Small and Medium Enterprises: Statements.

Minister of State at the Department of Enterprise, Trade and Employment (Deputy John McGuinness)

I thank the Seanad for giving me the opportunity to discuss the issues in regard to small and medium-sized enterprises, an area in which I am especially interested. When I look at the membership of the Seanad, however, I wonder why I was invited, particularly when one focuses on competitiveness in the economy. There is an array of talent here which I am sure could make a great contribution to such a debate. One could take as an example Senator Shane Ross, from whose column in the Sunday Independent I have learned all I know about Irish business. Indeed, I have learned even more about competing because Senator Shane Ross has competed against the best, pulling the tails of commercial lions to the point that I wonder how he can dare enter a bank, sell a share, buy a house or use an airline. I admire his approach, however, and it is welcome that he takes on all the vested interests.

When one looks at competitiveness, I think of Senator Donie Cassidy and Deputy Mary O'Rourke. Perhaps they could come to the House to share their thoughts, or at least those thoughts which would not invite immediate removal from the Chamber. They are both experts on competition, branding and market share, masters in the art of dissemination and obfuscation and specialists in defining borders and crossing them. They know that competition is about a smile, a warm embrace and the sharp pulling of the rug from under the feet of one's competitors. In the presence of the truly great, who am I to speak? Speaking about competitiveness in Leinster House is like giving Tarzan lessons in crocodile wrestling — exciting but ultimately fatal.

Given all that, I am happy to be here and I acknowledge the presence of my constituency colleague, Senator John Paul Phelan, the Fine Gael spokesperson on enterprise. I am especially interested in the SME sector and the microbusinesses carried on under that heading because I come from that sector. I spent many years in business and know the ups and downs of it. I know how it affects people and families. I understand, therefore, the need for cost effective, light regulation and legislation in that regard to allow that micro element of the SME sector to develop and prosper.

We are reaching a point in our economy when the SME sector is about to come centre stage more than ever before. We have seen outside investment and money brought into this economy by companies which have set up here and provided long-term jobs. Such companies continue to be welcome here. We have seen the work of Enterprise Ireland and of all these small to medium-sized businesses at county level. They will be centre stage from here on in. The future of the economy will centre around their activity. The creation of new jobs, research and development and innovation will stem from their activity within the economy. We must focus very much on these businesses.

More than 250,000 small businesses operate in our economy and they employ almost 800,000 people. We will only be able to foster the emergence of such enterprise if the operating environment for business, particularly small business, is supportive. This has been a key focus of Government policy. We have put in place policies and programmes which encourage the emergence of new business creations and facilitate long-term business survival. Examples of the actions we have taken include the positioning of our tax system as one of the most supportive of business in the world; the development of Ireland as a knowledge-based economy through the dedication of significant Exchequer resources to the promotion of research and development and especially innovation in the very important services sector; the introduction of the Better Regulation programme to tackle regulatory burdens, especially those faced by the business community; and the adoption of new strategies to support the enterprise sector, including small business, based on the reports of the Enterprise Strategy Group and the Small Business Forum.

The amalgamation of the existing Acts into a consolidation Bill will need to focus on, and understand, the SME sector. In the drafting of that Bill, there will need to be an awareness that one size does not fit all. We must be conscious that there are microbusinesses, small to medium-sized enterprises and large companies. The legislation, which is due in 2008, must focus very much on that area and understand the needs of business, particularly in regard to regulation.

The role of the county enterprise boards is very important. The 35 county and city enterprise boards were established in 1993 and are located throughout the country. The role of the CEBs is to provide support for microenterprises in the start-up and expansion phases, to promote and develop indigenous microenterprise potential and to stimulate economic activity and entrepreneurship at local level. The CEBs can support individuals, firms and community groups provided that the proposed projects have the capacity to achieve commercial viability.

The CEBs deliver a series of programmes to underpin this role and they can provide both financial and non-financial assistance to a project promoter. The forms of financial assistance which are available, subject to certain restrictions, include capital grants, employment grants and feasibility study grants.

The provision of non-financial assistance can take the form of a wide range of business advice and information services, management capability training and development programmes and e-business training initiatives. The county enterprise boards have been successful in developing a structure capable of both generating and tapping into enterprise at local level. County enterprise boards have been particularly effective in their ability to respond at local level to the needs of micro-enterprise. Through their involvement in a wide range of national programmes, county enterprise boards have assisted in transforming Ireland's economic landscape by providing a unique enterprise focus at local level through developing and stimulating indigenous enterprise potential. In 2006, county enterprise boards issued grant approvals totalling €14.4 million to the micro-enterprise sector and issued grant payments totalling over €10.6 million. A total of 894 projects were approved for financial assistance from the county enterprise boards while a total of 892 projects received grant aid. Over 2,000 net jobs were created in county enterprise board-assisted enterprises. Over 19,800 people participated on the various management training and development courses offered by the county enterprise boards.

In respect of the county enterprise boards in the south east, I recently launched their week focusing on entrepreneurial spirit and encouraging micro-enterprises to participate with county enterprise boards. It was a hugely successful week which was the first in the country. It should be mimicked by other regions to ensure that there is greater focus on each region relative to its strengths and weaknesses. In turn, it is my intention within the Department to continue to focus on county enterprise boards to ensure that the burden of bureaucracy is lifted from them, that they achieve the agenda they set out in the beginning, that they become easy to deal with and flexible in their approach and that we ensure best practice in the context of county enterprise boards as the model used across the country.

In the context of how we look at alternative energies, county enterprise boards are an area where we can focus on development in this area, ensure there is a growth of jobs assisting that sector and the new developments that are taking place and achieving what we wish to achieve in respect of our carbon footprint and greenhouse gas emissions. All of that can be achieved by including micro-businesses and small and medium-sized enterprises. In the context of county enterprise boards, there is also a need to focus on the growth of those companies into Enterprise Ireland clients. This is essential. There are far too many companies with less than 100 employees. This is the growth area. We need to focus on growing those numbers to become Enterprise Ireland clients and, thereafter, ensuring that they export and concentrate on that indigenous sector that could employ 100 or more people. In that context and relative to my own region in the south east, with which I am very familiar, there is a need to grow and expand that knowledge economy, based around our institutes of technology and moving on to have a university for the southeast.

Senator John Paul Phelan

Hear, hear.

Deputy John McGuinness

This is essential and could be easily piloted in that region so that we can experience at first hand what it is like to grow into an Enterprise Ireland client, grow from there into a bigger company, use the technology and educational infrastructure and ensure we are ready for the next curve within our economic development. We must be ahead of that curve and the only way we can do it is to invest in that type of third-level facility in collaboration, not just with the other educational operators, but with those in business in ensuring that we have that cross-support from business and commerce in the educational sector.

The report of the Small Business Forum has underlined for us all the extraordinary contribution that the small business sector is making to our economic prosperity. Research carried out on behalf of the forum showed that in 2002, small businesses paid 11% of corporation taxes, or around €520 million, 37% of income taxes, or almost €4 billion, and 50% of VAT in the services sector or over €4 billion. The report contains a detailed analysis of the factors that drive the small business sector and has provided us with a blueprint for the further development of the sector. The Government has already made considerable progress on the implementation of the report's findings. Examples taken to date include the fact that the threshold for the exemption from the requirement that companies have their accounts audited has been increased from €1.5 million to €7.3 million.

The budget in December 2006 included a package of measures designed to help the small business sector, including the extension and radical improvement of the business expansion and seed capital schemes up to 2013. European Commission approval for the extension of the business expansion and seed capital schemes up to 2013 was received in late August 2007. In announcing budget 2008 on 5 December 2007, the Tánaiste and Minister for Finance announced that the requirement that recycling companies must have received grant assistance before availing of the business expansion scheme is to be replaced by a requirement that their business proposals be certified by an industrial development agency or county enterprise board before they avail of the scheme. As the business expansion scheme is an approved State aid, it will be necessary to advise the European Commission of this proposed change.

In his Budget Statement in the Dáil on Wednesday 5 December, the Tánaiste and Minister for Finance, Deputy Brian Cowen, announced the following initiatives aimed at reducing administrative reporting burdens on small and medium employers. With effect from 1 March 2007, VAT registration thresholds for small businesses were increased from €27,500 to €35,000 in the case of services and from €55,000 to €70,000 in the case of goods. These thresholds are being further increased from 1 May 2008 to €37,500 for services, and to €75,000 for goods, respectively. The measure will take about 2,700 businesses out of the VAT system.

The Finance Act 2007 confirmed the changes to the preliminary tax obligations of certain companies, as recommended by the Small Business Forum. Small companies are now permitted to calculate their preliminary tax payments based on 100% of the prior-period tax liability if their tax liability for the prior period did not exceed a certain threshold. The Act increased that threshold from €50,000 to €150,000. This threshold was further increased to €200,000 as part of budget 2008. This will be effective for preliminary tax payment dates arising after 5 December 2007. New companies which do not expect their tax liability for the first year to exceed €150,000 are no longer obliged to pay preliminary tax in that first year. This threshold was further increased to €200,000 as part of budget 2008. This will be effective for preliminary tax payment dates arising after 5 December 2007.

The innovation voucher scheme was launched in March. This scheme provides an incentive to small businesses to explore new ideas within their businesses and should help drive levels of innovation within the sector. A total of 350 companies were awarded vouchers of €5,000 each up to the end of September 2007. I understand that Enterprise Ireland has received a further 156 applications, which are currently being processed.

As part of the implementation of the Government's science, technology and innovation strategy, Enterprise Ireland has been working on developing a suite of supports specially designed for the particular needs of manufacturing and internationally traded service companies. This includes an R&D stimulation grant to encourage companies that have not carried out research and development in the past or which have done so on a sporadic basis to develop the establishment of a sustainable research and development activity. Within the context of the new R&D stimulation grant programme, Enterprise Ireland will deliver the knowledge acquisition grants scheme, which will allow grants of up to €50,000 to be paid on a once-off basis for projects up to one year.

There is huge scope in the area of research and development for job creation, particularly in the food sector. One thinks of many of the giants, such as Glanbia with its research and development, heading up what is best practice throughout the world and engaging with huge multiples so that they feed what is desirable in the context of the food industry back into those companies. Supported by the Government, they are able to bring about innovation and research and development and fulfil the market desires of the companies dealing directly with the end client. We must continue to support this area and establish our niche market in the context of that knowledge-based economy to ensure there is continuing investment so that job creation in this area will be to such an extent that we will become the world leaders in a necessary area of development relative to the food chain and the demands of such new economies as China and India. We must constantly focus on this area to ensure that the small and medium-sized enterprise area is heavily plugged into what is happening on the world stage so that it can also play the important role we need it to play to create sustainable jobs into the future.

In respect of reducing the regulatory burden on business, a high-level group on business regulation was established comprising representatives of Departments and agencies, the business sector and the Irish Congress of Trade Unions. This is chaired by the Secretary General of my Department. The group will seek ways to reduce and simplify administrative burdens, particularly those affecting small and medium enterprises. The group is focusing on actions in the five priority areas identified by the business regulation forum. To date, it has addressed concrete measures such as tax clearance certificates, waste licences, audit exemption thresholds, work permits, redundancy payments, etc.

This process is best served to address the recommendation and believes that a strong input from business as to which regulatory requirements are causing the biggest burdens is critical. Departments must understand the regulatory burden with which business must comply. Forms from the CSO must be revised and we must understand who these forms target. It can take much energy for a micro, small or medium sized business to complete the forms. I come from that sector and know that people tick boxes simply to comply. The analysis carried out of these forms cannot be accurate because compliance drives form-filling.

The regulatory burden on micro-business should be reviewed to determine if it is needed or if it should be reduced to once per year. For small and medium enterprises, the forms should be simplified and made more relevant to the business. These minor wins would give comfort to business, knowing that business is being acknowledged, there is space for it, that it can develop and someone is listening. We hear the cases for this being made during budget time but there is no ongoing engagement with the SME sector to give it confidence and help it understand that we are in partnership together.

The Revenue Commissioners are the best example in this area.

Senator Mary M. White

Hear, hear.

Deputy John McGuinness

They are responsive, they have the technology and a willingness and expertise to engage with the SME sector and business across the board. They are successful, not in catching people out but in assisting business to meet its obligations. If one is meeting obligations, one does not look on the Revenue Commissioners as a great scourge, as one may have done many years ago. The system is changing due to coaxing, cajoling, an understanding of the sector and a mix of technology.

The tech-check programme provides small businesses with the opportunity to access a highly subsidised independent technology check-up and help them to identify ways to boost productivity and profitability through the better use of technology. This programme is being delivered by the county and city enterprise boards. Projections to year-end indicate that 790 checks will be completed countrywide, as the programme becomes more fully embedded at national and regional level. After that assessment is made, we need to consider what is required by small businesses in terms of information technology. What is required may be beyond the financial capability of the company and more assistance may be required to such companies. The county enterprise boards and the Departments must be more flexible and we must respond to queries in real time so that business decisions can be supported in a way that is focussed, directed and supportive of the SME sector.

The Management Development Council has been established to drive levels of managerial capability within the enterprise sector. The council will benchmark Ireland's current management development provision while also developing a co-ordinated approach to building appreciation in the SME sector for the value and need of leadership and management skills. Two meetings of the council have been held to date.

The first Small Business in Ireland report was published by the CSO on 30 May 2007. This publication brings together for the first time a comprehensive set of statistics that clearly demonstrates the importance of the small business sector to our economy and has been widely welcomed by the business community and the Government. It gives a basis for direction and an understanding of the issues to which I referred earlier.

Reflecting the concerns of the forum, new guidelines to local authorities on the implementation of development contribution schemes under the Planning and Development Act 2000, issued by the Minister for Environment, Heritage and Local Government in May of this year, have emphasised the need for the impact of such schemes on our competitiveness to be taken into account. As we encourage micro-enterprises and the SME sector to develop we must understand what they face in requesting planning permission, fulfilling fees and meeting the contribution scheme. If we understand this development, a more even balance can be reached between counties so that we have a more similar system across the country.

The same point applies to rates. People have complained about the lack of uniform application of rates across counties. Businesses need to know where they are going and the costs involved. We need to spell out those costs so that they can be factored into business decisions. The burden of that cost would be lightened if it was done in this fashion. Decisions could then be taken more easily and the employment growth trend would be different.

To meet the economic challenges ahead we must sustain a high level of entrepreneurial activity in general and maximise the number of new businesses that are innovative, and that aspire to and are capable of significant growth. The environment in Ireland is highly conducive to entrepreneurial activity at present. The culture is also highly supportive of entrepreneurs and their activity. The economy remains strong, with buoyant consumer demand. There is general agreement that Ireland is characterised by a pro-business policy, which has been in place for many years and is supported by all the main political parties. The positive contribution of private sector initiatives and the enterprise development agencies in fostering and supporting a spirit of entrepreneurship is also generally acknowledged. Moreover, the sophisticated foreign direct investment sector provides a potential customer base for new entrepreneurs and a means of achieving indirect exports.

Based on various indicators, Ireland is only just behind the elite group of the most entrepreneurial countries in the world. Global Entrepreneurship Monitor research indicates that, in 2006, the equivalent of 80,000 individuals in the adult population in Ireland reported that they had set up a new business in the past three and a half years. When this figure is combined with those that indicated that they were actively attempting to do so, over 200,000 individuals or 7.35% of the adult population were new business owners or entrepreneurs engaged in planning a new business. This level of relative early stage entrepreneurial activity placed Ireland seventh within the OECD.

The importance of entrepreneurship was recognised by the Small Business Forum. The forum recommended that there should be a particular focus on the stimulation of latent entrepreneurial potential, particularly among women and ethnic groupings. If we are to be successful in meeting these challenges, we need to ensure that the spirit of entrepreneurship that appears to be flourishing becomes embedded in the consciousness of our people. The education and training sector will play a critical role both in developing entrepreneurial mindsets and in equipping current and future entrepreneurs with the skills necessary to strategically position new enterprises and then manage their subsequent development and growth. However, if we are to build a much greater number of competitive and innovative companies in Ireland, we must see many new businesses being created now and in the years ahead. The challenge is not only to generate a high level of new businesses but also to maximise the number of innovative businesses among them that subsequently develop to achieve high growth.

As a follow-up to one of the Small Business Forum's recommendations, Forfás published its report entitled Towards Developing an Entrepreneurship Policy for Ireland on 24 October 2007. The Department of Enterprise, Trade and Employment is currently working on the drafting of this policy statement with a view to submitting it to Government shortly.

I referred earlier to Enterprise Ireland and IDA Ireland. I acknowledge their valuable work on behalf of this country. IDA Ireland attracts businesses to Ireland and ensures those that are established continue to flourish and grow. I have been on a number of trade missions with Enterprise Ireland since my appointment in July and I am impressed by the level of entrepreneurial activity interfacing with the biggest names in commerce throughout the world. Small companies from Ireland are doing business on the world stage, winning contracts that make one wonder how it was achieved. They succeed on the basis of risk, establishing companies in the market and gaining respect in these markets, a key factor of their success. I have seen businesses in Dubai, Moscow and Canada. The Irish in business are to the fore and every contract they win feeds into the Irish economy, creating and sustaining jobs. It also ensures that big companies will defer to the Irish involved in commerce on matters such as supplying secure banking technology for branches throughout the world. We need to build on that enterprise and we cannot allow ourselves to become complacent. We must examine the synergies among IDA Ireland, Enterprise Ireland, Bord Bia and others actively involved in promoting Ireland and the activities of business interests within it to ensure we capitalise on what is happening in the marketplace.

There is perhaps a need for Enterprise Ireland to reach out to the members of the Irish diaspora who are embedded in the economic systems of other countries, who are respected for what they do and who hold key positions. Attracting these people into becoming actively involved with Enterprise Ireland and IDA Ireland may help us to open up new opportunities that will yield further success in the context of job creation in this country.

We cannot ignore the changes taking place in the world. We cannot continue to complain about matters that are not within our control. We must consider those aspects over which we have control and change the way we operate in terms of altering our focus and starting to react in real time. We must work in partnership with the companies involved and ensure the contracts which are badly needed to underpin the development of the SME sector and of the businesses within it are won.

As stated earlier, small and medium enterprises and microenterprises, which I will never forget to mention, are coming centre stage. We need to reach out to them and ensure they grow. We must also support them with our policies. I accept that such policies may have to change, perhaps overnight. In addition, they must take cognisance of the way small businesses operate in order that the latter, which are now central to our economy, continue to flourish.

Irish people have a great entrepreneurial spirit. They passionately believe they can make a difference and can create employment and businesses for themselves. We should build on their enthusiasm and work with them as we move into the future.

There is a need for Enterprise Ireland to continue to focus on change. There are two constants in business, namely, change and risk. We need, in conjunction with Enterprise Ireland and IDA Ireland, to take risks with the business interests to which I refer. I accept we are dealing with taxpayers' money and that we must obtain value for such money. However, we must also take risks. If we are working in true partnership, then people must recognise that those on the other side of the equation in this regard are taking risks, not only with their own assets but also in the context that they might fail. Irish people often consider failure as being the end. A failure is merely something that happens on the way to being successful.

Senator Donie Cassidy

Hear, hear.

Deputy John McGuinness

We must change how people view this matter. I was involved in business and I started out in difficult times when people were obliged to pay interest rates of 20%. When one approached one's bank manager in the 1980s, one was seen as a chancer. Now, because the scene has changed, one is viewed as an entrepreneur and one may sometimes be in a position to extract even more money from banks to support one's initiative. The Department needs to recognise and understand what is happening and to move very quickly.

I was somewhat disappointed with the debate relating to competitiveness in the economy that took place in the Dáil last week. While I accept there are issues of concern, the debate focused on failure within the SME sector and on the part of Enterprise Ireland and IDA Ireland. Nothing could be further from the truth. The sector is extremely vibrant and dynamic and merely needs to be partnered by the Government, in an ongoing and real way through the adoption of policies and the provision of support.

Whatever we say in these Houses in respect of business, our words are analysed by newspapers and other media outlets across the globe. When I met representatives of Dell recently, one of the comments directed to me related to what is written about our economy. In contrast, there are 20 Irish companies operating in Moscow which are very comfortable with and confident about doing business in a foreign market. As already stated, Members would be surprised about the way in which these companies win contracts. They win them not only in their own interests but also in the context of representing Ireland Inc. They need to be supported in this regard. As public representatives, we must support them. None of this takes away from the Opposition the opportunity to inform us where we are going wrong.

I would be the first to acknowledge that mistakes were made. I also acknowledge that mistakes were made in my business. I was big enough to correct those mistakes, however, and proceed to do business again. That is how we must operate. We need to focus on the can-do attitude prevalent among young Irish entrepreneurs. We must continue to encourage them.

I have outlined the facts, figures and statistics and it is clear the Government recognises the great importance of SMEs to the economy. It will continue to do all in its power to aid the creation of new companies and support the efforts of existing interests to continue to grow and succeed. We must also give careful consideration, however, to the foundations upon which we are relying in building a knowledge economy, two words which, incidentally, sit uneasily together. The importance of our education system and standards to that foundation, and to our ambitions, cannot be overstated.

Ireland is a well-educated nation by international standards. However, that is not enough. If we are to offer graduates to the world, they must be the products of an education system which, at all levels, is world class, producing at the top end degrees and doctorates that are internationally recognised as hallmarks of academic excellence.

I sometimes think that in today's politically correct world, exceptionality is being discriminated against. We must encourage our brightest and provide them with the support they need to develop their full potential. We need to recognise and reward them, thereby creating role models for others to emulate. There surely must be ways of bringing on the weak and encouraging the average and good without retarding the progress of the exceptional. If we do not find those ways, the certain outcome will be mediocrity.

There is also a danger that education could become a commercial product. I watch the jargon and buzzwords of commerce slipping past the portals of academia and I wonder where all this will lead. We do not want degrees delivered on a conveyor belt, replacing quality with quantity. Neither should education be about speed or commerce. It should be about the creation of a rounded, civilised individual who will make a positive contribution to the world as well as to his or her work.

While understanding the need for it, I am concerned about specialisation. As stated in the Dáil recently and reiterated earlier in this House, I would like to see us produce more rounded graduates than currently seems to be the case. I would like to see Pythagoras and Picasso — the right angle and the curve — having at least a conversation at the crossroads that benefits both before they go their separate ways. How can that be achieved without undermining concentration on the desired degree? I do not know but such a development would be good for graduates and for society. For the same reason, I would like civics or, better still, philosophy taught at all levels in our schools. We must give time to the spiritual well-being of the individual as well as the economic well-being of the nation. If we do not, both will ultimately suffer.

In considering what I was going to say about education, it occurred to me that I have not heard any strong voices emanating from within academia nor have I heard those involved in the sector promoting any grand vision. Have these voices been drowned out by the roar of the Celtic tiger? We need to hear from our academics because they also have a duty to speak out and make a contribution.

Competition is a fact of life but it far from being life. It is no harm to remind ourselves of that. As a small, open economy, Ireland must fight for its share in an aggressive global marketplace. We should not lose sight of our values, however, or the fact that by concentrating absolutely on quality, especially in education, we might be able to serve very profitably both the market and society. There are down-sides to competitiveness. For example, standards can slip, social responsibilities can be ignored and those who cannot or will not join the race can suffer. We could end up being a nation that knows the price of everything and the worth of nothing, confused and aimless with the vain and vacuous strutting their stuff. Success comes at a price. Sometimes that price is too high. It is the responsibility of politicians, teachers and academics to set the standard and ensure we do not pay too much.

I thank the Cathaoirleach for affording me the opportunity to make my maiden contribution in the House. I look forward with interest to the contributions of Members.

Senator John Paul Phelan

I welcome the Minister of State. I was not sure whether it was his maiden contribution in the House. He stated that he looks forward to Members making interesting contributions but he certainly made such a contribution himself. I agree by and large with most of what he said. The Minister of State's words were thought provoking. In my six years as a Senator, I have not heard Pythagoras, Picasso, philosophy and Tarzan mentioned in the same contribution. I am not sure whether Tarzan wrestled many crocodiles. As I understand it, he wrestled mainly with apes. There are a few apes in the path of the development of small and medium-sized enterprises. Perhaps the Minister of State is the Tarzan-figure to wrestle with those.

Senator Alex White

No, that is the Leader of the House.

Senator John Paul Phelan

I wish the Minister of State the very best in the task he faces. He brings a freshness to dealing with this area. Even in his contribution, he did not stick purely to the script. It is good to see someone who is willing and able to speak off the cuff on a issue about which the Minister of State has some knowledge.

I acknowledge, as outlined by the Minister of State, that a number of changes introduced in the budget will have a positive impact on small businesses. The raising of the audit threshold and the changes in research and development funding are to be welcomed.

I agree with what the Minister of State said about the provision of a university for the south east. This does not specifically relate to this debate but the provision of a university is important to the development of small and medium-sized enterprises in my region. I concur with the Minister of State's sentiments that a university needs to be developed in the south east region as soon as possible.

I wish to pick up on a number of points made by the Minister of State. One aspect of his contribution was a little disappointing in that he did not outline sufficiently the direction in which the Government is moving to introduce reform to address the difficulties faced by small and medium-sized enterprises.

The Minister of State mentioned a number of points I wish to address. He made an interesting comment about academia. He asked have the voices of academia been drowned out by the roar of the Celtic tiger. I believe he is right in that many voices were drowned out by the roar of the Celtic tiger. Many younger people in particular entered the workforce before they had finished their education. We had a good debate on upskilling a few weeks ago. I was disappointed the Minister for Finance did not refer specifically to that area in the budget because it is of vital importance. Many voices were drowned out when the Celtic tiger economy was strong. Now that its gallop has been halted somewhat people are exploring other alternatives.

I was interested in the Minister of State's remarks about the new guidelines to local authorities on development contribution schemes. I agree with what he said about local authorities putting high development charges on new developments, which will have an effect on our competitiveness. That cannot be divorced from the fact that local authorities are forced into that position because their funding is not being supplied from central funds to the level it was previously. That is the bottom line. Local authorities are exploring other areas to secure funding, whether it be development charges or rates.

I agree with the Minister of State's remarks about rates and the calculation of rates across the country. The calculation of rates by local authority areas is very much hit and miss as a result of a lack of consistent and sufficient funding from the Department of Enterprise, Trade and Employment to support local authorities. The Minister of State cannot criticise the calculation of rates on one hand and not accept some of the blame for that on the other.

The Minister of State mentioned the action the Government has or is considering taking to create a favourable atmosphere for the development of small and medium-sized enterprises. He referred to the tax system and how we have positioned our tax system to be supportive of business. That is correct and it has been hugely beneficial in the past 15 years. The development of Ireland as a knowledge-based economy will be through the dedication of sufficient Exchequer resources to the promotion of research and development. Following the discussion in this House with the Minister of State, Deputy Kelleher, a number of weeks ago, I was disappointed sufficient emphasis was not placed in the budget on the area of upskilling and further education. Changes were announced in regard to research and development but if we are serious about ensuring the continued development of the economy into the future, we need to invest huge resources in the area of further education and adult education. That must be done sooner rather than later.

The Minister of State said that the introduction of a better regulation programme to tackle regulatory burdens, particularly those faced by the business community, was a priority. I wholeheartedly agree with that, as I am sure would everybody concerned. Up to this point the Government has failed miserably in this area. It has put more regulation in the face of small businesses in recent years, a problem that must be addressed in the near future. The Minister of State mentioned that a committee, chaired by the Secretary General of the Department, has been established and that legislation will be soon be introduced. I welcome that and that this problem will be addressed, although it should have happened a while ago.

I recently spoke to a number of people in my area who are engaged in small business ventures and asked them what they considered to be the major issues affecting small and medium-sized enterprises into the future. They gave me four headings on which I will briefly speak. They mentioned inflation as a continuous problem facing small business; regulation, which the Minster of State mentioned; the efficiency of public services; and infrastructural problems. The Government has contributed significantly to the problem of inflation that has existed in the past few years in particular. The inflation rate has been in excess of 4% for a large part of the last year and a half, which is having a detrimental effect on small and medium-sized enterprises. It is estimated that the effects of the changes announced in the budget would add about almost a half of 1% to the inflation rate, and that is something in which the Government has a direct role in implementing.

The Minister mentioned the role of the local authorities in terms of the costs small businesses face, with which I agree. I mentioned rates and development changes. The area of regulation is in many respects probably the single biggest impediment many small businesses face. Many people staring their own business face over-regulation and strangling red tape. I am glad the Minister of State intends to introduce legislation to reform some of the needless bureaucracy that exists in this area. As he comes from a small business background, he will have a particular interest in this area.

With regard to efficiency in the public services, in a number of recent surveys carried out by different groups small and medium-sized enterprises were asked to identify the key problems they face into the future. The key problem identified in the most recent survey by BT Ireland was the lack of efficiency in public services. Only 10% of those surveyed said that public services had improved since the benchmarking process was initiated. Some 50% of those surveyed said that it had stagnated and 40% said that there had been a disimprovement in terms of the public services they use and need to carry out their business. That is a startling statistic. This key problem must be addressed across the board and not only for small business. A serious problem exists in the lack of efficiency and delivery of service by certain sectors of the public service. The Minister of State has a difficult job in this regard, but it is essential it is addressed if small businesses are to progress in coming years.

I agree with the view of those surveyed recently by BT Ireland that VAT should have been addressed in the budget. Regrettably action was not taken. Some 26% of respondents in the survey said it was the most important issue they wished to see addressed in the budget. The only change in VAT in the six years I have been a Member of this House has been the increase in the rate in the immediate aftermath of the 2002 general election. It is a crippling cost on small businesses and it needs to be addressed sooner rather than later.

The final issue affecting people in this sector was mentioned to me is infrastructure. There is no doubt significant developments have occurred in our road infrastructure and the ongoing developments will result in significant improvements across the country. However, there is much more to infrastructure than the road network, although some road blackspots have not been rectified. I refer in particular to broadband. We are debating the issue of broadband roll-out later tonight and I hope to speak on that issue. The Minister of State, being from my own county, will be familiar with the difficulties that people with small businesses in rural areas have in trying to get a high-speed Internet connection. These broadband connections are essential for the development of such businesses, especially if they are operating in a global context. It is a disgrace that they are not in place. If the Minister of State did nothing in his five years in office except to ensure that we get adequate broadband provision across the country, then he will have done a good job. I will do anything possible to assist.

We have seen increases in funding for the provision of rail services and carriages and I welcome that. However, there is a strong case for opening old lines that still exist and that have not been built on. New Ross has been put to the end of the queue in waiting for the new bypass, even though it is the biggest traffic blackspot in the south east and possibly in the whole country. There are six and seven mile tail backs every evening on the Waterford approach into New Ross. There is an existing rail line from New Ross to Waterford, even though it would need a major upgrade, yet no effort has been made to re-open it.

I wish the Minister of State well in his new job. He has the necessary drive to tackle some of the big issues that face small and medium enterprises in the future.

Senator Mary M. White

I congratulate the Minister of State on his appointment. It is a great honour for him and his family. He will achieve a lot more than extending broadband across the country. If he keeps going, he could be a future Taoiseach of the country. He has many fans and as a businessperson——

Senator Alex White

The Senator says that to all the guys.

Senator Mary M. White

I do not. Do not mind Senator Alex White. He is jealous. I would like to see more business people in politics, because in his speech the Minster of State showed us that he understands how business and companies work and develop. If everybody was working in the non-trading sector, there would be poor days ahead for us.

Ireland's economic transformation in the past decade has been remarkable. Our nation is envied and studied by many other developed and developing countries around the world. In January 1988, The Economist published a picture of a woman and a child begging on the street in Dublin, with a headline “The poorest of the rich”. Ireland was presented like this all over the world. It was a bad image. Much has changed since then. At that time, we were the basket case of Europe and all the young people in the audience know that a transformation has occurred in our country. Many reasons abound on how we have become so successful. Other countries in eastern Europe, South America and even individual states of the US have visited to see what has been going on. Hillary Clinton came here to see how she could spread regional development through the state of New York.

I am going to look at the individual entrepreneurs and how the Government was entrepreneurial in its decisions on developing businesses. Far-sighted policy decisions taken by the Government over a number of years created the conditions in which economic activity could thrive. When global economic conditions were ripe, we were able to take full advantage. Economic and enterprise policy is constantly evolving and like a good business, the Government must constantly evolve its policies. It will not continue to grow business unless it changes because circumstances are changing.

At present there are difficult trading conditions around the world for companies. I was in the US a month ago, where my nephew works with Merrill Lynch. He said that there is fear throughout the company about the state of the stock market there. Competition for overseas markets is intense and there is also intense competition for foreign direct investment into Ireland. The Government's current policy is driven in part by a long-term view, which is a vision of what home-grown internationally focused companies can achieve if constraints and barriers to growth are removed and appropriate supports are provided. These are the wealth-generating companies and they are located throughout the State. Their success will have profound implications for the local and regional economies in which they are based.

In 1987, Connie Doody and myself started Lir Chocolates. This was at a time when unemployment was at 18%. I started the business not to make money, but to lower the unemployment levels here. We brought jobs to East Wall and the local parish priest came to us for our first Christmas and thanked us for providing extra temporary employment at that period. He said that there would be food and presents on the table in many houses in East Wall because of the jobs we provided. I speak from personal experience when I say that creating and providing jobs can help local economies.

Irish owned internationally trading services companies spend around €17 billion in the Irish economy on wages, raw materials and service. This spend multiplies throughout the economy. It is seldom recognised that the contribution is similar to that of the foreign owned enterprises here. People do not realise the contribution that is made and its value to the economy. To build and maintain strong growth in an ever more competitive and interconnected world requires creativity and imagination. In order to sustain an economy, we need creative ideas, new and better ways of working, and innovative products and services. These will be the main drivers of future success. Even as a small company, we knew that survival was about innovation and creativity. We spent five years in developing our Bailey's chocolates, with three people devoted to the task. It was a small company at the time, but we are not so small now as we have 140 people employed. The key was to make Bailey's chocolate that would last six months, but at the start we were only able to make a kind that would last two weeks. It took us five years to do it.

An Leas-Chathaoirleach

Has the Senator anything for us this Christmas?

Senator Mary M. White

The Senators all know they will get a bar.

I would like to talk about the enterprise agencies, such as Enterprise Ireland and the county enterprise boards.I had the honour of being appointed by Mr. Frank Feely, then Dublin city manager, to the evaluation committee of the first Dublin City Enterprise Board and I spent five years on that. I agree with the Minister that there is a tremendous opportunity all over the country for these enterprise boards to give the start and unleash further entrepreneurial spirit for the country. Competition has intensified around the world and we are threatened by China and India. The Indian government competes with us with intensity and passion. Senator Quinn may find it difficult to believe that it is more difficult to develop indigenous companies than to get foreign direct investment into the country. Getting Irish companies to grow and develop is more difficult. I congratulate Enterprise Ireland, the county enterprise boards, FÁS and Bord Bia and would like to mention my experience during six years on the board of Bord Bia. Former Deputy Joe Walsh, as Minister for Agriculture and Food, had the vision to see the need for Bord Bia, which would drive Irish food and drink products and market them around the world. He was a tremendous Minister for Agriculture and Food. He handled the foot and mouth disease outbreak on a weekly basis. When I see the trivial matters that cause hardship in Leinster House I realise how remarkable was his achievement in getting us to fight off foot and mouth disease.

I would like to give three examples of successful Irish companies. Mr. Frank Ryan, CEO of Enterprise Ireland, is one of the most enterprising people I have met. I have known him for approximately 30 years. He was a missionary and zealot for getting foreign direct investment into Ireland. Morning, noon and night he intensified his work on that. I was aware of this because my husband was chief executive of the IDA. It is fantastic that Mr. Ryan is driving Enterprise Ireland. Irish companies are competing and winning. Mantis Cranes of County Donegal is the only manufacturer of self-erecting cranes outside continental Europe and supplies the US market to an estimated value of €700 million per annum. Selatra is a small, Irish-owned software company that has made a significant breakthrough in the Russian mobile telephone market. Prodieco has made considerable gains in the German engineering market. Can Members imagine an Irish company competing with German engineering companies?

Senator Quinn was not here when I held up a copy of the cover of The Economist from January 1988, which named Ireland “the poorest of the rich” and portrayed us as the basket case of Europe. However in 1999 The Economist called us the “Celtic Tiger” and the “shining light of Europe”. The cover illustration shows a glow coming from Ireland on the map of Europe. The seeds had been sown over many years by Government and the enterprise agencies. I have several copies and Members may keep them as icons. The first cover showed poor people begging on the street and it went around the world.

Senator Feargal Quinn

I know the two covers well

Senator Mary M. White

Ten years later we were described around the world as the shining light of Europe. I wish the Minister every success. I am delighted to see a business man as Minister. The world is his oyster; it is there for him to achieve. I also thank him for everything at a personal level.

Senator Feargal Quinn

I thank the Leas-Chathaoirleach for this opportunity and for allowing me to follow Senator Mary White's interesting speech. With the young people in the Visitors Gallery, I read and listened to the Minister's speech and listened to Senator Mary White and others. What impressed me was the fact that the Minister is talking about innovation and entrepreneurship. When I left school many years ago I was the only person in my class of 48 people who planned to go into business, perhaps because I came from a business background. In those days the majority of people had the objective and ambition of getting a secure job in the Civil Service or somewhere similar. I mention this for the young visitors because Ireland has changed, and Senator Mary White has talked about that, particularly in the past 20 years. Senator Mary White was helpful to me last year when I was asked to speak in Argentina and Brazil about entrepreneurship and the Irish success story. I read the book by her husband, Mr. Padraic White and Mr. Ray MacSharry about the Celtic tiger and, as the Minister said, it is like reading an exciting novel to see what happened and find out about the success.

I mention this because of the importance of education, which the Minister of State touched on in his speech. I would love young people growing up to see entrepreneurship as a real opportunity for them, to create their own jobs rather than have somebody else create jobs for them. Education is changing. Yesterday I spoke to the vocational education committees about looking for the customer. The question used to be whether the customer of a school is the student or the parents. Whatever about the past, the customer of a school is the student. In the past we educated people to the age of 19 and told them they had enough education to get a job. Now we have lifelong learning and our job in education is to teach students how to learn because they will have to learn again and again, will probably have four or five jobs in their lifetimes or better still establish their own businesses and achieve five or six different jobs in their lifetimes.

A few years ago I wrote a book that was published in 11 countries and did well in Japan. I have been to Japan several times and got to know Mr. Masatoshi Ito, a Japanese retailer. He visited me a couple of years ago and we toured supermarkets. As we left my Lucan supermarket to return to my home in Howth he asked me when I started in business and how many shops I had at the time. We had 18 shops at that time and I started in 1960 with one shop. He replied that he started in 1952 and that in 1960 he, too, had one shop. I asked how many shops he had now, and after checking with his interpreter he worked out that he had 14,600. He owned a company in the United States called 7-Eleven, among others. I asked Mr. Ito what made him different from all the other retailers who had one shop in 1960. He asked me to let him think about it. Half an hour later as we got out of the car he answered, "Whether you believe you can, or you cannot, you are right." He told me he plays tennis and if he approaches a game thinking he has no chance, he is right, he has no chance. If he goes into the game believing he can beat his opponent, he is also right. That change of attitude has happened and Ireland has gained confidence. There is even a danger we have become complacent about it in recent years. The ability to train and educate for entrepreneurship is essential if we are to create success in the medium and small enterprises and enable them to grow.

In the past few years the Minister for Education and Science asked me to chair the National Council for Curriculum and Assessment committee that introduced the leaving certificate applied curriculum. What an interesting development that was. Until then the only way one could do the leaving certificate was, after two years of study, to go into a room for three hours and write down everything one knew about a particular subject. The leaving certificate applied was different. It said there are other intelligences, not just the ones of communication in written form. Spoken communication is just one example. Professor Howard Gardner of the Harvard Graduate School of Education noted the other intelligences that are not being measured. The leaving certificate applied measured only in written form in those days. I learned that there are bright, intelligent, active young people who are at the back of the class because they were regarded as poor at writing, reading and, perhaps, sums. They were put at the back of the class at seven, ten or 13 years of age, and stayed there.

The leaving certificate applied ensured there would be continuous assessment so that there was an opportunity to judge such children on other types of intelligence rather than just their ability to pass written examinations. One could see people grow and develop and those formerly regarded as failures at the back of the class suddenly became much better. I was very pleased with the Minister of State's words when he talked about small businesses and enterprises in terms of how they interact with those people who believe they have no chance of succeeding without becoming much bigger. The best ideas sometimes come from very small companies that nurture and develop little ideas.

I am patron of the Irish Association of Supported Employment and one of the things it is interested in is the O2 ability awards that Aisling Foundation produce. Last year, a man called Gar Holohan won the award with his company Aura Sports and Leisure. He identified a need for swimming pools for people with disabilities. It was a wonderful success story. There are a number of these fitness centres, and they are not only for people who are disabled. Mr. Holohan was able to include people with varying levels of ability, and they were able to succeed. That came about from the spark of an idea through someone who was innovative and seized the opportunity. We have to encourage everyone to develop confidence in generating and developing new ideas, and show them it is possible regardless of the size of enterprise. The Minister of State is right in his belief that it is only a question of whether one believes one can. If we can instil in people's minds that they can do it, they will achieve far more.

I was on the board of North Dublin Partnership when I was elected to the Seanad and I learned something from the experience. I was disappointed I could not remain with the partnership as an elected Member of the Oireachtas. It was set up in the 1980s to create jobs in Finglas. One of the difficulties, I found, was that there was always an assumption when people in different parts of the country came together to form an association to promote job creation. They would form a committee and then the first thing they did was to send someone to the Government in Dublin to help them develop the enterprise, instead of doing it themselves. I was delighted to find in the North Dublin Partnership a level of enthusiasm which ensured the people there did something for themselves rather than asking somebody else to come in to do it.

One of the points Senator Mary White dealt with concerned the difficulties sometimes encountered in setting up a small business compared to pursuing an initiative to invite in foreign direct investment. I sat on the committee for better regulation and was very impressed that the Government's aim and ambition was to reduce the regulations that stifle business. Approximately ten or 12 years ago a person who was planning to set up business in Ireland contacted me. He did not come to Ireland in the end because he was made more welcome in other countries through the reduction in bureaucracy. In the event, I believe he set up in Scotland instead because at that stage the Scots had decided they wanted these jobs to go to them rather than Ireland. We must always ensure that while our regulations may be in place for the best of purposes, they should not stifle initiative.

One law that affects small and medium businesses concerns me. It was passed by this House, and I had not noticed it until later. It is the Consumer Protection Act 2007, section 48(4)(a), which is concerned with the National Consumer Agency. I remember it going through and I had not noticed, but it gave the Minister the right — although he has yet to empower it — to say that if a customer pays by credit card he or she cannot be charged extra for using a credit card as against using cash. That seemed very sensible as it went through the Oireachtas. However, if the Minister introduces this it means a vendor cannot differentiate in favour of a cash customer. If somebody offers to pay for a product in a small shop by credit card and the shopowner asks for cash instead, he or she will not be able, in the event, to offer a discount for cash — even though the credit card company will take a percentage off the price paid to the retailer. I mention this because it is part of the onus on legislators to use impact analysis on every aspect of legislation. Things we tend to do very well sometimes hinder the opportunity to achieve success in other ways.

I shall leave one thought with Members, because it is something that frequently crops up. Sometimes people make the mistake of trying to win new business all the time instead of looking after their existing enterprise, and this frustrates me. If we could only get it across to people to look after their customers rather than spending time trying to get new clients, that would be worthwhile. Last year I had an experience where my wife told me that a young woman with an English accent had been phoning me, at home. My wife trusts me a great deal, and she was letting me know that this woman had phoned three times and would not tell her what it was all about. Next time I was home, the phone rang and this young woman from England said she represented The Economist newspaper, my subscription was running out, and she invited me to renew it. I was happy to renew it and had seen there was a 35% reduction. She said that did not apply to existing customers, only new ones. She said: “Don’t blame me. I am actually only doing my job”. I no longer get The Economist. My wife takes it, which solved the problem in that way. I mention this because part of the task we have is to persuade people not to expect the Government to do everything. They can ensure the Government opens the doors but must do the work themselves.

Senator Donie Cassidy

It is nice to see the Acting Chairman, Deputy Ann Ormonde in the Chair. I congratulate the Minister of State, Deputy John McGuinness, on his new portfolio and wish him well. I look forward to working with him over the next five years. It is great to see someone who has come with such a wealth of experience, enormous ability, and a large amount of energy. I look forward to very many positive new changes in the portfolio held under Deputy McGuinness as Minister of State. I have been a friend of his for a long time and it is great to see someone holding office who has come up the hard way, a man who was self-employed and made it for himself. Given such a background he has a great chance of making it for the nation.

It is stimulating, too, to be in the presence of Senator Mary White, a very successful entrepreneur in her own right, as well as Senator Feargal Quinn, who is a national figure. I took Val Doonican's one-liner, "Do what you do, do well", to heart when Senator Quinn advised business people to look after their customers. I bow to what he had to say in that regard. The thought for the week, however, is something I gleaned from the Minister of State today, when he said that failure was only something that happened on the way to success. There never was a truer word. I congratulate the Minister of State on an excellent presentation to the House. It was very uplifting and stimulating. I had looked forward to the Minister of State's visit to the Seanad, as had every Member who is here, to hear his contribution and learn of his enthusiasm for his portfolio. It was uplifting.

I agree with the Minister of State's assertion that we Irish should be, as we always have been, even through very bad times, a nation and people of "can do", rather than anything else. We are a very positive nation, which has achieved an incredible success story, particularly over the last 20 years, without any help from the media. The Irish people did it their way and owe nothing to the media.

Senator Mary M. White

Hear, hear.

Senator Donie Cassidy

I have always asked whether there is a paper that will give us half a page of good news per day or a radio station that will give 15 minutes, or a television channel, with the exception of the programme "Nationwide", which we see on our screens three times a week, to tell the success story of the real Ireland and the transformation that has come about. The Taoiseach, when he leaves Ireland, is admired abroad for what he has done over the last ten years as is Ireland for its achievements, over the last 20 years. Everyone comes here to see how the Irish have done it. I do not know whether there is an agenda, and I often tell my friends I do not know one wealthy journalist. I knew one, the late John Healy, but no one else. God rest him, he has gone on to his eternal reward. If one cannot do it for oneself, how can one tell others to do it? If one has the will and determination, it is bound to happen if one lives in Ireland as one's turn will come.

With regard to the past 20 years, I pay tribute to Ray MacSharry, the late Charles J. Haughey and Michael Mullen because they gave us the national understanding in 1987 which stopped all the strikes. Those of us who were Members of the Oireachtas in those days know that every Wednesday we had strike after strike. Everyone was up in arms over the lower rate of income tax of 35%, a higher rate of 65% and a 2% health levy. No one could survive. Is it any wonder we had the black economy. Anyone who kept a business going in that time deserves a gold medal for endeavour. We did it and we are where we are today with a tremendous success story. It has been discussed from the high heavens and I wanted to state it today.

As the former Chairman of the Oireachtas Joint Committee on Enterprise and Small Business who held the post for the previous five years, I visited many places throughout the world. I was uplifted with what Enterprise Ireland did under the stewardship of Frank Ryan, its chief executive and one of the finest men I ever met who was associated with a Government agency. If the Minister of State listens to Frank Ryan and goes with Enterprise Ireland to South Africa, Canada, the United States, India, China, Abu Dhabi, Dubai and Riyadh, he will see the challenges facing Ireland. I visited all of these places as Chairman of the committee.

I salute the teaching profession and those teachers who gave of their time over generations and decades to give us the vibrant economy we have today. It was transformed through education, free travel and third level institutes. It is on this subject I wish to speak. Ireland's future over the next 20 years relies on the success of third level institutes such as those in Letterkenny, Sligo, Athlone and Carlow. The poor man's child and middle to lower income earners' sons and daughters got to where they are today because of third level institutes. The institute of technology in Athlone has 6,500 students and is thriving. Long may it continue.

I visited Waterloo University, approximately 20 miles outside Toronto in Canada. This is where BlackBerry technology was created. I met two of the three young men who created it and one of their fathers given them a loan of 100,000 Canadian dollars. The area in Waterloo to which they went is now Waterloo University. They reversed the policy of universities in other parts of the world, including Ireland and Europe, whereby one signs over one's rights as a scientific innovator and if one creates something, one gets a percentage back. In Waterloo University, if one creates something, one owns the intellectual property in perpetuity and leases back a portion of it to the university.

If the institutes of technology were to adopt this policy, not alone would we attract the best brains in Ireland who want to own their intellectual property but also the best brains of Europe. The greatest success in the United States and Canada is at Waterloo University where one can own one's intellectual property. This is where the future of Ireland lies with regard to research and development and intellectual property.

The Government should consider increasing the points system for mathematics and science to encourage students into these areas because it is where future jobs lie. Perhaps the Minister of State would intervene to persuade the Minister for Education and Science to examine this. It was stated at a meeting of the Fianna Fáil parliamentary party that this is an important area into which students should be encouraged. Multinationals will locate where the student brain pool exists and this is how Enterprise Ireland, the IDA and the Department will persuade people to stay.

I wish the Minister of State all the luck in the world and I look forward to his many future visits to the Seanad. I hope to participate in future debates. We will help in any way we can with our experience which cannot be bought.

Senator Alex White

I also read The Economist, as do most of the contributors to this debate. It is interesting to reflect on the rather stark example given by Senator Mary White of the contrast between 1997 and 2007. However, I would not take the measure of success of The Economist as being the only such measure for an economy or society. It is interesting and important but it is not the sole measure. We should all accept this.

Senator Mary M. White

It influences multinationals coming to Ireland.

Senator Alex White

It is true major developments have occurred over the past decade and we all rejoice in the economic success of the country and participated in it. Various Members have come at this debate from various perspectives. The Minister of State, whom I welcome to the House, approaches it having a strong background in business as do Senators Quinn and Mary White.

As we are ticking the boxes on where we come from and what experience we have, my experience of dealing with small and medium-sized enterprises is as a practitioner in the non-trade sector, to which Senator Mary White referred, dealing with small business facing employment law issues. This is an area of regulation worth considering. Small businesses often find themselves up against it when they run into an issue, whether it is dismissing someone or facing a discrimination case. I am conscious of the frustration many businesses have. They do not necessarily believe the laws are bad or wrong, although some may hold this view. There is a lack of immediate support and guidance for dealing with these crises which can suddenly arise in the course of business, especially for a small business in the early stages of its development.

I often have seen people with fantastic energy who came together with a good idea in the information technology sector but they experienced a people management problem in the first six months or first year which caused difficulties. The representative bodies for employers do good work in assisting people in this situation. When we discuss regulation we tend to concentrate on financial matters such as those touched on by Senator Quinn. We should also consider the question of how we can better support small businesses and enterprises in the context of developing the laws by which they are bound, particularly employment law.

We can have vibrant and robust business together with strong protection of employment rights. The two are not mutually exclusive. Employment law has expanded in a piecemeal manner in recent years. European directives have been introduced which deal with part-time work and fixed-term contracts. These are minefields to navigate for small businesses run by one or two people. They want to look after existing customers and perhaps look to the future and new business. However, they see new regulations introduced weekly or monthly covering holidays, working time or equal treatment. We should consider streamlining some of this. Some of it is dealt with by the Labour Court and more is dealt with by the Employment Appeals Tribunal. One tries to explain to people that not all cases are brought before the Employment Appeals Tribunal. Some cases must go before the Labour Court while others go to the Rights Commissioner and then, in the event of an appeal, to the Labour Court. The different bodies have interlocking jurisdictions. Although the Department has given the matter some consideration, it would be productive to consider rationalising which types of cases should go before which tribunals. Such an analysis could help employers make sense of their responsibilities.

In respect of the wider question of regulation, the Labour Party acknowledges that we have achieved substantial progress through regulation, a word that tends to be accompanied by the word "burden". While regulation is frequently a burden for the person who must deal with it, it generally delivers a gain for wider society. For example, having equal treatment in the workplace, basic minimum holiday entitlements, regulations to prevent abuse of employment contracts and so forth provides a social gain which improves the quality of life. Once, during a debate with a person who reads The Economist more enthusiastically than I do, I responded to my opponent’s repeated use of the term “burden of regulation” by asking whether one could not make the case for describing regulation as an achievement. There is a wider level of protection which we should defend. The Minister of State’s concerns relating to the manner of its implementation in individual businesses is shared by Senators. Regulation should not be unnecessary or disproportionate to its objective and should be applied efficiently.

Like Senator John Paul Phelan, I found much of the Minister of State's contribution to be very thoughtful. It contained little with which I could disagree, especially regarding the education system. He is correct that education should not focus solely on honing individual skills. Having reading about this issue, it appears that even in countries such as the United States, employers seek to employ rounded individuals with an ability to make decisions and analyse problems. While individual skills are important, especially in a technical field, we need to have strong, innovative individuals with analytical and problem-solving skills employed in businesses across the private and public sectors. Innovation may be a skill with which one is born but it can also be developed. An education system that is strong at all levels encourages people to seek to solve problems as opposed to merely fitting in as cogs in the system.

The Minister was also correct that academics must play a greater role in this debate. I do not quite need to declare an interest in this regard but I am married to an academic. On a more serious note, the Minister of State makes a fair point that we want public intellectuals and experts, for instance, those teaching science or business at university, to contribute their ideas to this debate. Dr. Edward Walsh, formerly of the University of Limerick, springs to mind as a person who played this type of role. While I did not always agree with his positions, which were sometimes a little too far to the right for my liking, he made a strong contribution to public debate by becoming genuinely engaged with these issues.

The Minister of State referred to various public bodies such as the IDA, Forfás and Enterprise Ireland and singled out the Revenue Commissioners as an organisation which has developed many of its procedures to a high standard. We should do more than pay lip service to the important role of these organisations and the public service in general. We should also realise that while the public service must become more efficient in certain areas, it is at the heart of what we need to do because it must implement the new and changing policies, initiatives and ideas we develop. Senators had a little crack at the Minister of State on account of certain remarks he made about inefficiencies in the public service and in this context he is correct that inefficiencies exist here and there. However, this debate must not stray to the extent that we fail to recognise the vital role of the public sector in advancing the issues and demands under discussion. It has the skills needed for this purpose and is well equipped for the task. It is not enough to say, as the Minister of State did, that a partnership is needed. We must support the public service.

Senator Dan Boyle

I welcome the Minister of State to the House. We served together on the Committee of Public Accounts for five years, during which we learned the value of spending public money wisely. While this is a virtue in the running of any business, unfortunately it is not always properly recognised in the expenditure of public moneys. I represent the Green Party which, through political discourse, has allowed itself to be portrayed as lacking knowledge of economics and failing to engage in economic debate. As my party's spokesperson on finance, I believe I have helped dispel this myth.

Another challenge for my party is to counter the view that the Green Party has little interaction or involvement with industry, especially small business. My party leader, the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, ran a successful language school, an important service industry. Our deputy leader is still involved in running a chain of bookstores, while the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, ran a successful cycle tourism business.

I place myself in the same pantheon. To contest the industrial and commercial panel in the Seanad elections of 1997, I had to justify to the Clerk of the Seanad, who was a hard woman to convince in these matters, that I had a direct involvement in industry and commerce. I am a director of several companies involved in arts and environmental protection, which are limited by guarantee which means they are not trading entities. I was also a director of a charity shop for the Earthwatch organisation. This was a strange contradiction in terms in the sense that it provided low price goods to raise funds for a charity and did not make a profit. While it did not qualify as a business activity, the Clerk of the Seanad was somewhat lenient in accepting my nomination.

I raise these matters because I have gone on record since in other political and economic debates as a strong supporter of the teachings of Adam Smith who has been adopted as a guru by other political parties, especially those of the right. Adam Smith's writings contained strong warnings against the emergence of monopoly capitalism. The type of economic model he tried to promote was based on multiple small-scale businesses operating in the most local base possible. This is the essence of Green Party economic policy and sums up the type of economy we should strive to achieve.

The economy should have an appropriate level of foreign direct investment. It should not be so reliant on FDI that it is left open to what has been described in terms of currency fluctuations as an "asymmetric shock". The world economy is at a crossroads and we must ensure we have a strong indigenous economy that will survive with the least possible damage the impact of probable changes in the global economy. I would like to think measures are in place that help us deal with this. The contributions to this debate already, have talked about the need to foster the ethic of small businesses and to encourage as many practitioners as possible. Part of that debate has been the role of regulation, as mentioned by Senator Alex White. I would be supportive of the need for regulation and the protection of consumer interests.

In establishing and encouraging new businesses we must strike a balance between the extent to which people with innovative and entrepreneurial ability should go towards making sure their businesses take hold and the extent to which they should be seen to be agents of the State. Many people establishing new companies are frustrated that the balance in that regard does not weigh in their favour. There is a great deal of paperwork and regulations to which people must adhere before setting up a business and, as legislators, we must ensure the balance is weighted as far as possible in favour of those trying to establish businesses. Some improvements have been made in that area. For example, the VAT registration threshold has been raised a number of times in recent years.

One amendment to a Finance Bill I managed to achieve in my five years as an Opposition spokesperson was when Charlie McCreevy was Minister for Finance, and that was to get rid of a lower threshold for research and development. I made the argument that if we were to get future economic success from research and development we were as likely to get it from single or two person operations operating out of a garage as from somebody working in the highest tech laboratory possible. I listened with interest to what the Minister said in this regard.

The European Commissioner with responsibility for science and research spoke recently to the forum on Europe. One of the arguments I made to him was the need for a proper balance in terms of allowing research to take place for research sake, for a scientist to operate in a situation where he or she is not wholly concerned with commercial matters because much research and development is sponsored by commercial interests. By the same token we have to ensure that research and development money which is provided by the State does not all go through our educational institutions. It is here that we are possibly getting the balance wrong. Money is being absorbed into our third level education system that might be better directed in research and development terms at people establishing small businesses to help them with innovation and marketing needs. It is a balancing act in terms of regulation and State intervention.

I get a sense of cross party acceptance that the need is to ensure the balance should be weighted in a particular direction. If that can be achieved the uncertainty that exists at a global level in terms of the world economy can be overcome. I am confident the measures in place will help us do that.

Senator Paddy Burke

I wish to share time with Senator Doherty.

Acting Chairman (Senator Ann Ormonde)

Is that agreed? Agreed

Senator Paddy Burke

I welcome the Minister of State, Deputy John McGuinness, to the House and wish him well in his new portfolio. I have no doubt he has a good grasp of the small and medium size business sector. It was refreshing to hear him speak on the matter. I shall confine my contribution to a few questions to the Minister of State.

We have lost our textile industry and our indigenous craft industry. During the past ten years we have witnessed a massive explosion in the retail service industry. My town of Castlebar has more than doubled in size during the past seven or eight years, yet no manufacturing jobs have been created. All the jobs created are mainly in the service and retail sectors which is worrying from an economy point of view. I presume the position is similar in towns throughout the length and breadth of the country. Some the stores are massive, probably with massive overheads in rates and development charges. Given that the Minister of State mentioned development charges, these can be quite severe on a person starting up a business. The Minister of State appeared to suggest that the new report made recommendations to county managers to adjust development charges. Does this apply to the retail and the service sector also, as some of the units are quite small, or is the Minister of State speaking specifically about industrial zones? Senator Cassidy is right in saying the third level institutions linked to small indigenous businesses in the local area is important and is the way forward. The same applies to research and development.

I attended a launch in Castlebar of Baxter Healthcare and congratulate the company, the IDA and the Government on an investment of €75 million. That no new jobs will be created means there is a change in IDA funding policy. Do county enterprise boards and Enterprise Ireland refund companies where jobs are maintained rather than create new jobs? This appears to be a change in IDA policy.

Senator Alex White

Keep the jobs.

Senator Paddy Burke

I would appreciate if the Minister of State would comment on that issue.

Senator Pearse Doherty

There is no denying that the State has made remarkable economic progress during the past 15 years and the small and medium enterprises have benefited somewhat. There are a number of areas where we can help SMEs to develop. There is an acknowledgement that SMEs are the best way to produce new jobs and certainly the best way forward for the regions. I stand here as one who is an employer but not in enterprise. I come from an area that has been hammered by job losses, many of which have been foreign direct investments, where family members and friends have been left unemployed as a result.

There is no doubt the Government has committed endless studies, plans, documents and explanations on the way forward. It appears there is always a one size fits all approach, what works in Dublin is supposed to work in the regions but it is not like that. Speaking to SMEs there is a consensus about what needs to be done. There is a need for a marketing service to help them market their products, for administrative supports to reduce the paperwork burden, for technical supports for software communication, Internet business, opportunity and customer management systems, and a business school expertise in managing growth and cash flow problems. While there are many other issues I do not have the time to dwell on them.

In regard to the national training fund, to which businesses contribute, there is an appreciation that the upskilling of employees does not meet the needs of the industries that require it. There are also other issues in terms of the all-Ireland development and the difficulties SMEs experience with legislation, particularly in the Border counties which is day-to-day problem. There is also the issue of the demand for an increase in the minimum wage. While we appreciate that the rise in costs, particularly wages, has a large impact on SMEs they must accept that the cost of living in the State requires a certain wage to be paid to people to survive. What is pushing up those wages can be tackled and it can help relieve the burden on SMEs. Housing, healthcare and child care are just three areas where costs have risen beyond all reasonable expectations. To meet these costs people need a fair wage. If the Government progressively intervened in these areas some of the pressures would be taken off the public and the business world.

Minister of State at the Department of Enterprise, Trade and Employment (Deputy John McGuinness)

I thank Senators for their contributions to this debate. It is an opportunity for me to listen to all parties and what they have to say on the SME sector and the State agencies that guide us through this process to sustain jobs and win new contracts, be they IDA or Enterprise Ireland.

Senators John Paul Phelan and Alex White referred to the public service, one with regard to its deficiencies and the other with regard to the need to acknowledge the good work being done. In my contribution, I acknowledged it is undoubted that there are decent, hard-working people within the public service delivering policies on behalf of the Government. The question is whether they have in place the appropriate dynamics or systems to deliver to an economy that is now very different and dynamic, and where demands change on a regular and immediate basis.

My suggestion is that we need reform, and that we need to look at the elephant in the room as well as the changing of the old order. We need to ensure the public service has the processes and systems in place to allow it to progress, while at the same time releasing the new energy and liberating public servants. The unions and the Government need to work in partnership, with all in the political system, to make this happen.

I constantly hear complaints about delivery within the public service. I support the need for change and the need to confront the elephant in the room. I will not stand back from this debate because it is one this country needs. There is benchmarking for those employed in the public service but there is another side to the issue. The private sector demands that if one is paid on one side, outturn and performance should be measured to ensure we are getting the best for our country. The system in the public service does not allow this to happen.

I listened attentively in the Dáil to Deputy Michael D. Higgins, a politician I greatly admire. What he has to say is common sense and is usually part of an excellent contribution, regardless of the subject of the debate. He commented on the morals of those in the world of commerce who have their snouts in the trough and are getting an enormous amount of money in salary and bonuses. I suggest that, through the Committee of Public Accounts — Senator Boyle referred to this point — we need to examine further the morals of those in the public sector, given that the members of the committee see evidence of millions of euro being spent incorrectly or lost to the economy because we simply do not have the systems in place to deal with the issues that have arisen.

These are the questions we need to ask ourselves and it would be wrong of us, as public representatives, not to do so. If we question the performance of the private sector and insist on best practice and regulation, with which I agree if it is not too heavy, we have an equal obligation as public representatives and legislators to ensure the best performance from the public sector and to ensure we give every public servant the opportunity to perform in a system that is modern, dynamic and can respond to the investment being made in it.

Through the years, we gave that system nickels and dimes because we did not have funds available but we are now spending billions of euro. Members should watch the Committee of Public Accounts and they will understand this change. I worked with Senator Boyle on that committee and saw the change in spend. When we focused on roads infrastructure and other projects, we achieved value for money and ensured that contracts came in on time. This in turn serves the development of the economy because it is infrastructure that is most needed, as noted by Senator John Paul Phelan and others.

I am in favour of and support those who work in the public service. However, we need to demand the same from the public sector that we would from a normal modern business dealing in global markets. The money collected with such diligence by the Revenue Commissioners needs to spent on behalf of the taxpayer with the same degree of diligence. We should expect this from everyone, including politicians, who should be judged on their outturn.

I disagree with the huge amounts paid in bonuses to individuals in the public sector. Bonuses must be earned and must include a performance element. If not, how will those public servants further down the pecking order view them? As with the call to academics in terms of education, we need to call on those who serve the system. Since I made my public remarks in the Dáil and elsewhere, a great number of people in the public system and the trade union system, and those working in and outside this country, have agreed that change is needed. I would be wrong not to say this because it is what I believe, as much as I passionately——

Senator Alex White

Will the Government move forward the process?

Deputy John McGuinness

Yes, but everyone of us has an obligation, the Opposition as much as anyone else.

Senator Alex White

Initially, the Government has the obligation.

Deputy John McGuinness

Let us move ahead in partnership and acknowledge what needs to be changed. I am up for it, and everybody else should be up for it also.

Senator Alex White

The Opposition parties are up for it as well.

Deputy John McGuinness

We must do business on behalf of Ireland.

Senator Alex White

The Government should come forward with proposals and we will——

Deputy John McGuinness

I respect the work done by the county enterprise boards. I want to see them coming forward with initiatives on marketing their own areas. Within the work they do is the answer to some of the queries that have been put to me in this debate, including Tech-Check in terms of technology and the support from the mentoring system, which is available for every company. I was a member of the county enterprise board for many years and know that any professional intervention required by a company will be supported by these boards. The questions I have been asked have already been answered by the investment made in them.

With regard to upskilling, there is regular investment year on year, now more than ever. Skillnets is a very successful programme delivering upskilling to every business one can imagine which wants to become engaged in the programme. We must, however, build on this progress. Such programmes are not a permanent answer but are simply what will serve our economy for the present. I called earlier for us to be flexible in our approach to this issue.

I do not agree with my constituency colleague, Senator John Paul Phelan, that this is about the blame game. It is about every Member of the Dáil and Seanad recognising the changes that must be made in the interests of the economy. With regard to Enterprise Ireland, people must always benchmark themselves against somebody else to see whether they can make a difference in terms of what they do, and thereby achieve value for money for the investment being made. The same can be said of the IDA.

Profit is the measure of performance in the private sector. Profit in the public sector is public satisfaction — it is about having people receive proper service from the public service and therefore not turn up to their public representative's clinic at weekends. This is how it should be measured.

Reference was made to broadband, which is fundamental to most businesses. Everyone needs it and demands it. It is up to companies like Eircom to unbundle the local loops, get involved in business and work with the Government to capitalise on the investment that has already been made in local area networks and municipal area networks. The ESB has rolled out technology and fibre-optic cable across the country but others are afraid to take this, the "last mile" — the Americans are probably correct when they refer to bringing it the "first mile".

There is also a need for people, not just businesspeople, to demand a service. We need to encourage by proper marketing the uptake of this service right to the individual's door. We need to encourage Eircom in this regard. I hoped when Babcock & Brown acquired a major stake in Eircom that we would see a huge concentration on that market but it has not happened. Public engagement on this issue is required. The investment already made by the Government needs to be protected in terms of rolling out broadband at the required level.

I have a firm belief with regard to local government charges and rates and I agree with Senator Paddy Burke that there is a need for focus in this area. These charges affect the growth of business because people are afraid to move forward due to the hefty charges for planning fees and other contributions. There is a knock-on effect given that, for example, a premises would be re-rated if the owner took the initiative to expand a business, which acts as a disincentive.

I am not afraid to make this point. It may not be the proper to do so in terms of Government but we need to acknowledge the problems that exist if we are to correct them. To achieve this, we should work through the Departments of the Environment, Heritage and Local Government, Enterprise, Trade and Employment and Finance to find some equitable way of funding local government.

My father was in local government from 1950 and I spent 25 years in local government. During all of that time and since, there has been ongoing debate about the funding of local government. There is a need to examine what is happening with regard to such charges. The appropriate recommendations for change should be brought forward, if necessary, and I believe they are necessary. It is only by having this open and frank discussion in the Oireachtas, however, that we can look these problems in the eye and act on behalf of Ireland plc. If we do not do so, we are the ones who will suffer at the end of the day.

Education was mentioned a number of times in this debate. I firmly believe in the role of the educational process in fostering budding entrepreneurs and, to this end, the engagement of county enterprise boards at secondary level is essential. It must be explained to those who are interested in entrepreneurship and have the ability to achieve it, that business is not just for somebody else, it is for everybody. It is up to high achievers with a passion for business to become involved and do it their way. Irish people have that understanding of business, which I have seen in play on various trade missions. I am impressed by what such business people can do. The Government and its agencies need to keep up with the pace of such developments, as well as understanding their demands and working with them. Entrepreneurs should work with colleges and county enterprise boards in order to show how it can be done. Such interaction must take place.

We sometimes refer to job losses, particularly those linked to foreign direct investment. However, when people are employed by a dynamic, foreign company they learn a lot and upskill. A method should be found to acknowledge the credits one can build up as a result. Inevitably, when someone leaves a dynamic and constructive company — and they are all dynamic in how they deal with staff and approach markets — such experience can place a person at the cutting edge of the development of indigenous business. One leaves with a different culture and mind-set, so we should acknowledge by certification the process of upskilling that takes place within such companies. In that way, workers can bring into the work place, and within their own families, the culture of "can-do", along with methods of achievement which can be put into practice in one's own community. That is what it is all about. We should examine ongoing matters in a different way. Business has to do it and so should we.

I am passionate about the role I play within the Department of Enterprise, Trade and Employment. In addition, I am hopeful for continued cross-political interaction on the issues of the day. I hope that in some way, through that interaction, we will be able to bring about some form of constructive change for the SME sector and others that make up our economy. I thank Senators for the opportunity to address the House.

Sitting suspended at 5.05 p.m. and resumed at 5.30 p.m.

Seanad Éireann debate - Wednesday, 12 Dec 2007

Small and Medium Enterprises: Statements.

Seanad Éireann debate -
Wednesday, 12 Dec 2007