both exporting and non-exporting firms will be eligible next time round. That is a very significant change in the eligibility criteria.

We also know from contact with companies that some did not wish to be associated with a scheme that might suggest to creditors they were in any difficulty. Other companies felt that while they were under some pressure there were better uses for State funds. There was a variety of reasons that companies did not apply. Our judgment is that a key consideration was the requirement that 30% of the product of the company should be exported.

Deputy Leo Varadkar

With regard to dead weight calculations, there must be some estimates or some idea as to how many of those 35,000 jobs would have been saved in any case. When Fine Gael makes proposals on employers' PRSI, or whatever, we do dead weight calculations. Anybody who is serious about this would do that. Mr. Ó Móráin must have done some calculations and must have some figures on that. If he has not, it is clear we will come back in five years' time and have the Comptroller and Auditor General tell us this was a waste of money.

Mr. Feargal Ó Móráin

Perhaps my colleague, Mr. Niall O'Donnellan, might respond on this point also. All we are doing is providing the analysis a little before the event. We seek, by our judgment of a company's business plan, to make that assessment. We carry out a valuation of our programmes, such as they are, to establish the level of dead weight. It is a very difficult thing to measure in practice. One is really going out and asking companies what they would have done if they did not have the money. It is quite a difficult process.

In the current situation, our role was to administer the scheme as we were asked. We have done that to the best of our ability and made the best judgment. We did not do any prior dead weight analysis. That was not our role. Our role was to administer the scheme and that, effectively, is what we did.

Deputy Leo Varadkar

Has anyone done that analysis?

Mr. Feargal Ó Móráin

I will leave that to my colleagues in the Department.

Deputy Leo Varadkar

We published a proposal last year and soon will publish another concerning employer's PRSI. One of the first things we did was to run it by experts and different people and we provided that very dead weight calculation. We knew if we came out with a scheme such as we did that would exempt new employment from employer's PRSI the first thing that would be thrown at us would be the dead weight aspect. I would be really shocked and appalled if a State agency such as Enterprise Ireland or the Department of Enterprise, Trade and Employment had not done a dead weight calculation on this. A political party would be laughed at, pilloried and abused if it produced a policy proposal without calculating dead weight. Is Mr. Ó Móráin saying Enterprise Ireland implemented the policy without doing that?

Mr. Feargal Ó Móráin

Our role as a State agency is to implement the scheme on behalf of the Government and the Department. We have done that and we will do it again for the next round. We are implementing it in line with the rules and regulations of the scheme and applying our own best judgment and the skills and experience of our staff and the outside help we got to make the judgment. What we sought to do was to make sure the dead weight issue was addressed by seeking to ensure that only those companies that could demonstrate they had a need were supported. That is what we did.

Deputy Leo Varadkar

Essentially, Enterprise Ireland is merely administering the scheme and has no idea how many of the 35,000 jobs are being saved.

Mr. Feargal Ó Móráin

They are all being saved in the sense that we linked the payment of the money to all those jobs in individual companies. An individual company commits to retaining a higher number of jobs than those it would otherwise retain. By virtue of doing that we require a company to commit to a larger number than the jobs being paid for. In a sense, therefore, we are trying to spread the dead weight over a larger number of jobs. Regarding a judgment as to how many of the jobs would have existed without this strategy scheme of Enterprise Ireland, I cannot say.

Deputy Leo Varadkar

Might it be 24,000?

Mr. Feargal Ó Móráin

Based on our analysis I do not think so. Our analysis would suggest that all the companies we supported were under pressure and were going to reduce employment. We have not done the calculation the Deputy refers to and I cannot give him the figures.

Deputy Leo Varadkar

That is remarkable.

Mr. Niall O’Donnellan

There have been studies of analogous job subsidy schemes previously run in the State and they obviously would include estimates of dead weight. As I recall, it is in the order of 50%. This job subsidy scheme is obviously somewhat different. None are exactly the same but there is some basis for expecting a reasonable impact. We are administering the scheme and it is——

Deputy Leo Varadkar

If it is 40% or 50% that is fair enough but let us be honest about it and not go around pretending this scheme has protected 35,000 jobs if we have reason to believe, based on previous or current analyses, that 40% to 60% of those jobs would not have been lost in any case.

Mr. Feargal Ó Móráin

The Deputy is absolutely right. We are not suggesting that 35,000 jobs would have disappeared without this scheme. That would be——

Deputy Leo Varadkar

That has not been explained to the Tánaiste.

Mr. Feargal Ó Móráin

That is a matter for the Tánaiste. All we are saying is that the companies we supported committed to retaining 35,000 jobs.

Deputy Leo Varadkar

Even though they may have retained them in any case.

Mr. Feargal Ó Móráin

Our judgment is that some portion of those jobs would have disappeared without the scheme but I cannot tell the Deputy what that portion would have been.

Chairman

Is there any response from the Department to the points raised by Deputy Varadkar?

Mr. Vincent Landers

Yes, to a couple of them. The Deputy raised the German scheme, for example, and the issues around the 130,000 FÁS places on training programmes, to which I will return shortly. The German job retention or subsidy type scheme is not quite the same as the Irish scheme. We looked at the German model, got details on it and got some costings from our German colleagues on what is happening in that scheme. Effectively, it is a short-term working scheme. The Deputy is correct in that assumption. From our perspective, the problem in the current budgetary climate is that the German scheme effectively pays, from the State coffers, up to 80% of the employees' salary to keep them in short-term working. Unfortunately, in our situation that would be a huge cost to the Exchequer and would not be sustainable to any extent and, therefore, we sought to try to utilise public resources to the best extent possible in a more direct way. That would send a clear message to the markets that we are interested in keeping people in employment while keeping people who are productive at the best value per head. He might look at the criteria for the scheme in terms of the applications.

Qualification has a multiplier selection criterion in it on jobs retained versus jobs subsidised. That was a further attempt to reduce dead weight and to ensure the effect of the job subsidy scheme was the maximisation of the number of jobs retained, so it is not just one job for one subsidy but there is a multiplier effect in terms of the value for money impact. The German scheme was 80% of the salary for each employee, which was extremely costly. The German Government is currently reviewing that with a view to discontinuing it. I am not sure what decision it will come to on that.

The 130,000 figure mentioned represents real places on FÁS schemes, we did not make them up.

Deputy Leo Varadkar

How many are full-time places?

Mr. Vincent Landers

They are all full-time to the extent that they are all training course places. Their duration and mix is obviously of relevance in the sense that, in response to a crisis, state agencies must respond as quickly as possible. In the April supplementary budget, the Government committed €128 million extra funding to support labour market activation measures, including extra training places. The nature and mix of the courses in question is kept under review on an ongoing basis by both FÁS and the Department. We are working with FÁS in the context of the budget to see how best to get the mix right so it reflects the requirements of the people involved and the future skills needs of the economy.

We are not talking about a system that totally reflects the individual's requirements and circumstances, it also must take cognisance of what we know about the future in terms of trying to position Ireland in the best possible place to meet the new jobs that will emerge when the economy recovers, hopefully in a couple of years' time.

On the construction issue, we have taken several steps to try to help apprentices to finish their apprenticeships. We are working with employers in that area while some initiatives have been undertaken to re-skill redundant apprentices. That is part of the policy that will be developed as time goes on. We will try to tackle structural unemployment where the economy requires that people are re-skilled in an entirely different sector, instead of upskilling them in the hope the jobs will come back in the future. That is a major challenge for us.

Deputy Leo Varadkar

That is exactly my point. To re-skill people takes more than a six week evening course. How many of these courses will last eight months or a year?

Mr. Vincent Landers

The greatest distribution of courses last between ten and 20 weeks, with 20 weeks being roughly six months. The mix and duration of courses is under active consideration by the Department.

Deputy Arthur Morgan

I share Deputy Varadkar's concern about the dead weight calculation. If a scheme has been devised or is being devised, is the Department doing that work before passing it over to Enterprise Ireland? The major responsibility for dead weight testing, therefore, would lie with the Department.

Mr. Vincent Landers

In general we have experience over many years in administering enterprise-related schemes, which are about subsidising various industrial activities and employment grant schemes. Those have informed us of the general dead weight that applies to such schemes.

It was in cognisance of that information, and a policy demand to respond immediately to an emerging crisis, that we came up with a policy concept that we then gave to Enterprise Ireland so it could use its experience of administering previous schemes of such a nature, such as employment grant schemes, to assist us in devising criteria around the application of the scheme that would seek to minimise dead weight further. My colleagues from Enterprise Ireland have already spoken about some of the criteria applied to the scheme to minimise dead weight. Sometimes, however, dead weight will persist.

Mr. Frank Ryan

We would carry out the evaluation of schemes that are operational within Enterprise Ireland on an ongoing basis. On this occasion we are administering a new scheme, along with the enterprise stabilisation fund, on behalf of the Department.

Deputy Arthur Morgan

I welcome the announcement about the change in criteria, because it dealt with a narrow field in terms of qualification, including internationally traded services, which excluded a significant number of important indigenous manufacturers who were not at this stage exporting. When will the review be complete?

Many of us have concerns about the additional FÁS places that have come on stream. I agree that they are of a short duration and one must wonder what sort of qualification a person could get on such a short course. I welcome, however, the comment about looking at the needs of the economy in future, that is very important, because innovation is necessary.

Mr. Feargal Ó Móráin

The press release the Tánaiste issued stated that details of the second call will be announced next week, that is the time-line.

Deputy Damien English

I thank the witnesses for coming in today. I was one of those who called for this meeting. Any business I talk to that gets support from Enterprise Ireland is happy to get it. I am concerned, however, at the number of businesses that do not get it, and there are many of them. Enterprise Ireland only funds about 3,500 companies. The work being done is brilliant, and the people are very good. The success stories I hear from those businesses are fantastic but I am concerned about the businesses that do not get that help or fail the criteria, such as the need to export or not having the correct number of employees. If a business needs help here, it should get it. That is not happening and that is why we should all bang our heads together to see what we can do to change that.

There are many businesses that do not get help for one reason or another and jobs are then lost as a result. Mr. Landers said he has a duty to spend the money as best he can for the best return. If there was more money, what would be done with it? The budget will be presented in a month and this committee has a duty to put forward demands for more money for businesses. I want to hear about new ideas, about the schemes that work best, about the areas that require more money. What can we do to save some of these jobs next year?

Billions of euros are spent on social welfare and in many cases the money is going to waste. Those people need the money but would be much happier working. The businesses that could employ them would be much happier if they were at work but the Department is saying its slice of the pie is not big enough, that it does not compare to social welfare.

We must see more imagination on how the money is spent. There should be more ideas from discussions with other countries. They must have other ideas that could work here but there are only a couple of initiatives so far in 2008 and 2009 and that concerns me. Many businesses need help but are not getting it.

Is there a strategy for the retail sector? There were representatives here recently from the retail area of the Department and when we asked about strategy they looked at us as if we had two heads. There are massive job losses in that sector but there does not appear to be a strategy. Many companies just need advice. They are good business people but need help about financial advice, employment law or budgeting. How can we get them the help that they would get from Enterprise Ireland if they qualified? Thousands of them do not qualify for it. Enterprise boards can only help a certain sector of business. I served on one and while they do great work, many businesses cannot access such help. Moreover, many businesses do not even realise they need such help until it is too late.

The United Kingdom operates a system of health checks and I understand it works quite well. Do the officials concur that this system works? The provision of a little help to a business in the form of making available to it the right professional advice or pointing it in the right direction might help it to access money through a bank, to secure more investment or to qualify for a grant from Enterprise Ireland in the first place. However, the system falls down in this regard. Are figures available regarding those who applied for but did not receive grants? Enterprise Ireland's presentation noted there are 146,000 employees in companies that received grants. How many companies did not receive grants that had applied for and which should have received them? Do many companies exist that could fit into the criteria? Had Enterprise Ireland the opportunity to draw up new ideas, what would they be? The agency should tell members, who then will fight for the resources. However, my impression is that members will not get such ideas and that there is confusion about who should lead the way. Should the Minister or the officials lead in respect of new ideas? There is a gap in the middle and companies are suffering.

Is there openness regarding the funding of new community employment schemes? I refer to the possibility of county councils or others applying to set up a new scheme to employ people. I share the perspective of the average person on the street, which is that thousands of people are unemployed and although a great deal of work could be done in all communities, nothing happens. While members have been discussing this issue since February 2008, I have seen no new scheme, imagination or initiative to match up the more than 400,000 people who are unemployed with work that needs to be done. I accept that human resources issues and other complications would arise but this could be done if the will to do so really existed. I am concerned that there does not appear to be movement in this regard.

I understand a scheme is in place in Sweden whereby average punters receive a tax break if they directly employ others to provide a service, such as working on their houses. Participants can claim some tax back having demonstrated the person employed was C2-registered and was suitably qualified. I do not believe such a system exists in Ireland. There is a small grants scheme to adapt one's house if one is elderly or unwell but the average person cannot avail of it. This alone could create jobs in the service industry. Are new ideas being generated and does a business strategy exist for each sector? Is there much coming down the line in respect of new export products? Enterprise Ireland is at the coalface dealing with companies that seek grants. Is there much activity or are legislative or administrative changes required to encourage more activity?

While enterprise boards appear to be quite busy, they do not have enough money and this is the time to ask for more money. If Enterprise Ireland considers its funding to be adequate, it should tell members so and they will drop the subject. However, I believe it needs a great deal more money than it receives at present. Under current circumstances, it is something of a joke to refer to a sum of €250 million when members were engaged in signing off on €54 billion last week. I would accept the provision of an additional few hundred million euro to go towards business and jobs because I am concerned about what is being done differently in the past 12 to 18 months. Not enough is happening and I wish to establish where the delay is and what the problem is. If I am imagining this, the officials should tell me so but I do not believe I am.

Businesses are approaching members stating that they are unable to get help, are stuck in red tape, need some advice or do not know where to go. The limit of ten employees galls me. I refer to the demarcation issues between Enterprise Ireland and the enterprise boards in respect of the ten employees limit. One must move with the times. Businesses need help and should get it but I fear they fall between the different sections that operate through the Department of Enterprise, Trade and Employment. This is of major concern to me.

Is there merit in having a Government bank that will issue money to small businesses? I do not wish to go into the issue of whether NAMA is right or wrong today but it will not get money flowing to businesses quickly enough to save jobs in the next six to eight months or thereafter. Does this proposal have merit and have the officials discussed it among themselves? Have they recommended it to Ministers? Is there merit in a loan guarantee scheme for business and has that been discussed? Such schemes are not being debated properly and because they are not been called for politically, no one else talks about them. However, changes are required and are not taking place quickly enough. I am sure many ideas exist and if possible, I want to hear about new schemes that members can recommend over the next three or four weeks to Ministers.

Chairman

As Mr. Ryan took some notes, he should address the issues pertaining to Enterprise Ireland.

Mr. Frank Ryan

I will address the issues regarding the areas of responsibility from a legislative point of view for Enterprise Ireland. In any 12-month period, we deal with approximately 3,500 companies. Were one to count the total number of companies with which we deal, it probably would be closer to 15,000 companies but in any 12-month period, we deal actively with 3,500 companies. It is important that in suggesting remedies, one understands the cause. At present, our understanding is that there has been a catastrophic loss of demand. That is the first fundamental problem. There is no point in having schemes that employ people and so on if there is no one there to buy the output. Consequently, our first focus has been on increasing the exports of our companies and trying to divert them out of the United Kingdom where they are under phenomenal pressure. Essentially, there has been an unofficial devaluation of sterling and we now are experiencing its full impact. There are only two ways in which we can work with any company in respect of competitiveness. The first is through increased innovation and the second is through increased efficiencies. In addition, we must get them out of the United Kingdom market and into the eurozone in particular, in the case of companies that have products and services that can travel into that environment. Therefore, we have a eurozone programme at present.

We also have made a major commitment to getting our companies access to finance and have worked very hard over the past 12 months in this regard. To an extent, Enterprise Ireland's strategy of 12 months ago is unrecognisable from that which obtains today because the world is unrecognisable compared with the way it was 12 months ago. This issue of access to finance has caused us to engage differently with the main banks and with Allied Irish Banks and Bank of Ireland in particular. I mean by this, that we now have an understanding at the highest levels of the banks of the importance of SMEs and indigenous industry and the contribution that sector can make to the State and to the future profitability of the banking sector. This has meant that Enterprise Ireland has put one of our organisation's senior managers into Bank of Ireland corporate banking. Moreover, someone from Bank of Ireland corporate banking is currently on a three-month training programme with Enterprise Ireland and we intend to do exactly the same with Allied Irish Banks quite shortly. We are talking to them about the modern growth sectors such as green technology, medical devices, life sciences and so on. These are sectors within which the banks do not have tremendous experience of operating. In return, they are helping us because they are excellent in areas such as forensic accounting and we can learn from their skill sets. Consequently, a win-win situation between the private and public sectors also is possible from these engagements.

In addition, one must recognise that the devaluation of sterling has put phenomenal pressure on Irish companies and their cost base. Many companies now face a daunting challenge which will not go away at the end of the year but definitely will carry over into 2010. Such companies must work on their efficiencies and we have introduced two new schemes in respect of lean manufacturing and lean production because that is the only way in which one can defend oneself against the currency issue. One can innovate, which is a fancy name for producing new products and services that have much better margins associated with them and which meet the needs of customers. On the competitive side, we must work on the lean side of things.

I refer to the introduction of new schemes. Unless one takes out a giant national cheque book and writes enormous cheques to try to sort matters out, and I have never seen a country refloat successfully its economy through mass subsidies, any new scheme such as the enterprise stabilisation fund or the enterprise employment scheme always will be time limited and always will be focused and targeted at a particular opportunity that exists. Enterprise Ireland has spent the past ten years developing a range of good quality SMEs the success of which increasingly can be seen in the newspapers. Many of those companies are vulnerable today through no fault of their own and must be sustained. The importance of sustaining them is often misunderstood. For Enterprise Ireland to assist promoters to establish a company and expand it to a turnover of approximately €20 million takes ten years. A growing number of companies are breaking through that €20 million mark and we cannot afford to let them drift away. We must realise that it is through such schemes that we can make a difference. A strong cadre of companies will be ready for the upturn when it comes. There is no point in us being late for it. Our data suggest that the bad news is bottoming out. In four of the past five months, our client companies have recorded overall export growth. While that growth is small, it is welcome in comparison with the situation at the start of the year.

We must realise that the rest of the world is competitively doing what we are trying to do. Recently, there has been much commentary in the media on the effectiveness of trade missions, and so on. We went on a major trade mission to China with the Taoiseach. The following week, Angela Merkel and 150 German industrialists arrived. The world is out there and it is not a secret that the growth areas are China, India, Brazil and the Middle East. Everyone is trying to make this happen. We needed to change. Enterprise Ireland now has staff who speak fluent Portuguese, because we are helping companies to break into Brazil. If one does not speak Portuguese, one cannot do business in Brazil. It is as simple as that. We have colleagues who speak Arabic, Russian or Chinese because those are the markets of the future.

We must recognise that all schemes will have a limited impact because they can only have so much funding. The question is whether they use their funds as astutely as possible. This is what we are endeavouring to ensure. We have approved just over €150 million through the ESF and hope to receive funding of another €50 million in early 2010 to allow our work to continue.

Good quality companies are being saved. Irrespective of where the dead weight falls, these companies would not be around were there no ESF. They do not have sufficient financial resources and are not asset rich or easy to bankroll. They are quite difficult to fund in banking terms. These are the companies that are showing our best resources. A growing number of them have attained the €50 million mark and are heading for the €100 million mark. They are top class, but they are a difficult sell because they are not household names. It is not like attending the committee and discussing an Intel or a Microsoft, which everyone knows about and can relate to. We are discussing high-tech companies that we have spent years working with and that are going well.

I can give one example before stopping. When one flies to the United States of America via Dublin Airport, one's fingerprint is taken and eye photographed. The biometric software enabling these activities is supplied by an Irish company called Daon. For entry to Japan, Australia or Korea, Irish software enables border controls. These are the types of technology company that Ireland has, but they must be sustained over the next 24 months. The possibility of going back to scratch to start all over again is not worth considering.

Deputy Damien English

My point was not that there was a danger of the money being spent wrongly. Rather, are companies missing out because of limited resources? I believe that there are, but is it a high volume? What type of money is required? If people do not get money, they will end up on social welfare and the State will still spend. This is the issue I am trying to tease out.

Mr. Frank Ryan

It breaks down to three areas. Approximately one third of our companies do not need any help. They are financially secure and have considerable cash resources on their balance sheets. We are not offering them any money because they are fine. The majority of the companies at which we are aiming the ESF are in a middle group.

We have a weaker category of companies that cannot make it. Many will not make it irrespective of whether there is State intervention. They have either lost their customers' confidence or they can no longer deploy their products or services in an acceptable manner in the international marketplace. Some of them may need to scale back heavily to survive before trying to rebuild their innovativeness via our research and development fund, innovation vouchers or so on. It is difficult to say, but some companies cannot be saved because the marketplace is the final arbiter of whether they will survive.

Chairman

Would Mr. Landers like to comment? Deputy English made a number of observations.

Mr. Vincent Landers

I will refer to the questions on options and what else can be done in respect of individuals and companies. From my perspective, labour market activation is about trying to bring the unemployed back into employment. We are concerned about facilitating firms in this process, which is the aim of the employment subsidy scheme, ESS. It is also what the work placement scheme is supposed to be about when it is rolled out and reviewed fully. While we mentioned 2,000 places in the April budget, the intention is to let that figure grow to facilitate everyone who wishes to participate. Demand needs to come from firms and providers in the private and public sectors. As far as we as officials and the Government are concerned, we see no difficulty with the public sector participating in such schemes, although this will be subject to agreement through the relevant industrial relations processes. There will always be valid challenges in terms of protecting existing jobs and structures.

Subject to these criteria, we intend to let the programme flow to the extent demanded by the market. However, one must bear in mind that it is merely a work experience programme to give those who have been identified as not having had an opportunity to gain experience in a workplace a chance to enter into employment. No matter what we do for individuals on the labour market activation side, there must be jobs for them that they can find.

I hope the work placement programme will serve two functions in the real marketplace and the voluntary and community sector. There are many gaps at community level and much community work of a good quality needs to be done. Many graduates and non-graduates who wish to volunteer are not being facilitated because of the structure of the social welfare system, and so on. Dealing with this matter is one of the aims of the work placement programme.

Deputy Damien English

Many thousands of people fit those criteria. How large can the scheme get? It will be cost neutral in many cases.

Mr. Vincent Landers

It is under review, but suggestions have been made.

Deputy Damien English

The criteria are off the wall and need to be changed. If 10,000 unemployed people who want to use their skills apply, will the scheme be allowed to go that far in conjunction with the social welfare budget?

Mr. Vincent Landers

There is a criteria issue around Social Welfare Acts. People who are in receipt of unemployment and related payments are supposed to be available for work. If they are on work experience full-time, they are not available for work. While there is some facility within the system to allow the scheme to some extent, we need to be careful not to undermine legislation.

Deputy Damien English

We need to discuss this issue. We might need to change legislation.

Chairman

We are in a different era. We are staid and terrified of going beyond tram lines. Is this not the problem? We need to throw them out. I have argued for the rehabilitative aspect of community employment, CE, schemes, since people would be better off doing 19 hours per week. They would get social welfare were they to be brought back into the system anyway. Why not let them out to make their contribution? They would feel like a part of the community.

However, we are getting answers like these, and it has us tetchy. People ask politicians whether we can change the system and whether we are fools because we are giving out €200 or so in social welfare payments. Could we not spend that money through the CE schemes? The local boys up the road could hop on a bike and get on the scheme.

I am not blaming anyone, but I know what the answer will be. I will be told that I am a bit of a clown because I do not understand that materials and supervision are necessary. If Jimmy supervises ten people, he will not mind supervising 15. This is my first answer. Second, if a wall is to be painted and doing so would give Tommy, who suffers depression or is recovering from something else, a bit of an outlet and rehabilitation, why not let him do it? We would gain enormously as a society and it would only cost €200 or so. We are not robbing the tills but taking the money out of the social welfare pocket to put it into the community employment pocket. For 19 hours' work we would get a result. It would not be possible to measure the benefit as it would be intangible but I have said to the Minister that we are too fond of profit and loss accounts which do not reflect the social advantage which would accrue. I agree with Deputy English that we will never change the system. If the Social Welfare Acts are inadequate we should make amendments to confront a situation we could not have anticipated in 2001 but which now stares us in the face.

This committee has spent the past year going through the issue and has met Mr. Ryan and others in that time. Enterprise Ireland is now implementing new schemes but I knew the scheme it introduced a few months ago would not attract a huge number of applicants because it was so tight. I know such schemes have to be export-led because that is where our future lies and non-tradeable activity has sunk us. However, there are many little manufacturing companies and we should try to save their jobs because they are desperately important. Three jobs in a rural area can be the equivalent of 200 in an urban area. That is why people tell us to get off our butts and do something.

We asked Enterprise Ireland to come before the committee to impress upon them the fact that things have got so far ahead of us that, unless we are like Usain Bolt and put in a burst of speed in the next couple of months, they will have gone beyond us completely.

Deputy Damien English

We have discussed this matter during Question Time and in this committee for the past 18 months but Mr. Landers is the first person to tell us it cannot be done because of the Social Welfare Acts. Nobody has done anything about it but it defies logic for hundreds of thousands who are sitting at home not allowed to work. They are not happy with the situation and it is not good for them or for those around them. There are projects to be worked on everywhere but there is no attempt to match them to the people who want to be involved. This country cannot afford to sit back and not change the system in that regard because hundreds of thousands of people are not productive as things stand. I hope the situation will change.

Mr. Vincent Landers

I cannot change social welfare legislation.

Deputy Damien English

Is there any communication between Enterprise Ireland and the Department of Social and Family Affairs on this issue?

Mr. Vincent Landers

This issue and that of community employment are issues for Government and it is working on them as it prepares the budget. I assure the joint committee that social partners, the relevant representative groups, interested parties and Members of the Oireachtas have raised the issue time and time again and the Government is well aware of them. We want to change what we can change. CE schemes and other suggestions to put people back into work at local level have cost implications. One cannot take it from one pocket and just put it into another because it would have implications for the system.

Deputy Damien English

I accept that but there are massive benefits and, in many cases, they are cost neutral. There is, however, a social cost to people not doing anything. In times like these communities can gain and projects can be done which would never be done otherwise. While there may be a small additional cost the majority of the money is being spent anyway. If I am wrong to come to this conclusion, show me the figures. I have challenged the Minister to prove me wrong but nothing has been forthcoming. If it would cost a fortune, then prove it and we will stand back from it. We have debated it in the Dáil and been told such a thing was not possible but that is not good enough any more. We have to move to make things possible.

The scenario which exists between the enterprise boards and Enterprise Ireland has caused us problems.

Chairman

This committee travelled all around the commuter belt, met people and made a recommendation. We met all the county enterprise boards and know their members very well. They told us there was a gap between firms with ten employees and those in the next group but we told them there should be no gap in this regard. Mr. Ryan told the committee a firm with more than 12 or 15 employees could get involved. Maybe we do not understand our job and have made a mess of our recommendations but we urge the delegation to cut out this nonsense of restricting it to ten. The matter is up in the air at the moment. There are arguments about the future of county enterprise boards and Mr. Ryan will probably tell me it is a decision for Government.

Deputy Chris Andrews

I welcome the presentations, which were very interesting. Deputy English raised the loan guarantee scheme. Has Enterprise Ireland made any recommendations around that? I take it the answer is "Yes".

The employment subsidy scheme is a good scheme and changing the criteria to include all manufacturing companies, rather than just exporters, is a positive development. Has Enterprise Ireland considered loosening the criteria further to include the car sector, hotel and catering or other sectors? Does it know what the implications might be for doing so?

Chairman

That is a good and searching question.

Mr. Niall O’Donnellan

We are looking at the loan guarantee scheme. Our companies need credit and one of the issues in dealing with banks is the lack of adequate security. A loan guarantee scheme can be a mechanism for dealing with that. We have looked at the pros and cons and have particularly studied the enterprise finance scheme in the UK, which has been running for several months and is the successor to the small business loan guarantee scheme which ran from 1991. We have spoken to the banks and the people who run the enterprise finance guarantee scheme and only this morning we spoke with one of the UK banks which run the scheme. The big pro is that, if it works well, a company can get access to loan finance it would not otherwise have got. The big issues are around whether the banks will use the scheme to supply additional credit to new clients. In many cases the UK banks looked for security from customers and then used the loan guarantee scheme and that raises questions as to additionality. Additionality is a big issue with all loan guarantee schemes and the UK scheme leads us to question how we would achieve additionality if we ran it in this country. The loan guarantee scheme is an insurance scheme, so the client pays for it and in the United Kingdom the customers pay 2% more in effect than they would otherwise be charged. In the current context, with interest rates relatively low, it may not be a major issue, but it is likely to become a big issue. We are looking at the costs and benefits of such a scheme to see if it would address the issues that our clients face. It would have broad implications for companies throughout the economy, not just in the export sector. It would deal with some of the issue Deputy English raised on non-exporting companies.

We will do further work on the proposed scheme over the next two or three weeks and then do a report for the Department.

Deputy Chris Andrews

Has Enterprise Ireland conducted research among its client base to find out their views on the loan guarantee scheme?

Mr. Niall O’Donnellan

We have not asked companies directly about loan guarantee schemes, but we know from discussions with some companies and from feedback from some of the representative organisations that loan guarantee schemes are a product they would be interested in having developed, so for that very reason we have looked at it. We are examining whether it will make a real difference in terms of new lending to the companies we work with and in a broader sense and if the price that must be paid is acceptable. We need to do extra work to come to a sensible conclusion. In principle we think the scheme is a good instrument but there are pros and cons and costs and benefits and that must be assessed.

Deputy Damien English

Will it be assessed and a recommendation made before the budget?

Mr. Niall O’Donnellan

We will come to an initial conclusion in the next two or three weeks.

Chairman

There is no answer to that.

Deputy Chris Andrews

I would like to get an answer on changing the criteria around employment.

Mr. Feargal Ó Móráin

I can give a much shorter and simpler answer to that. The criteria will not be published until next week but the intention is to have very wide applicability, beyond the sectors that were covered originally, without the exporting criteria.

Deputy Mary Alexandra White

I welcome the delegation from Enterprise Ireland.It has been a good discussion. I wish to focus on areas that have not been touched by some of my colleagues. First, I wish to raise the high potential start-up units. I have been self-employed all my adult life, before I got into politics. I know what it is like when one is looking for advice from Departments or various agencies. Mr. Ryan stated that Enterprise Ireland would have to readjust its way of thinking. The people who are approaching me are really very frustrated. They have a good idea but might not have the professional experience of running a company, so they need help. When people stand around the water cooler, sometimes there is a moment when one says: “That’s it.” They might not have the business plan or the finance. Does Enterprise Ireland support export companies that might be in the embryonic stage but it is obvious they have a good idea? I raise this issue because a company that wanted to get started in Ireland went to Enterprise Ireland and all the other possible agencies but because it did not tick the sixth box, it did not get the finance here. The company went to England and started its enterprise.

I know that one cannot bend rules but perhaps in tough times we should think how we can do it better. For me, hearing Mr. Ryan say that Enterprise Ireland has had to change its thinking was the best thing I heard. Unless we change our thinking in really tough times, we will continue on the same railway track and we will not broaden out. We must broaden our thinking and think strategically and laterally for businesses that have the good ideas, the personnel, the academic qualifications but not the funding.

If we could liberate the Department and Enterprise Ireland and encourage new thinking we could help people. I do not suggest that EI is stodgy, but if we continue to think in the old way we will come up with old solutions. With innovative thinking we can help people. As a legislator I want to be able to help the people who approach me to implement their best ideas so that they can get started after their Eureka moment. The i Technology in Japan started with people of great academic expertise having a "water cooler" moment. Some of the companies that approach EI might not have everything it seeks, but we must bend slightly to help them on in these tough times.

I am interested in the incubation units. I was at several graduation ceremonies in my constituency recently and saw all the graduates with their mortar boards and gowns, full of hope and expectation but facing a very difficult world. What is hatching in the incubation units and how are they performing? Enterprise Ireland is investing in them. Our third level institutions are suffering from the lack of professional donations. We have the O'Reilly Hall and the Naughton Institute in Trinity College and the Smurfit Business School, but that type of funding is drying up. Extraordinary ideas come from extraordinary people and I wonder if they get help in the incubation units.

Senator Mary M. White

I will comment on Deputy White's final point on the O'Reilly Hall and other philanthropic gifts to universities. I have a serious issue with that. They should be altruistic and should not look for their names up in lights. I have an antagonism to it every time I see it.

Mr. Feargal Ó Móráin

They will not know which Mary White.

Senator Mary M. White

I can understand why a company would set up in England rather than in Ireland. There are many Irish companies that could go over the Border and be much more profitable because the costs are so low in the UK.

I congratulate Mr. Frank Ryan on his stellar up-beat presentation. We need to keep optimistic and up-beat. We have a moral responsibility.

My party colleagues know that I have a bee in my bonnet about our international competitiveness and Irish labour costs. I would have liked IBEC to have come before the committee to hear what they say about our competitiveness and how we are getting on. In the course of the presentation it was said that firms are letting people go to try to survive and keep their costs down. What is the situation on labour costs? I must leave to go to the Seanad shortly.

Mr. Frank Ryan

I will respond first to Senator Mary White, whom I thank for her comments. Our competitiveness is improving the more we go through the correction. We are going through a major economic correction. For the majority of the companies that EI deals with under the enterprise stabilisation fund, the promoters and staff will take salary reductions as part of their contribution to fund the company until the end of 2010. That would be a regular occurrence in our companies. I will give members some of the practical things people are doing to try to improve their competitiveness. Certainly the reduction in electricity and gas prices is most welcome. We are on the record through our contributions to Forfás and the National Competitiveness Council that we want to see further reductions in these areas as they impact on the operating costs for companies here. The situation is improving. It is very important that in Enterprise Ireland we are not preparing for the previous battle but for the next battle. The next battle will be in the area of innovation and our competence in research, in commercialisation of that research and in the production of sophisticated products and services for sale on world markets. The trend we see is that the companies that are doing well have the ability to be able to deliver solutions not just produce a product and make a claim for it. It is hard to sell those products internationally right now unless one is out there solving problems. If one can solve a problem, one will get a healthy margin on the business one does. Customer solutions as the next step up from products and services are where we need to focus. Deputy Mary Alexandra White raised the issue of high potential start-ups and the "water cooler" moment and all the rest ——

Chairman

Flexibility is important. If a company can tick five of the six boxes, if one has jumped Becher's Brook and one falls at a smaller fence, what happens?

Mr. Frank Ryan

First, it is most important that the State agencies are very flexible. That is the reason we started in the past 18 months to work with the county and city enterprise boards and FÁS to do joint presentations, with the three State bodies working together. Members may have seen the ongoing advertisements in the newspapers and on radio inviting potential entrepreneurs to come in for a two hour evening session to establish their interest in business start up.

In that initial period, we are starting to ensure that there is something for everybody in the audience. When the entrepreneur comes into the system, he or she may need to go on a start your business programme with FÁS, as that may be the point he or she is at in the development of the idea. He or she may need to go to the county enterprise boards where they can help through skillnets or some particular activities, or he or she may be ready for Enterprise Ireland. One may be at the point where one has a strong interest in the export side. It is most important that when people come through those doors, they are encouraged. It is hard to get the courage to stand up in front of neighbours in the local area and say one is interested in starting up in business. People know very quickly what is on your mind and it is important that is not discouraged. It is important too to streamline the supports that are appropriate. The average time from that Eureka moment at a water cooler to a project being up and running is somewhere between nine and 18 months. That is often not understood. There is a great deal of planning associated with setting up a company today that can be competitive and successful in an international market. It is not something that happens overnight. Yes, we will have very quick start-ups every now and then but our average is nine to 18 months after a great deal of hard work, testing the product and engaging in research and development. The product is put before international buyers for feedback and sometimes people have to change the product or service they had in mind to meet the needs of the marketplace as opposed to the needs one had thought were in the market place. It is an interactive period that takes place at that point. We are well positioned that if anybody in the community comes forward with an idea to start up a business there is something for them between FÁS, the county enterprise boards and ourselves. Nobody should go home at the end of a session saying that nobody took him seriously or was interested in what he did or that they told him to go down the street and talk to somebody else. We must be very careful and perhaps we have suffered from that in the past.

The future lifeblood of what we are doing will be from entrepreneurship. It is most likely that all our sons and daughters will work for themselves or work in a small business than that they will ever work in large business or Government. That is the way it is in developed economies. One is much more likely to work for oneself or in a small business than to work in a bank or for a Government body. That will be a big switch. We are switching from being a developing economy in mind set to being a developed economy. The advice we give to our children has to change markedly. Our children have to be told to prepare for entrepreneurship because new ideas, fast ways of doing things and flexibility will be the competitive pitch of the future.

Mr. Feargal Ó Móráin

Deputy Mary Alexandra White asked about incubation centres. She very correctly identified that the key skill is to support the person who has the embryonic idea and our thinking in funding the development of incubation centres is to do that, in other words to provide the physical infrastructure within which the ideas can be germinated. We fund not alone the incubation centres, but the development managers, that is people who work with the companies, because our own staff cannot reach everywhere. We have a number of other initiatives, for example, the innovation vouchers have been used extensively by people who are thinking of starting a business and have used them in connection with the incubation centres. Carlow IT is the IT which has made most use of the innovation vouchers and they have made very clever use of them. There are now more than 1,000 people employed across the incubation centres in the different institutes of technology and universities. We see them as a physical part of the infrastructure that we are putting in place, particularly focused on providing space for the more interesting types of start ups, as described by the Deputy, the graduate or the person who is well qualified who has an Eureka moment and needs a bit of support and space to develop that idea. We see it as a seeding mechanism. A number will turn out to be lifestyle companies, some will fail, some number will also develop into interesting middle size companies but a few will grow to be large size companies. It is part of the funnel that we are putting in place.

Deputy Mary Alexandra White

Is it mostly in the science and innovative end?

Mr. Feargal Ó Móráin

No, not in the ITs. The range of businesses starting in the institutes of technology incubations is very wide. Typically, they are not often based on research in the institute itself because most of the staff in the institute do not do much research. Looking across the intake, many will have done the enterprise platform programme that we have supported and they come from any discipline. They are people with interesting ideas but not necessarily in the science area. We know from our own experience that the companies that are really going to make it need some edge, be it a service or a technological edge, but something different that can sustain them that can mark them out from the average. Sometimes it is technology but not always by any means.

Deputy Michael Fitzpatrick

We were known as the nation of risk takers and while all the risk takers are now in trouble there is great credit due to the development boards for the work they continue to do and have done in the past. I would not like to see that watered down. I know they will now come under Enterprise Ireland but I hope we will see fit to retain in place the professional and technical staff because of the professional way they do their work at local level. Small things happen at local level and we should not try to have a universal standard to fit everything by taking the enterprise boards out of the local authority areas and putting them in a bigger structure. It may work but if we are to try to continue to get innovative industry in local authority areas, we should try to retain the enterprise boards.

Some of the courses being conducted by FÁS are very short, but are of the FETAC standard. The VEC has been an innovator in the provision of very high-tech courses for a range of people. We have a great many second level schools with great IT facilities which are not being used to the extent they should be. A vocational school should be open for much longer and providing a much wider curricula programme to people who have opted for second chance education. They provide adult education but we should put more focus on it.

We have co-operative and enterprise parks, where the unemployed are getting involved in doing courses and training. Are we doing enough to encourage them to get involved in their own start up business or are we allowing them to roll on and roll over without giving them serious professional advice or taking a hands-on approach?

The delegation said the Social Welfare Acts prohibited people from getting into employment. I have suggested an amnesty for people on social welfare because many of them do not want to be on it. However, a lone parent or someone in the black economy finds it hard to come off social welfare so an amnesty for three months or so might give them a chance to get back into the real economy.

The presentation was excellent and I thank the delegation for attending. I hope we can hold another meeting to try to come up with ideas and innovations which we can then pass on to Enterprise Ireland and officials from the Department. There are many good ideas out there and that is what we need in times of recession.

Chairman

I will allow Deputy Varadkar to speak.

Deputy Leo Varadkar

I thank the Chairman for indulging me. I have some sympathy with the position Enterprise Ireland is in. Some 400,000 people are on the live register and we have an employment crisis. The temptation of the public and politicians is to bang the table and say something must be done. They come up with ideas and expect them to be acted on. However, the danger lies in doing things that do not work. There is a feeling that, because we mistakenly spent €7 billion on NAMA, we should also throw €1 billion at jobs and corporate welfare. I do not agree with that view and any interventions we make should be designed to produce real results. Throwing money at a problem is not the solution and is part of the reason the country is in this mess.

Will the list of companies which benefit from the employment subsidy scheme be published? Is it available or is it commercially sensitive, meaning it has to be kept secret? I asked about the work placement programme but the question was not answered. Why are only 203 people currently availing of the placements? Is it because of difficulties in finding appropriate placements or because the right people have not applied? There is a case for using the scheme to fill gaps which have now emerged in the public sector. They would have to be full-year placements for graduate teachers or graduate nurses, who would spend 20 hours on the placement and 20 studying for a master's degree so that they would be in a position to fill a place when somebody retired. It would be controversial but there is a place for such an approach for a number of years.

The delegation spoke about the Enterprise Ireland overseas offices and the work being done in Brazil and China, which will be extremely important in the next couple of years. I note what they said about trade missions and that is an area about which the Opposition has not been critical of Government. If banquets have to be attended they have to be attended — one cannot have a banquet in Bombay and expect people to pay for their own curry and poppadoms. These things have to be done properly. Are there plans to expand the network on the ground? Exporters tell me they do not particularly want grants from Enterprise Ireland but want offices and people on the ground who can vouch for them and facilitate what they do. Literally half the world is India, China and Japan and half the world's economy will be India, China and Japan by 2035. We do not need to have offices in Luxembourg, the Holy See and Malta but Bangalore, Chongqing and Wuhan. Is there a plan for a greater network of offices and more staff on the ground in those places?

Deputy Arthur Morgan

When a person is seconded from Enterprise Ireland to the bank is the salary paid for by the bank? The Enterprise Ireland field personnel must be under huge pressure because more people than ever must be coming to the organisation for advice, if not financial assistance. On the question of finances, the €100 million in the ESF fund must be like throwing a glass of whiskey into Lough Erne.

Deputy Damien English

Is green energy being considered as an area qualifying for Government insurance for loans? If a company of more than ten employees is refused a grant can it go back to enterprise boards or partnership bodies for funding?

Chairman

I will ask a question on export credit insurance. It is expensive but companies might need it to get into a market or sustain themselves in a market. People are present from the activation market and from the Department of Enterprise, Trade and Employment. I do not say Enterprise Ireland is fixated on a policy but it is important we get out of the straitjacket of old-fashioned thinking. I did honours mathematics but I am obviously stupid. If one gets €220 from one source and the same from the other, PRSI notwithstanding because it goes back into the coffers of the Exchequer, why are people curtailed in this way? I am bamboozled by it.

I remember when Deputy Ruairí Quinn brought in the social economy scheme in 1985. The first people who utilised it were local authorities, who operated it very well. The opening of the Royal Canal next March from Islandbridge to the Shannon would not be possible without community employment schemes. I know because I was involved and I live on the banks of the Royal Canal. Local authorities appointed a supervisor — one of their top carpenters — to make the lock gates. The value of the project to the country is inestimable and the CE schemes played a major role. Who, however, has measured the value of that project? It makes me angry that the delegates tell me there is a differential in value. What will be the significance of that next March when we can step on a boat at Islandbridge, go direct to the Shannon and return via the Grand Canal? Is that not what tourism is about? If I was a Minister I would rip up the social welfare code which is causing the problem. I would not wait for the budget but do it tomorrow, because we are fixated on budget day and our situation is changing by the month. This country must be run in a different way. Some in my party might not agree with me but so be it.

Deputy Arthur Morgan

The delegation will now see why members of this committee are so disciplined — we are all afraid of the Chairman.

Chairman

Most members know my views on this. I come from a background where I believe that making a contribution, however small, is inestimable. The lock gates on the Royal Canal is an example. I can bring anyone to the 32 lock gates on the Royal Canal because I was part of that committee. Indeed, my own local authority played a major role in this project which was led by Mr. Jim Ahern, a retired county engineer. I can name the people who were on the committee and I know exactly what I am talking about. Only ten years earlier they were talking about closing the Royal Canal, putting a road on it and driving to Dublin on it. That is the difference. I know all about it. I live and was born on the banks of the Royal Canal and I played a major role in it. Without the Royal Canal amenity groups and Waterways Ireland, that facility would be gone. What happened was that those lads who trailed the great carpenters went on to become great carpenters themselves because they got great training. Those are two values. The delegates say it costs an extra €10 per head but it could not cost much more. We had better get out of the straitjacket that is hemming us in and has us in 1980s thinking rather than in 2010 thinking because there is a huge challenge ahead. That is my view for what it is worth.

Deputy Leo Varadkar

I too live on the banks of the Royal Canal so I will have to take a barge down to the Chairman some day.

Chairman

The only thing is that it must have turned left at Mullingar. In any event it is a beautiful place in which to live and we are glad of it. I am just using that as an example and some of our enterprise colleagues will be well aware of it. I am sorry for intervening and becoming emotional about it but it means a good deal to me and to many ordinary people.

Mr. Frank Ryan

I ask Mr. Feargal Ó Móráin to take the question on the reality of the ESS, etc.

Mr. Feargal Ó Móráin

As the Chairman has implied, the companies in receipt of approvals under the ESS would regard it as being commercially sensitive that their competitors would be aware. Companies in the marketplace have to be very careful about the trust buyers have in them and to be seen to be in receipt of a scheme like this could do them damage, particularly overseas. As an agency we have to balance that with our responsibility as we are using taxpayers' money and have to account for it. As an annexe to our annual report we publish all the money every company receives. We will not be publishing the list of approvals for the ESS.

A question was also raised about the €100 million for the enterprise stabilisation fund. I remind the committee that the enterprise stabilisation fund is being used generally for preference share investments. It is not grant money. We were making investments in companies. As Mr. Ryan explained earlier, where we have assessed their business plans and where we have linked in with banks, banks are typically putting money on the table also. This is following a serious assessment of the companies. The sum of €100 million seems to be about the right amount. We have approved approximately €50 million so far and we hope to receive the second €50 million which was committed for next year. For that particular programme that appears to be the right amount of money. The challenge for all of us now is how we can survive on less, not more.

The areas of innovation, research and development, and start-up support are the future. If there was more money available to us we would prefer to put it into that area to develop the future. We consider €100 million is about right for the enterprise stabilisation fund.

Mr. Frank Ryan

In regard to our overseas offices, trade missions and so on, in 2009 we will run approximately 21 trade missions and sectoral missions. Sectoral missions are focused on industry sectors. Some 150 colleagues are based overseas in 32 offices. We open and close offices as the need arises. There is no guarantee that we will stay in an area if business is not being done. We have closed three or four offices in the past couple of years and have opened offices in San Paulo, Brazil; Toronto, Canada and New Delhi, India; because we think they are strategically more important to us going forward than where we had offices. The vast majority of companies that we deal with are small and, therefore, do not have the representational competence to be able to position themselves overseas. They have to be introduced both at Government and business levels to contact networks. If one speaks with any of the companies that participated in those programmes they will say that the support they get from our overseas colleagues is vital in accessing export opportunities in overseas markets.

Deputy Morgan asked about the bank. While our colleague was in Bank of Ireland we continued to carry that cost and when the Bank of Ireland colleague is in training with us the bank carries that cost. We each carry our own costs.

As regards companies seeking help, in 12 months there has been more than a 40% increase in the number of companies that want to work with us. It does not take a genius to understand why they would be coming to us. We are overrun right now with requests from companies for assistance all over the world.

Deputy Arthur Morgan

In delivering on that assistance is there a coalface?

Mr. Frank Ryan

Yes, there has to be a coalface and an ordering and a prioritisation of issues. We have to make sure also that the companies seeking requests are ready for the marketplace because, perhaps, something has happened such as the loss of a contract in the UK and then they say they would like to go to Canada. We then ask if they have organised everything in both English and French because to operate in Canada one must do that but the most likely answer is that they have not, so there is a preparatory issue as well. There is any amount of work at this point in time in regard to that issue.

The 105 community enterprise centres around the country have worked extremely well. There is about 86% occupancy and approximately 5,000 people employed in those centres today. They have been very good for rural locations where people have no alternative but to leave and go to a large urban area. There are huge societal and economic benefits associated with those centres. If I have omitted to respond to any issue raised I apologise.

Deputy Damien English

In regard to the companies with insufficient criteria, can they go back to the enterprise boards or partnerships?

Mr. Frank Ryan

If a company is turned down by the community enterprise boards or Enterprise Ireland it is not the end of the world. There is interchangeability between the two agencies. Sometimes they are turned down for good reasons.

Deputy Damien English

But sometimes they are not.

Mr. Frank Ryan

Strangely enough, my experience after 32 years is that companies that are approved think we are great and the companies that are turned down think we are——

Deputy Damien English

We respect that. I can judge companies too. When they do not tick the boxes, as Deputy White said earlier, that is the problem. I understand Enterprise Ireland has to refuse some for other reasons.

Mr. Frank Ryan

If anybody is dealing with a problem in regard to eligibility in that area, I would ask them to drop me a note.

Deputy Damien English

Some fit into some place.

Mr. Frank Ryan

We will look into it. All customers are valued.

Chairman

Some of our outbursts were well worth it.

Mr. Vincent Landers

In regard to the amnesty for social welfare recipients in the black economy, I will take that issue back to the Department of Social and Family Affairs as it is within its remit rather than ours. My colleague, Mr. Egan, has been working with FÁS and the VECs on their interaction and sharing of facilities and may comment on that point and on the lack of uptake of the work placement programme to address the point made by Deputy Varadkar.

Mr. Niall Egan

I will take the work placement programmes first. Initially when we designed the criteria for the scheme for the 2,000 places we expected to be inundated with applications. In hindsight, the benefit of 2020 vision has not happened. It has taken a long time for us to promote the programme throughout Ireland, primarily through FÁS. We are at a stage where more than 2,000 people have expressed an interest in participating in the programme. There are 527 actual positions to be filled, in addition to the 102 people who are currently on the programme. Many of the positions have come on stream in the past three to four weeks. We are seeking a big uptake in terms of positions coming on stream.

The one thing we constantly come back to, however, is that the criteria are too restrictive. That is the purpose of the review we hope to conclude at the end of this week or possibly next week. The criteria we have been told are particularly restrictive are those which affect employers' participation; for example, companies employing less than ten people are excluded, as are companies that have made people redundant in the past six months, and the existing vacancy condition requires people not to be able to fill a vacancy with a work placement programme. Given the economic circumstances we are in, those criteria must be reconsidered. When the scheme was announced there were only 527 positions available. We have started to consider these criteria and we plan to make the scheme much more accessible to companies. However, I point out that we put the criteria in place for a reason: to discourage displacement. We must be conscious of that fact when we implement the revised criteria. It would be fair to say that it will not be completely open, but it will, I hope, be opened up considerably more.

Deputy Arthur Morgan

Does Mr. Egan think a lack of awareness or promotion was an issue in the take-up of the scheme, if he can judge that?

Mr. Niall Egan

Initially, when the programme was launched, this was definitely an issue. There were several issues; part of it was getting the word out among the various services such as FÁS and the local employment service offices throughout the country as well as the social welfare offices. It took time to make sure everyone was informed. We have now resolved those issues. Every local FÁS and employment service office is fully aware that everyone who comes in should be offered the scheme if they meet the qualifying criteria, and local social welfare offices are now also aware of it. FÁS has done quite an amount in terms of promotion over the past four to six weeks, including a new promotional campaign at local level which started yesterday in local newspapers and radio stations. The Deputy is right in that promotion of the scheme was not as good as it should have been. We are investigating this. It is a fair comment.

With regard to graduate placement, it will be difficult to implement that because it will be costly and it will take time. It is a good idea and we have considered it, but there are issues that must be resolved, one of which will be obtaining additional resources. That is something we will raise in the context of the budget. However, at this stage we cannot make any commitment. We have considered tying education and training components to the work placement programme, but it should be borne in mind that anyone on the work placement programme can avail of a training course in his or her own time; ideally, it would be part-time, but it is still possible. Just because a person is on the work placement programme does not mean he or she is excluded from doing that.

With regard to Deputy Fitzpatrick's question about FÁS and the VECs, FÁS and the IDA entered discussions in July and finalised a national co-operation agreement. As a result of that a series of structures were set up, one of which was a national steering group on which FÁS and the VECs are represented as well as the Departments of Enterprise, Trade and Employment and Education and Science. A plan has been set for enhanced co-operation between FÁS and the VECs on a regional level and there is a regional structure. This will probably come into effect in January, although work is ongoing in the interim. There is to be joint planning between the two representative bodies with the aim of reducing duplication, which exists at a regional level between FÁS and the various VECs. The Deputy also made a point about sharing resources. There are some excellent facilities available from FÁS and the VECs; the Deputy also mentioned the high-tech IT facilities the VECs have. There is a plan to consider this.

Probably the most important aspect is improving progression among the various FÁS and VEC courses. If a person participates in a FÁS training course of short duration, it might give him or her the minor FETAC award needed to qualify for a longer-term VEC programme. We are considering this. The regional committee structures are due to commence in January, but work is being done at present to make sure they will be effective.

Deputy Damien English

There was a question about loans to business.

Mr. Niall O’Donnellan

We are considering loan guarantee schemes rather than Government loans as such. In a sense, the ESF money, although it is in the form of non-convertible preference shares, is technically a loan. On green tech, the banks have committed to green loans under the recapitalisation programme, as members know, and that is progressing. Does that answer the Deputy's question?

Chairman

Deputy Varadkar is seeking clarification on one issue.

Deputy Leo Varadkar

With regard to the 500 places on the work placement programme, how many of these are in the public sector? It seems this is one area in which we can be sure there will not be any displacement issues.

Mr. Niall Egan

They are in the private sector. There has been confusion about the moratorium on recruitment in the public sector, which we have resolved, and we are waiting for the Department of Finance to issue an instruction to that effect. There have been placements in the public sector to date, but the majority of the 527 are in the private sector.

Chairman

I thank the representatives for coming here to assist us in our deliberations. We have had a forthright and frank discussion today. We know the organisations involved are working extremely hard. There are no instant solutions — we must accept that. We need to be efficient and proactive in counteracting the recession. That may illustrate some of the frustration we feel. We have no font of divine wisdom here, but there are sometimes little ideas we feel might usefully be explored. We know it is not the problem of the organisations and we must do more at a political level, but by speaking to people such as our guests we hope we impress upon them that some of the issues we raise are important and that jobs can be supported if we have the courage to take the necessary measures. I hope that with courage and foresight we can show that the measures we need to take are beneficial in terms of the policy of regeneration.

The representatives will work to the limits of their capacities to try to help us resolve this issue, but I appreciate it is up to politicians to lead. As some people at this committee have said to me, they implement the policy given to them by politicians and will never deviate from it. We appreciate that. However, I hope our guests will acknowledge there are areas in which small changes could have a significant impact. That is why we may have illustrated things in a forceful way today. Members of the committee have been following these developments for the past 15 months.

We thank the representatives for being present here for more than two hours. They gave as good as they got and answered every question, which is admirable. I must say to Mr. Ryan that Enterprise Ireland has worked extremely hard on things such as trade missions and I compliment it on what it has achieved and continues to achieve. It is easy to be smart about the work its members do, but much of it is hard work, and we need to entertain people in other countries to show us to them at our best. It is easy to deprecate and be critical from afar. I support it in those efforts and will continue to do so because we must showcase our country, as well as our educational facilities and achievements, at the very top to ensure we continue to make progress.

I wish the representatives well in their endeavours. They may sometimes think I am an enemy, but I am not, although I suffer from frustration, as do my colleagues. We are all in this together and we wish you well. The Department officials are only four weeks away from D-day and I saw many notes being taken. All of our colleagues have ideas and I hope some of them will ferment into positive ones which will be on the agenda in four weeks' time and beyond. Thank you again for your attendance; we deeply appreciate your spending so much time with us when you have other things to do.

At the next meeting we will discuss the European Anti-Poverty Network Ireland position paper on employment, Tackling the Economic and Social Crisis, with representatives of that organisation, and the report on the Dublin commuter belt zone with the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Coughlan. We will also ask the Minister to address the issue of the proposed code of practice for grocery goods undertakings.

Deputy Leo Varadkar

Will we cross the picket, or will the meeting be held somewhere else?

Chairman

I will put it this way: I will not pass the picket.

Deputy Leo Varadkar

The Chairman will be docked.

Chairman

The strike may well be cancelled, but as of now it is pencilled in.

The joint committee adjourned at 5.10 p.m. until 2 p.m. on Tuesday, 24 November 2009.