I welcome the Minister of State to the House and wish him a happy new year.
Report of Advisory Group on Small Business: Statements
I thank the Acting Chairman for her best wishes which I would like to return.
I welcome the opportunity to discuss the importance of the small business sector to the economy and to hear statements from Members on the report of the advisory group for small business, The Voice of Small Business — A Plan for Action, a copy of which all members received last December. It is a clear plan of action. I thank the Cathaoirleach for setting aside time to facilitate statements on the report and I look forward to the valuable input of Senators. I will listen carefully to their comments. I am sure members of the advisory group will be keen to hear their views and will reflect on them in the context of their future work. That is why it is important that we debate the report and take on board the recommendation of Senators and their experiences in small companies. Their comments will also be constructive in future discussions with Ministers and their officials in addressing the various recommendations contained in the report.
As Minister of State with responsibility for small business, I want to be the voice of small business to the Government to reflect the sector's concerns and bring forward proposals to assist businesses. It is vitally important that, as a Government, we communicate on an ongoing basis what we are doing for small business and that we hear first hand what issues need to be addressed more urgently and what measures can be considered to further support small business. One of my first initiatives was to consider the need to have continuing dialogue structures in place whereby the concerns of small businesses could be brought to the attention of the newly appointed Government.
This led to the establishment of the advisory group on small business, which was launched by the Taoiseach on 16 June last. In my capacity as Minister of State with responsibility for small business, I chair the advisory group. The objectives of the group are to facilitate structured and regular dialogue with representatives of the small business sector on issues of concern — the purpose of the debate is to ensure we take on board the issues and concerns of Senators who deal with business people on an ongoing basis; to promote the economic development and job potential of the sector having regard to the current restraints imposed on the national finances; and to recommend action points and follow-up for onward reference to Government.
In identifying members to serve on the advisory group, I paid considerable attention to having a well balanced representative group with an emphasis on individuals who had first-hand experience of running businesses, as well as including representatives of the key State enterprise support agencies. Thus, the group's membership includes individual business people and representatives from Chambers Ireland, the Credit Review Office, the Irish Hotels Federation, ISME, the Small Firms Association, the county and city enterprise boards, Enterprise Ireland, Forfás and officials from my Department. Forfás and my Department act as secretary to the group and Forfás provide backup research and in-depth analysis.
I acknowledge the hard work and dedication of all those involved in the advisory group on small business. Their involvement is entirely on a voluntary basis and involves no cost to the taxpayer. I thank them for their work to date and look forward to their further contributions in following up on the report and in addressing new issues.
The advisory group addressed some key issues it felt were important in assisting the small business sector to cope with the current economic crisis and to prepare businesses for future growth and job creation. The group's report was finalised and submitted to the Taoiseach, and was published on 23 November 2011. Senators will note that the report addresses some big ticket items as well as more focused issues. The themes addressed include lending facilities and access to finance, labour costs and flexibility, local authority structures, costs of doing business, access to public procurement, the hidden economy, competitive practices, improving cash-flow, mentoring and advice, management development, access to information, and insolvency and debt resolution. The advisory group has categorised recommendations under immediate, short-term, medium-term and long-term actions. The Government is already working on many of the issues identified by the group and others will be fully considered and determined in the coming months.
In regard to lending facilities and access to finance, the Government, through the Minister for Finance, has taken action to reorganise, recapitalise and de-leverage the domestic financial system in order to restore the banks to health and provide credit to business. In addition, the Government is committed to introducing a temporary partial credit guarantee scheme and a separate micro-enterprise loan fund to supplement normal bank lending and to provide additional lending where specific measures are warranted. The Minister, Deputy Richard Bruton, is working to implement these two initiatives. Initiatives also taken by the Minister in regard to wage settling arrangements under EROs and REAs are addressing labour market costs and flexibilities. Local authority structures and reforms are being advanced by the Minister, Deputy Phil Hogan.
As an immediate response to some of the other recommendations in the report, the Government has immediately committed to five recommendations for action. These are pragmatic ideas which are capable of early implementation to help troubled small businesses obtain supports, address some of the challenges of the hidden economy, assist their cash flow by promoting prompt payments and seek ways to reduce administrative burdens. The initial actions to be delivered are as follows. First, to develop a simple one-page guide setting out warning signs to encourage small businesses to ask for help and outline services available. This is aimed at supporting businesses that are in crisis and unsure where to turn for help and advice. Second, to audit and review the multiplicity of licences required by businesses to assess the potential for discontinuing some licences and for amalgamating licences. This will cut down the regulatory burden on companies and the level of inspections as well as the cost of regulation, which can be critical for companies which are currently over-regulated. Third, to introduce additional scanning at ports to combat the illicit tobacco trade, which has such a detrimental impact on small retailers, as highlighted in a television programme earlier in the week. This would be very cost-effective given there is currently a huge illicit trade. All forms of smoking are detrimental to one's health but what is being imported is even more detrimental. Fourth, to make available an official notice regarding the Government's current 15-day prompt payment practice to support full compliance for all public sector bodies and agencies. Fifth, to develop a voluntary code of conduct on payments within the private sector, with the aim of reducing payment terms from the current average of 70 days.
The remaining recommendations will be considered and discussed with relevant stakeholders to determine which ones may be advanced. The report will also feed into the development of the action plan for jobs being finalised by the Minister, Deputy Bruton.
In parallel with the establishment of the advisory group for small business, I have also established an interdepartmental SME liaison group. This is to ensure that each Department of State clearly identifies the importance and concerns of the SME sector and ensures that actions taken have full regard for their impact on SMEs — the small business test. This group will also focus on those recommendations of the advisory group which require cross-Government implementation. In every Department, there is a small business element. It is important to have joined-up thinking.
The Government is fully committed to small and medium-sized enterprises, as evidenced by the programme for Government, the jobs initiative, budget 2012 and the Government's action plan for jobs which we will announce shortly. The Government is acutely aware of the importance of the small business sector and its potential for generating employment. Our challenge continues to be where to target our efforts and financial supports and interventions to best effect in the coming months. When one considers the 200,000 companies employing 650,000 people in a €90 billion economy, the backbone of this economy is small business.
In these constrained economic circumstances, this requires difficult choices to be made in the face of enormous challenges — choices to ensure that we achieve change and make a real difference, not only to the business community but also to balance the human, social, and economic effects so as to protect and enrich the living and working conditions of all the people we represent.
On the importance of small businesses to the economy, my aim, as Minister of State, is to ensure that small businesses will continue to play a central role in our economic recovery. Their ability to succeed and grow underpins our future potential for jobs, growth and prosperity. As I stated, there are almost 200,000 small businesses in Ireland, involving a remarkable 650,000 employed throughout the country. That is why we want to get the views of every Senator here on how best we can strengthen that role. Encouraging even 25% of those companies to create one job each would create 50,000 jobs. Currently, small companies are the most effective way of getting people back to work. Small businesses are operating in a particularly difficult environment, and it is vital that we continue to focus on actions that achieve positive improvements in the operating environment for small businesses.
In the context of budgetary allocations for 2012, even at a time of declining resources, my Department's budget is being broadly maintained, with current spending at €366 million slightly lower than the 2011 allocation but capital spending at a record high of €514 million. This will directly support the enterprise sector. In the next two years, the Government will commit approximately €1 billion in enterprise capital supports. It is a considerable amount of money for the area of investment in jobs and in the future of Ireland. The Government recently committed to a multi-annual action plan on jobs, with quarterly targets and a strict implementation process. This will be key to delivering a rolling set of reforms across the economy and Government to support the Government's first priority, which is job retention and creation.
Access to finance is the key issue for the small business sector. We need a financial system that is better suited to the needs of our smaller company sectors. Financing the productive capacity of the economy is critical to long-term economic success. While large businesses have various options open to them, including the capital markets, small businesses are heavily dependent on the banking system. The initiatives taken by my colleague, Deputy Noonan, Minister for Finance, to restructure and recapitalise the banking system were the principal responses to making credit available.
The recent restructuring of the domestic banking sector creates capacity for the pillar banks to lend in excess of €30 billion over three years to the SME and other important sectors. The Government has imposed lending targets on the two domestic pillar banks for the three calendar years from 2011 to 2013, inclusive. Both banks are required to sanction lending of at least €3 billion in 2011, €3.5 billion in 2012 and €4 billion in 2013 for new or increased credit facilities to SMEs. The banks have informed the Department of Finance that they expect to meet their lending targets for 2011. This will be independently benchmarked.
A number of targeted initiatives are being developed by my colleague, the Minister for Jobs, Enterprise and Innovation, to build on the recapitalisation platform and ensure a flow of credit to businesses in order to sustain jobs and generate new employment opportunities. These initiatives include the temporary partial credit guarantee scheme. The introduction of a targeted temporary partial credit guarantee scheme was one of the commitments announced in the jobs initiative launched in May 2011. On 22 November 2011 the Government approved the design of a temporary partial credit guarantee scheme and tenders have now been invited for an operating body for the scheme. The invitation to tender was published on Monday, 5 December 2011 and we intend to roll out the scheme at the earliest opportunity. In parallel with the procurement process the Minister is proceeding to draft the necessary legislation to underpin the scheme, which is designed to assist viable SMEs on the margins of commercial lending decisions to gain access to credit.
In November 2011 the Government also sanctioned the establishment of a microfinance loan fund to generate up to €100 million in additional micro-enterprise lending, which will benefit more than 5,000 businesses over a ten year period. Loans of up to €25,000 will be available in all industry sectors for micro-enterprises with up to ten employees. It is the intention to establish this facility in the first quarter of this year. Both schemes have been very effective in other jurisdictions.
The temporary partial credit guarantee scheme and the microfinance loan fund will not solve all the issues that arise in respect of access to credit but they will form key components in a suite of initiatives aimed at ensuring the flow of credit to SMEs to sustain and expand employment. Both confidence and credit are needed to sustain the domestic economy, which is worth €90 billion. If people have confidence to spend in the economy, businesses will be more viable for lending.
In conjunction with the Department of Finance I will be holding a series of regional meetings to discuss the issue of access to bank credit with local stakeholders. These meetings will explore the findings of the recent Mazars survey of credit demand, which was published by the Department of Finance late last year, and consider options for Government action to improve access to credit for SMEs. Mr. John Moran, the head of banking in the Department of Finance, will also attend the meetings. We hope to engage with all SMEs, chambers of commerce and business people. If difficulties arise on foot of the Government's recapitalisation of the banks, I want to hear about them first hand. The dates for the meetings will be announced next week. They will allow me to hear the views and experiences of local businesses and their representative groups. Local bank representatives will be invited to attend and State agencies will also discuss access to bank lending.
I ask Senators for their opinions on the issues that arise for small businesses. Their recommendations will inform the Government's ongoing work on job creation and supporting small businesses. This feedback will complement the information supplied in the Mazars survey and ensure future Government policies on credit to SMEs are based on as much information as possible and are implemented at the earliest opportunity. We hear about people who are not getting credit. We want to hear from businesses and representative bodies in a public forum.
To assist the cashflow and working capital of small businesses, the 15 day prompt payment arrangements have been extended across the wider public sector for invoices received on or after 1 July 2011. Central Government Departments have been paying their invoices within 15 days since June 2009. The first set of returns from public sector bodies covering the period 1 July to 30 September 2011 has been collated by most Departments. In respect of my Department, the first set of returns was published on the Department's website on 4 November 2011.
As much as €15 billion per annum is spent in the economy through public procurement. Greater emphasis is being placed on making public procurement more accessible to small businesses, especially in seeking to foster greater small and medium enterprise, SME, engagement in developing innovative products and services to meet the needs of public bodies. It is important, given that public contracts are subject to EU procurement regulations, that the tender arrangements in place facilitate and support Irish companies, especially in the SME sector which is a critical part of the economy.
PRSI changes were made as part of the jobs initiative to encourage employers to recruit new employees. Reviews of the sectoral wage agreements pertaining to hotels, restaurants, catering and construction are being carried out to improve competitiveness.
Small businesses are not only a vital part of the economy, they also play a vital role in our society and local communities as well as economic regeneration. It is important that State agencies work with communities to create employment. The Government will work with Enterprise Ireland to support more than 100 community based economic development companies which are doing a successful job. I intend to continue to ensure the business environment is supportive of small business. Our future economic prospects depend on sustaining our strong entrepreneurial spirit, even in the face of unprecedented economic challenges. The Government is focused on ensuring small businesses are supported in every way to develop their business, increase exports, create jobs and rebuild the economy.
Senators will have heard the good news today from Bord Bia that the value of food and drink exports increased to €9 billion last year. Enterprise Ireland companies increased the value of their exports to more than €15 billion this year. Foreign direct investment is highly effective but we need to lift the domestic economy, consisting of 200,000 companies employing 650,000 people in an economy worth €90 billion. The small business sector will create jobs and rebuild the economy. The various Government initiatives I outlined and the work of the advisory group underpin this supportive business environment.
I am pleased to come before the House with the report, which is an excellent document, albeit of a preliminary nature. Having attended meetings around the country at which I listened to people involved in business, I know people want straight talk and action. If people in small companies are supported, they will create jobs at little or no cost to the State. I will listen to the ideas and recommendations of Senators and hope we will be able to work on them in government.
I thank the Minister of State for circulating a copy of this exceptional document with a handwritten letter. We have reams and reams of reports, some of which are boring and others very reasonable. The document before us is top notch and I am highly impressed with it. As a business person, I note it highlights the issues of importance to me.
The Minister of State drew attention to the role of small business. It does not do any harm to point out that small businesses are defined technically as companies which employ fewer than 50 people. The vast majority of small businesses employ fewer than ten people. The people who start up businesses, in particular small businesses, should become heroes in our community. These people have taken a risk and have gone out on their own. Starting up a business is very demanding. I did so myself with my colleague, Connie Doody. We worked 24 hours a day, seven days a week for 16 years. We worked Saturdays, Sundays, Christmas Day and St. Stephen's Day. It did not matter what day of the week it was. That is what it took to get the business started.
We started in Connie's kitchen and moved from there within three or four months. Now more than 200 people are employed in Lir Chocolates. It took perseverance and steel. Every day we faced a mighty challenge which could have put us out of business but the two of us had a first class relationship. We never fell out in those 16 years. When I have differences of opinion with my colleagues in the Seanad, I comfort myself by saying that we succeeded in creating a very successful business.
I take the opportunity to congratulate my colleague, Senator Mary Ann O'Brien, who also started up a chocolate business and employs a large number of people. She knows what I am talking about.
When starting up a business, one must be like an athlete training for the Olympic Games. People often ask me for advice on starting up a business and how to keep it going. I know within five minutes whether or not they will succeed. It is like people who want to be in politics; they are in love with it but they do not have the passion, the perseverance and the drive to keep going. People used to ask me if I went into Lir Chocolates every day. They thought it was like having coffee or playing golf. I know within minutes of speaking to a person who wants to start up a business whether he or she has what it takes.
I do not know where we would be if we did not have the multinationals. There is much more excitement in our local communities when a multinational comes in than when an Irish company increases its employment, yet millions of euro go into local communities from small companies. The document states that there are 200,000 small businesses in the country employing 655,000 people. People do not know that small Irish businesses employ that many. They are involved in software, medical technologies, food production, tourism, retail and professional and personal services. These small businesses are dispersed throughout the country and are keeping communities together. Small business provides a good quality of life for communities.
I refer to an important issue which has not really hit the radar and which I have noticed even in the city. I am all for multiples like the one which was owned by Senator Feargal Quinn. Senator Quinn and Tesco made our company and gave us the opportunities, in particular when Tesco took over Quinnsworth. It brought us into the UK where it had 700 stores. Practically overnight, we had access to a huge market in the UK. The population is so large in the United Kingdom that one can cope with the recession there because so many people are willing to buy one's products. There is an area of Rathgar where there are four or five small specialty shops but there is a supermarket opening right beside them. They are the businesses about which the Minister of State is talking. They are small retailers, the person providing professional services or quality food. I do not understand why the planning authorities do not look at the community where new businesses are being opened up. What will happen if the competition is so strong? There is no question that the public flock to the new facility. We cannot tell the people that they cannot go to the big multiple that will be on the corner but there is a problem with the planning permission, and I am talking about this city. When planning permission is granted for something new to be set up, they should look at the existing services.
Yes.
It does not make sense. In this particular community in the city it is possible that five shops will go out of businesses on one little street and therefore the sense of community and the sense of place will be gone. I find it difficult coming here in the morning to buy the newspaper because all the small shops have closed. I used to hear my colleagues in Fianna Fáil going on about this over the years at parliamentary party meetings and I did not have much sympathy but it has got out of hand.
The No. 1 issue is getting access to finance.
Yes, absolutely.
The Minister of State referred in his contribution to the micro-finance loan and the temporary partial credit guarantee scheme. We have to get those working——
Yes, as soon as possible.
As the Minister of State said, it is a great idea to take Mr. Moran, who is a rising star in the Department of Finance——
He will be coming around the country at some stage.
I would love to be with the Minister at some of those meetings.
I hope the Senator will attend one of the meetings.
I would like to do that because I love the area of small business, and Mr. Moran understands business having come from the private sector.
The Senator's time has concluded.
I congratulate the Minister of State on driving forward this document.
I thank the Senator.
Small businesses are at the core of our economic sustainability in creating employment. In his report the Minister of State said that thousands of companies have gone out of business in the past three years and thousands of jobs have been lost.
Yes.
When people lose their jobs it creates severe mental problems. Last year, the department of health in Greece published statistics to the effect that there was a 40% increase in suicide between May and July last year due to the economic recession there. It is important that we make heroes and heroines out of our small business people. When an Irish company expands——
The Senator is way over time.
——there should be excitement about it, not just the multinationals. I congratulate the Minister of State and wish him further success.
I welcome the Minister of State and thank him for coming to the House to debate his report. Since his appointment, and prior to it, he has been focused on this initiative. It is one of his main objectives and therefore it is welcome that he has got to this point.
We are discussing the first report, The Voice of Small Business — A Plan for Action, and the initiatives the Minister of State has undertaken to bring all the stakeholders around one table are important. I do not believe in speaking through the media. It does not work. People need to sit down around a table and determine what are the problems. I was particularly delighted that John Threthowan of the Credit Review Office was a member of that group and heard at first hand what people are experiencing, particularly those in small business, in terms of accessing credit and the deteriorating relationship many of them have with their banks for many reasons. It is important to recognise also that the report states that small businesses must also address the problem and present credible business plans. The banks lost contact with small business during the Celtic tiger era. They did not develop the expertise to work with small business. They failed to recognise the parameters that needed to be put in place when credit was being advanced to small and medium-sized businesses. It was too easy for them to depend on property. Everybody can understand how property is bought and sold. If one buys a site, one can get planning permission to develop it and sell it on at a massive profit. That is what happened over the years, particularly in the banking sector.
I hope we are getting back to the point at which banks can operate properly once more. It has been documented that they are training staff and getting to grips with the issues that face small business. Every business works in a different environment and has different issues. The institutions that lend to businesses need to get to grips with the environment in which those businesses work.
The Minister of State mentioned the restructuring of domestic banking, which involves putting over €30 billion into the banks for SMEs and other important sectors. Last year, some €3 billion was spent on new or increased credit facilities for small and medium-sized enterprises. A further €3.5 billion will be spent this year and €4 billion will be spent next year. Each bank has informed the Department of Finance that it expects to have met its lending targets for 2011. I hope that will be the case.
I welcome the Minister of State's initiative in going around the country with representatives of the Department of Finance to meet individuals. Members of this House and the other House who are looking on are concerned about the issue of access to finance for small businesses. We have heard reports from ISME and the Small Firms Association and we have had direct engagement, rather than anecdotal evidence, from people in our constituencies about the difficulties they are experiencing. We have been given counter-statements from the Irish Banking Federation that have blown what we have heard out of the water.
It is important for the Minister of State to listen. He intends to develop the structures needed to hear what individuals are saying. Many viable businesses will go to the wall for the want of small amounts of finance. We must recognise that some businesses are not viable in a recession, however, and may have to fold. Many businesses will survive if they are given a small amount of support. It is important that the Minister is taking to the road and listening to small business, which is the lifeblood of our society. I commend him for that.
The only positive thing one can say about the difficult economic period we are going through is that small business has come to the fore. It did not have a voice before now, when it was all about property and multinationals investing in this country. We tended to ignore small business and assume everything was rosy in the garden. We did not take the contribution small business makes to our society, in every parish in the country, sufficiently seriously.
If one travels from here to Galway, Sligo or Cork, one will see small businesses operating on every street one travels through. They are employing two or three people. Small and medium-sized businesses can employ up to 50 people. They are and will continue to be very important. It was clear when I read the report that those who have a great deal of entrepreneurial spirit, are willing to work hard and have ideas need to be supported. Many of them are working alone or in isolated environments. Small supports like access to mentoring and assessment of regulatory requirements are very important and need to be available.
Local authority charges, which have been mentioned, are seen as a burden on small businesses. Having been a member of a local authority, I would always have made the case for transparency in terms of charges. I felt it was not there. It is still not there. I refer to water charges and commercial rates, for example. The belief that the small business sector was an easy target in the community was well founded. If the budget did not match up we would load another percentage onto the commercial rate. Thankfully, those days have passed because of the work of Chambers Ireland and local business associations. That voice — the impact local authority charges have on businesses — has been heard.
An effort is being made to ensure that commercial rates will not be a target in the annual budgets of local authorities. Nonetheless, we are moving towards introducing water charges. For too long the commercial sector has had to bear the brunt of those, even in regard to domestic charges. There has not been a contribution from national government for domestic water consumption, as there should have been. One hopes we will have more transparency and efficiency because the private sector is paying for these charges.
I wanted to raise the issue of insolvency and debt resolution, to which the Government is committed. Legislation will be introduced and it is becoming urgent. I do not refer to the high profile cases, such as that of Seán Quinn yesterday, or of other people who can go abroad and claim bankruptcy. That is not what this is about. It is about small people, individuals who have debts they cannot pay, as opposed to will not pay. Examinership is not an option for them. Perhaps there could be a facility for them away from the courts, where debts could be restructured and they could work with their creditors. This might be under the umbrella of the courts but the people concerned would not have to bear the full cost of a High Court appearance, which is off-putting for most. As things stand, they must face bankruptcy. We need to be innovative and introduce structures that will help people. I look forward to that debate at another time.
I thank the Minister of State for gathering the respective minds and the group representatives who worked within the small business sector to compile this report. I welcome the opportunity today to discuss the report, given my personal background outside this House. I am what is called a serial entrepreneur — it is all I think about. I love business and have at least ten ideas a month for starting something new. If anybody has any money they can come to me.
Like many people in the business community, I have believed for many years that a proactive and, very important, a joined-up approach was required. It is very important that it is not only this Minister of State, Deputy Perry, who is involved. I hope every Department, every Minister and all his colleagues will join him. The words I use are "small business". I used to think the appeal was chocolate and saucepans. However, we are the life and blood of this country. All Members have read the figures today and can read them in the report. There are 200,000 of us, we employ so many yet we are going downhill. This is not an easy situation. It will take much more than Senators today to work it out. It will take the entire Government to address this problem.
The approach of the Minister of State is to involve representatives from the business world. I like the notion of him travelling the country. The formulation of this report is to be welcomed by all of us. I strongly encourage the Minister of State to continue doing this in the immediate future and to feel the urgency we in the business community feel. He cannot act quickly enough for us.
I will skim through some of the main points in the report, touching on lending facilities, the banks, the labour market costs, local authority structures, helping small businesses to compete on a level playing field and helping businesses to help themselves when they find themselves in crisis. There is also the hidden economy. None of these points is new to any of us who is a business owner.
I respect the Minister of State's report but I shall refer to the year 2008. I believe it was February of that year that I froze the management team's salary. That was a big deal. By August I had frozen the salaries of the entire factory. The word was, "There is lovely Mary Ann, always so nice and for whom everything is wonderful, freezing our salaries." In September's news, KPMG and Deloitte froze their staffs' salaries and so it began. I felt the chill very early on. While I accept the emotional female charge, for the next eight months I cried most days and evenings at home. A workforce is like a child but in this case it was 100 people relying on me.
Every Thursday, a wage bill of €45,000 had to be met. My main problem was with the banks. I will not go into names as we are not allowed, a Chathaoirligh. My business was viable and good but I had a cash flow crisis. Before the credit crunch, I always received a stocking loan. This time I did not. Many businesses have since gone because of refusals for stocking loans by the banks. I was lucky that Enterprise Ireland and a private investor lent me the money to tide me over. They saw mine was a well run, sustainable and indigenous business.
Everyone hears the sums bandied around that the banks are supposedly lending to small and medium-sized businesses. They are not lending such sums. Out of 20 friends with good businesses, some have gone simply because of the banks. The State owns the banks now so we must make them accountable. I love horse racing and gamble much. My bets on horses are on a par with the banks' bondholders. I wish I was a bondholder when I invested in property. While I lost every penny in my investments, they have not. We should be cushioning business owners as well as mortgage holders who have lost their jobs and who are in desperation as to how they will pay their mortgages. It must be remembered they are the customers of the small businesses.
Small businesses create tax intakes for the Government which, I hope, it reinvests in the community which, in turn, spends in our small businesses. However, this wonderful circle has been broken. Our money is going to the troika, which kindly lent us all this money, and bondholders. If we do nothing else this year, can we at least put up a fight?
Last night I spoke to the president of RGDATA who informed me up to 300 retailers have closed in the past 18 months. The brilliant economist Jim Power, who is passionate about buying Irish, a campaign which politicians are not supposed to talk about because of EU legislation, has stated money spent at a local family-owned store generates three times more in the local economy than money spent in one of the large multiples. Like Senator White, I accept it is great the multiples came here and that they provide me with export opportunities. However, at the moment we are trying to save Ireland.
The independent retail, grocery and convenient sector consists of approximately 5,000 shops and is responsible for providing 93,000 full-time jobs. It makes a total contribution to the economy of approximately €3.6 billion. I want to repeat that we should buy Irish. Senators are a different breed. The 60 Members should buy Irish produce at Tesco.
Will the Minister of State have a discussion with the Minister for Social Protection on her proposed changes to the sick leave regime, which could seriously hamper small and medium-sized businesses? I spoke to her previously in the Seanad about how her proposals continue to be a concern to me and other businesses. This continues to worry me. I love human beings. Some are great and they are all different. Some of us are brilliant engineers, mad entrepreneurs or good accountants but we are all human beings and I would love two or three extra weeks off a year. I know some of my staff well and I said to them this morning: "There are 100 of us. Don't tell me that 50 of us will not go to the doctor to say I have a ferocious sore throat or a pain in my hip." If 50 of my staff take three weeks off when this measure goes through, that will equate to 150 weeks or three additional salaries coming off the bottom line. My company does not have fewer than ten or fewer than 50 staff and that measure will kill me. I cannot cope. I will have to try to meet the Minister of State.
I will call to the Senator's factory.
I refer to red tape and the labour laws. I find it surprising that nowhere in this lengthy report is there a reference to employment tribunals or labour commissions. They are the consistent sword of Damocles hanging over every business. Employees' rights must be at the forefront of every business and they must be protected and adhered to, but so must those of employers. If I had gone out of business in 2008, I would have lost my house because my mortgage guarantees my business. I would not have been eligible for the dole or free fuel. The only thing I was looking at was saying goodbye to the house. That is where the tears were coming from. The scales of justice must balance evenly. Currently, they are heavily tilted against the employer. It is imperative that these tribunals and commissions be reformed from top to bottom, including the criteria applying to the selection of those chosen to sit on them. If the Minister of State lifts this burden, the willingness to employ will be revitalised. I cannot begin to outline the time an average business takes to comply with employment law.
A retailer friend of mine in County Cavan has 70 licences. He needs a licence to sell stamps, salmon, organic salmon, farmed fresh salmon, free range eggs and so on. An inspector from the Department of Agriculture, Food and the Marine checks the size of potatoes, while another examines the free range eggs and the dates on them. He needs an entertainment licence in order that children can use the Thomas the Tank Engine ride outside his little supermarket. This is crazy.
I refer to the employment support scheme. As I was on the verge of going out of business in 2008, this wonderful initiative was put forward by Fianna Fáil. The chocolate business is seasonal. Come May, people are thinking about bikinis and salads and not buying chocolates for their family and friends. I did not want to have to put my staff on a three-day week, as that could endanger a mortgage. The employment subsidy scheme was introduced at this stage.
I thank the Minister of State for attending and congratulate him on the report. However, I have lots more to say to him.
I welcome the Minister of State. I also welcome the report and its recommendations. As a businessman, he will be aware of the issues faced by this sector, including those mentioned by Senator O'Brien such as the need for a licence to have a Thomas the Tank Engine ride outside his shop in Ballymote, County Sligo. The first line of the advisory group's recommendation on commercial rates states: "Although rates are generally a relatively small proportion of business costs for small businesses, they can be particularly burdensome for some small enterprises." My experience is that rates are a huge issue for small enterprise everywhere I go around the country. That is the main issue from a business perspective in my part of the country and I called on the Minister of State previously for a national revaluation of rates based on the pilot scheme in Dublin where three local authorities benefited to the tune of a 35% reduction as a result of a review.
I welcome one of the recommendations in the report which states that the outsourcing of valuations should be considered. My question to the Minister of State, bearing in mind we need to bring them into line with current market reality, is to whom can these valuations now be outsourced if we take the Valuation Office out of the equation.
Another issue is the variation of rates from one county council area to another. A plain example comes from my own area of Monksland, County Roscommon. A person can throw a stone from Monksland across the River Shannon into Athlone in County Westmeath. The rateable valuation in Monksland is €74.34 per sq. ft. whereas in the thriving town of Athlone it is €52.27, a difference of approximately €22 per sq. ft. This begs the question of why anybody would want to set up a business in County Roscommon when they can go across the river and set up for much less. It is an issue that needs to be addressed nationally.
The report refers to a local government efficiency review group which could realise savings of €511 million per year. I welcome that and the recommendation that this €511 million be passed on to small businesses, whether by way of rate reductions or otherwise. However, I want to know where these savings are to be found. The figure seems specific. If the Minister of State said €500 million, I would believe he had thought it up, but whoever came up with the figure of €511 million must know that savings of that amount can be achieved. I would appreciate it if we could discuss that issue.
I am sure the Minister of State heard in his own home town during and after Christmas that every small business was going to close down. In my own town, a number of pubs and small businesses have closed. We spoke about this on the last occasion the Minister of State was in the House. There is a need for a two-tier rates system, one for the blue chip companies, to which the Minister of State himself referred when I discussed this with him in the House, and one for smaller businesses. If a small business employing one person has a rates bill of, say, €4,000 and the books show it cannot pay it, what is the point in undue pressure coming from the local authority to lead it to close down a business, putting either one or two people on the dole at a cost of €21,000 or €42,000 a year to the taxpayer? Where is the logic in that? The Minister of State referred to joined-up thinking, which is an issue I raised with him on the same subject the last time he was in the House. At the end of the day, we are pulling this money from one pot. There is no point in shutting down a business over as sum of €4,000 when it will cost us €42,000.
With regard to encouraging new business to set up, there is a need to consider giving a rates holiday to new businesses or else introducing a staggered payment structure at reduced levels, knowing we must also be careful to ensure this cannot affect existing businesses and cannot lead to displacement or undue competition. Mindful of that, we talk a lot of how we need to promote tourism more and the great capabilities we have to do that. I come from a town where the brand new hotel closed down last Christmas and did not open its doors prior to Christmas because of the bad weather. It put 40 people on the dole and never re-opened, costing the taxpayer €840,000 a year in social welfare payments, purely because it was not able to pay a rates bill of €40,000 and a water rates bill of €30,000. Again, where is the joined-up thinking there? It will cost us in excess of €700,000 a year because nobody could see there was logic in doing business some other way.
The Minister of State asked for ideas on how we can create employment. I have said this several times in the House and will say it again. In the context of the back-to-work scheme, as it costs €21,000 a year to keep somebody on the dole, if we were to give €10,000 a year to an employer to take a person off the dole, we would save €11,000 a year for that personevery single year. If we were to create 100,000 jobs per year in that way, we wouldsave €1.1 billion on the social welfare budget, plus receiving extra tax, PRSI, universal social charge and every other charge of which we have recently heard. This is a way that we need to start thinking because there is no other way. The likes of Mr. Mark Fielding will agree with me, that one must give inducements to get people off the dole and to get employers to take them on.
I want to mention NAMA, although it is not something about which I know a great deal. From my investigations over Christmas, apparently NAMA is concentrating most of its business in the UK property market — the figure is approximately 80% — and it seems to be ignoring what is going on in this country. In this country, there are many auctioneers and estate agents trying to reactivate the business property market and they are in negotiations with NAMA for the purchase of many of its buildings. In rural areas where buildings may not reach the same value as buildings in Dublin or in the UK, these auctioneers and estate agents have their i's dotted and t's crossed, and everything is done except for NAMA to sign off on the bottom line to state that the unit belongs to it. These auctioneers have been ready to set up small enterprises. They are ready to go. They are six months waiting in many cases in County Roscommon for NAMA to sign off on property and nothing is happening. It begs the question as to why we are paying somebody €1,000 a day for 365 days of the year to run NAMA when it is forgetting about Ireland first? I hope the Minister of State would use his influence and access to get the answer to these questions. I would welcome his response.
I welcome the Minister of State.
I love this debate which is so good to hear. I have listened to every word of almost everyone who has spoken. I particularly enjoyed the contribution of Senator Mary Ann O'Brien.
I speak as somebody with experience of what is going on. Let me tell the House a little story — I do not remember where it came from — about the burger seller in the United States. He had a business that he had run for many years, a little stall from which he sold his burgers. He did so well he was able to afford to send his son to college. His son went to college and came back and said to his father, "Dad, do you not realise there is a recession? Would you not be wise to cut back on those burgers and not be stocking as many as you had? Is there a need for you to work as many hours as you do? There is a recession, Dad." The burger seller cut back on the amount of stock he had and, amazingly, there must have been a recession because his business went down. Therefore, he cut down a little bit more and the business went down more. The burger seller said, "My son was so wise to remind me," but, of course, the whole story came the other way round. What we and the Minister of State must do is get us out of this situation where we are almost talking ourselves into the difficulty, and I do not know how he and we will do it here. Let us establish confidence, however we do it. It will not happen only from the Government, it will not happen from the Seanad and it will not happen from the media. We are not only believing in good news for the sake of good news, but we do need to establish confidence. We need to establish that one can do something with it.
I spent quite some time lately in Drogheda. I remember going to Drogheda on one occasion and meeting two men on the street who were unemployed and asking them how long they had been unemployed. One of them said to me, "I applied for a job six months ago and did not get it, but what else can I do?" I came home that afternoon and there was a knock on the door from two young men who had invested in a piece of equipment to clean cars. They asked did I need my car cleaned. My car — I do not have a look at it too often — needs cleaning quite regularly and I told them it would be great if I could get it cleaned there, just in front of my house. The two boys gave me the set-up, cleaned the car and got paid for it. They got four more jobs on our road that same weekend. These were two students who started themselves. They were not asking what more they could do. They had gone out and did something about it, looked for a market, found it and were able to achieve it.
I have spoken previously about that young lady in County Kildare in transition year. She attended one of the entrepreneurial classes that Jerry Kennelly ran in Kerry in the past four years and came up with a concept or idea. The students were told one is never too young to be an entrepreneur. She came up with the idea to produce a product that she could sell and now that she is aged 16 and in fifth year, she employs her father and sells the product over the Internet to customers in 22 countries.
There are many more success stories. I recently stepped down as chairman of Eurocommerce after serving in that role for several years. Eurocommerce, which is based in Brussels, represents businesses operating in retail, wholesale and international trade. There are 6 million outlets in the 27 member states of the European Union. Some of them are failing or encountering difficulties but others are successful. That is how we must sell ourselves. People are finding ways of doing something different by looking for success stories. Those 6 million outlets employ 31 million people in retail, wholesale, trade and commerce. This is an area in which one can quickly get active because significant amounts of foreign direct investment are not necessary.
One way that we can expand the sector is by encouraging people to set up their own businesses, even if they are small. I previously sat on a local partnership committee for one of our supermarkets. The partnership aimed to create jobs. Our supermarket had a number of windows which needed to be cleaned, as well as other tasks that could be performed locally but the majority of people who attended the meetings wanted to call on Forfás or FÁS to assist them. They were not thinking about doing it for themselves. One young man offered his services to clean windows. He had a ladder and a bicycle and he invested in a bucket to establish a window cleaning service which he sold at the end of the summer when he went to college. The window cleaning business, which heretofore was supplied from another town, was still going many years later. When a retired man asked me if there was anything else that could be done, I told him I would love to be able to provide salads on the spur of the moment. He grew lettuce in his back garden in order that we could purchase from him if we ran out of supplies during the day. I tell these stories because, while the report is very good, I hope the Government will be able to do something about it. I hope it is facing up to the challenge of supporting small businesses.
A number of speakers mentioned the issue of red tape. The report states:
The number of licences required by a single business, the cost, and the renewal process are particularly onerous. Following on from this, the unco-ordinated manner in which a range of regulatory inspections is undertaken also places an additional burden on firms. There is definitely potential for a more coherent approach among enforcement and inspection agencies.
I have long argued for less red tape. We should not tar every business with the same brush just because certain banks ran wild during the boom. The report quotes a business person asfollows:
In the waste collection business, I have to place an advertisement in the newspaper every time I have to renew a licence and go through the whole application process all over again. The time and cost to small business is onerous and unnecessary.
We should not be shy about buying Irish. Some years ago, our company decided to do something about buying local. This was a very interesting project because it brought the issue home to us. We visited the various factories in the vicinity of our Finglas branch to find out how many they employed. This reminded me about all the local factories that employed 30, 50 or 60 people. Encouraging people to buy local will help to ensure the viability of many small businesses right around the country.
Recently, in Drogheda, we got together a number of the local producers. There were fish producers, meat producers, ice cream producers and cheese producers in County Louth and County Meath. We brought them together with a group of "eateries", a word I am not used to using which refers to delicatessens as well as little restaurants, coffee bars, etc. We brought them in to the Scholars Hotel. There were some 50 customers and 30 or 40 producers coming from the area. A number of those customers or eateries promised themselves that by Friday they would guarantee they would always have two local products on their menu and each of the delicatessens were doing something similar. Customers coming in to the shops or restaurants could see it was not merely buying Irish; they were actually buying from somebody up the road. They did not realise that there was that cheese factory and somebody was making cheese there.
I believe the future can be bright for small business here, although it may not seem so at present. What many forget is that Ireland is experiencing the fastest increase in population in the European Union. That means there is a need for small businesses and jobs to serve that increase. Businesses must be ready to come out the other side, with the Government helping them to bring down costs and setting positive conditions to create jobs. It is amazing to consider it is forecast that by 2060 Ireland's population will have increased by nearly 50%, reaching the 6.5 million mark in the Republic, the biggest increase in the European Union.
I welcome the report on small business. We must keep a perspective. If the Government takes the right measures, there is some hope for the future. The biggest thing we can do is instill confidence and state that the Government believes that we can do it. If we believe in ourselves, we can achieve it.
I remind Members that the Minister of State is due to respond at 5.35 p.m. and there are ten speakers offering.
I welcome the Minister of State to the House. It is good to have him here.
I welcome the recent publication The Voice of Small Business — A Plan for Action, researched and published by the advisory group on small business. During this challenging economic period it is imperative that small businesses are given professional direction and that we, as legislators and policy makers, can put in place the best mechanism possible in order to encourage and help existing small businesses and entrepreneurs who are considering starting a business in 2012.
I commend the Minister of State, Deputy Perry, and the advisory group for its comprehensive report. I want to make some brief comments about the proposals in it. With over 200,000 small businesses operating in Ireland, it is critical that the issue of access to credit is adequately dealt with. I agree that the focus needs to be on the releasing of outflow of capital from the banks to small businesses. If each of the 200,000 small business entrepreneurs in Ireland could hire at least one extra member of staff, this would immediately reduce the live register figures by nearly 50%. Therefore, focusing on nourishing small businesses in 2012 should be pursued aggressively and without delay.
I fully support the report's identified objectives for small business in Ireland. For example, increasing the number of start-ups, survival rates and the number of exports, increasing international recognition for Irish businesses and higher levels of innovation will create a healthy climate for small businesses to flourish in the domestic and foreign markets.
The EU has a combined population of over 500 million citizens. Ireland is lucky to be part of this incredible international market and this should be taken advantage of by small businesses looking to expand abroad.
It is positive to see the Government's National Recovery Plan 2011-2014 will aid economic recovery while simultaneously improving the economic situation of small businesses. It is of paramount importance that we create increased certainty and a more positive disposition by the banking system towards small businesses.
The report's immediate short-term proposals for small businesses should be considered by all businesses, for example, actively improving cashflow, seeking advice, managing development and accessing the current information from the correct sources.
The proposal to create a web portal that would provide a one-stop-shop facility for business managers is a very worthy proposal and would centralise information for business managers. Also, the proposal to promote a start-up business course would give young buddingentrepreneurs the confidence and the skill-set to conduct best practice in business from day to day.
I strongly support the commitment within the EU-IMF deal to provide for a new structure of non-judicial debt settlement enforcement system that provides the alternative to courts. This needs to be advanced as a matter of priority. I note Senator Quinn has a Bill before the House, and I welcome it. Where small businesses are owed money or are sub-contracted by bigger contractors, it is important that the small businesses are paid.
I agree also with Senator Kelly's view on the issue of rates. I have been contacted by persons who are paying enormous amounts in rates and who are not able to continue to do so, and it would mean that they would have to close their doors.
I am glad that the Minister of State, Deputy Perry, is here today because he has a practical knowledge and hands-on experience of his portfolio. That is exceptionally important in any debate.
Likewise, listening to Senator Mary Ann O'Brien, I found it inspirational. It is an argument in favour of Seanad Éireann. When somebody comes in from the coalface or the factory floor, whatever way we want to put it, and speaks such common sense, it is a great pity it is not being disseminated out into the general public. I only wish that we could do something about communication. I missed the contribution of Senator White who comes from the same background but with Senator Mary Ann O'Brien, I was exceptionally impressed, not only by her passion but by her knowledge and practical approach.
Senator Mary Ann O'Brien used one particular term which is very important to this debate, that is, joined-up thinking. She is 100% correct. Incidentally, the joined-up thinking is in the report. What we now need is joined-up implementation. As one reads through the report, it is quite evident that there are many players in this area. When we talk about small businesses, it could be very easily misrepresented as insignificant businesses. When one considers that there are 200,000 of those in the country employing 655,000, that indicates how significant it is. In a negative sense, the fact that we lost 105,000 employees in small businesses in a two-year period, which is roughly 25% of the live register, is indicative of why we should be taking this debate particularly seriously.
I also accept that when we talk about small businesses, there are diverse businesses of all sizes. Many of the ones I have mentioned have fewer then ten employed but there are others which are much bigger than that. I met a hotelier recently who has a moderately sized hotel in provincial Ireland. He said to me that by the time he pays his rates, water charges, insurance and all the other bureaucratic charges he must pay, and before he starts making €1 for his family business and for those employed, his expenditure is €250,000. This is where the joined-up thinking must come in. I am saying, not that every local authority should make a decision straightaway to cut the rates to commercial outlets by 20% or 30%, but that those who represent small businesses should have an opportunity of having an input before any rate is struck to explain the dilemma. It is easy when one is striking rates to decide to add 10% as if one is getting it from a bottomless purse. I made the same argument here on VHI charges. It is a matter of adding on 13% or 14%, but we seem to forget that at the end of the line it is an individual who is paying. That is very true of small businesses. I understand that the Minister of State intends to act immediately on the recommendations contained in the report. Some of these recommendations are exceptionally comprehensive but I wonder about their foundation. While I do not want another quango or sub-committee to be established, a county or city manager is attached to every local authority. If we lose 105,000 employees in one sector alone, these managers should be brought in for a discussion behind closed doors with the Minister in order that they are made to realise this cannot continue.
The report acknowledges that the lack of credit facilities is the greatest challenge small business faces. The average person will never understand how we can recapitalise the banks with billions of euro without a price tag. I do not understand even though I listen to all the debates. We better start understanding the issue, however, in order to find out precisely what is happening. Some €540 billion was given out by the IMF to approximately 500 banks on the understanding that the money would create growth. The danger arises that the banks which borrowed that money at low interest rates will use it to improve their own balance sheets. It is time to call in the bank managers and tell them their jobs have been saved because we kept their banks intact. They kept us on a string by telling us different stories every week.
The report will lead to nothing unless the message is understood that we are finished with the fudging and are dealing with reality. I have great regard for the Minister of State, Deputy Perry, and I know what he has achieved at the coalface. He is the person to bring that message back to the Government. We are at the end of the line. If that message is not acted on we will be back here next year with a further 100,000 jobs lost. We should reflect the concerns of practitioners in this area.
I am a small business owner. I employed as many as 30 people at one stage, although I now employ five. I have raised my concerns with the Minister on previous occasions.
One case I encountered involved a young lady who sought to borrow €4,500 from her bank to purchase a car and was quoted an interest rate of 14.4%. The interest on that loan amounted to €1,758. When her father applied to the credit union she was able to get a rate of 6%, with €248 to be paid back over a three-year period. That was my daughter. I wrote to the regulator on the matter and he thanked me for informing him about it. Rather than his thanks, however, I want to know what he intends to do about it.
If we want to get money into the domestic economy, we must fund the good credit unions so that they can provide loans of up to €50,000 for small businesses. They will be able to supply money to the local economy. The manager and staff of the credit union will know the person to whom the loan is issued. I acknowledge they made mistakes but all of us did likewise. I guarantee the money will be out there within a couple of years.
My bank manager will tell me that I can deposit as much as I wish but I will not be able to take anything out. My bread man and my vegetable man have told me their overdraft facilities have been removed. Their suppliers are looking for cash upfront. If I do not pay cash, they will not survive. The banks are supposed to lend €10 billion over the coming years. However, they will have to contact some muppet or actuary in Dublin before they can grant credit worth more than €10,000. The person in Dublin will not be familiar with the person who is running the business. All of us have made mistakes in terms of investing in property but how can we get our businesses up and going again? In five years time I would probably employ 50 staff if I could get sufficient funding. The banks do not intend to lend large sums of money. The credit union structure is solid and efficient. Credit unions will get the money moving. That might be a solution for small businesses. Kilrush credit union is offering loans of up to €30,000 for upgrading tractors. That is the kind of thinking we need.
The regulator has a job to do but he announced in Cork that he would introduce a code of practice on mortgage rates. Saying and doing are two different things. It is no good to make the statement. We can get the economy moving if we can supply small amounts of money into Shannon, Sligo or Westport. We do not have to loan millions or billions of euro because €10,000 will allow most businesses to tick over or buy new equipment. Given that nobody is leasing equipment, how are businesses to purchase what they need to expand?
A garage owner in my locality employs nine staff but he gets walloped with rates bills of €9,000. If we can reduce the cost of rates, insurance and legal fees by 10% to 15% and get money into the credit unions, we will have a great opportunity to turn things around. The banks have no intention of putting funds into this economy. This has been going on for almost three years. Most of the people working in the credit unions do so on a voluntary basis, which means they have a lower cost base than banks.
Many speakers have advised shoppers to go local. As Senator Mulcahy noted, credit unions also know their local areas.
All of us agree that small businesses are vital to our economic growth and recovery. I welcome the announcement by the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, on a new initiative to generate thousands of jobs but we have had a succession of job creation plans in recent years and I fear there is a disconnect between what the initiatives seek to achieve and the management of the environment necessary for their fruition. If we really want to create jobs and retain existing employment, we need to nurture the capacity of small and medium enterprises, which account for approximately 54% of total employment in Ireland, or 900,000 people. Frustration in the sector is increasing as it is becoming more and more difficult to operate and survive. One hears talk of death by 1,000 cuts and I do not propose to list the problems facing small businesses as many have been noted by other speakers. The current cost environment compounded by the difficulties experienced by small and medium-sized businesses as a result of the lack of finance available from banks and late payments is wholly counterproductive. In this respect, I fully concur with Senator Mulcahy.
In preparing for today's debate I tried to obtain accurate figures on small businesses. While ISME provides a great deal of reliable data on the sector, I was disappointed by the lack of official statistical data on small business. The Central Statistics Office has not published its annual small business in Ireland report since 2009. I am concerned that the absence of an ongoing system for tracking the number, size, costs, ownership and trends in small businesses is impeding the introduction of effective policies. Will the Minister indicate from where the Government sources its statistics on small businesses?
While we all welcome the report of the advisory group and its blueprint for action, it should be noted that companies, whether small businesses or multinational firms, would not only have a report but would draw up an implementation plan setting out clear target dates and identifying which members of staff are taking the lead on various measures. With regard to the advisory group report, which Department is taking the lead, what precisely will be done and who will have oversight? These questions have not been answered as the report does not provide an implementation plan.
When will a solid timeline be provided for the roll-out of each of the proposed initiatives? In keeping with the small business Act for Europe, does the Government intend to keep the "Think Small First" principle at the core of its implementation plan? What funding has been provided for the initiatives set out in the document? How does the Government propose to advertise them? How will their success be measured? How will we ascertain whether the plan has been successful? We do not need further plans; let us implement this one.
I welcome the plain English initiative. In the past week, we have observed the confusion caused by letters sent to older people by the Revenue Commissioners. Plain English, for which Irish companies have won awards, is required and the State should adopt it. How will the Government effectively implement the report?