COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 29 Mar 2012

Chapter 29 - County and City Enterprise Boards

Mr. John Murphy(Secretary General, Department of Jobs, Enterprise and Innovation) called and examined.

Chairman

Last week there were complaints from the media that they could not broadcast some parts of the meeting because of the interference from mobile telephones when some members were speaking.

I remind members, witnesses and those in the Visitors Gallery to turn off their mobile telephones as interference affects the sound quality of the transmission of the meeting. I advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give to the committee. If directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a Member of either House, a person outside the House or an official by name or in such a way as to make him or her identifiable. Members are reminded of the provisions within Standing Order 158 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits or objectives of such policies.

I welcome the representatives from the Department and I ask Mr. Murphy to introduce his officials. Mr. Murphy is a new Accounting Officer who has not appeared before us yet, and I wish him well in his new position.

Mr. John Murphy

I am joined by the following: Ms Clare Dunne, assistant secretary dealing with enterprise and so on; Mr. Páraig Hennessy, finance officer; Ms Catherine Carroll, accountant in the finance unit; and Mr. Dermot Curran, assistant secretary. We are joined by Mr. Ronan Gallagher from the Department of Public Expenditure and Reform.

Mr. Seamus McCarthy

The account of the Vote for Enterprise, Trade and Innovation records gross expenditure of €1.15 billion in 2010. Most of the expenditure in 2010 relates to two areas: enterprise development, including science and technology, on which €730 million was spent; and labour force development, where the spend was €304 million. The bulk of the expenditure in both of these areas relates to grants to various semi-State bodies. Spending on the Vote in 2010 was down 26% from the €1.55 billion spent in 2009. A substantial part of the reduction was due to the transfer of responsibility for FÁS to the Department of Education and Skills with effect from May 2010. This was offset to some extent by the transfer of responsibility for certain research funding to the Department of Jobs, Enterprise and Innovation from the Department of Education and Skills.

Turning to the annual report, chapter 28 reviews two temporary measures introduced in 2009 in the light of the economic downturn to help maintain existing jobs and stabilise enterprises. These were the employment subsidy scheme and the enterprise stabilisation fund. The schemes were funded from the Vote and were managed on behalf of the Department by Enterprise Ireland. The total spending under the schemes amounted to almost €200 million.

Under the employment subsidy scheme, set amounts per job were payable on a quarterly basis to eligible companies in respect of a specified number of jobs at risk, on condition they committed to maintain a stated number of additional jobs. The maximum amount payable was €500,000 per company. In total, 1,631 companies were approved for funding. In the event, financial support of €116 million was provided to 1,521 companies that committed to retain over 93,300 jobs up to the end of November 2010. Subsidies were paid in respect of around 14,100 of those jobs. Approximately one fifth of the companies initially approved for support did not manage to retain all of the committed jobs up to November 2010. Unfortunately, it was not feasible during the examination to measure the extent of the shortfall in retained jobs.

Grants were payable in arrears each quarter on receipt by Enterprise Ireland of a company director's statement on job numbers, an independent accountant's report confirming that the conditions set out in Enterprise Ireland's letter of offer had been met, and a valid tax clearance certificate. A number of instances of incorrect payment came to light and repayments were sought in those cases. After the scheme ended, Enterprise Ireland conducted a programme of audits of payments to its own client companies on a sample basis. The results were not available when the chapter was being finalised but the Accounting Officer may have up-to-date information in that regard.

The other support measure examined in the chapter - the enterprise stabilisation fund - was designed to provide equity and other support to clients of the State's development agencies involved in manufacturing and internationally traded services. The examination found that some €80 million had been paid to 223 companies. This comprised €77 million by way of equity investment and €3 million in grants. Funding was provided on the basis of an assessment of each applicant's business strategy and development plan. Analysis by Enterprise Ireland in October 2010 of results that were available for 130 companies indicated that around 80% had not met their first year sales target and some 70% had not met their earnings target. However, it should be noted that equity share investment is repayable, and this limits the Exchequer's ultimate exposure. The experience with similar schemes is that 60% to 70% of the investment is ultimately recovered. The impact of both schemes - including any possible dead weight or displacement losses - will not be apparent until a full evaluation is carried out.

The county and city enterprise boards, or CEBs as they are often referred to, were established in 1993 to provide assistance and support to enterprises with fewer than ten employees. Chapter 29 reviews the activities of the existing 35 CEBs. It presents details of their expenditure and the types of supports they provided in 2009 and 2010. The chapter also looks at the outputs in terms of jobs supported. Funding for the CEBs is provided under subhead G of the Vote. Whereas the Department has responsibility for policy, Enterprise Ireland has responsibility for a range of operational functions for the CEBs.

The total expenditure by CEBs in 2010 was some €33 million. Direct financial support to micro-enterprises accounted for about one third of this. Support was provided in the form of grants, including some that were repayable, as well as equity investment. CEBs also provide assistance to small local enterprises in the form of training, management development and mentoring, as well as promotion and development of an enterprise culture. Some €10 million was spent in total on such enterprise and capability supports in 2010. Administration costs of almost €12 million were incurred, with salaries accounting for 70% of this. Salaries include the cost of staff time spent in providing business advice and support to micro-enterprises.

A 2003 review recommended greater self-sufficiency for CEBs through increased use of repayable financial support as well as collection of client contributions for support services provided. Under their operational agreement with Enterprise Ireland, CEBs are now required to provide a minimum of 30% of financial support in a refundable form. Some CEBs did not achieve this target in 2010, albeit by a small margin in most cases. Average client contributions amounted to approximately 15% of the cost of enterprise and capability supports. Enterprise Ireland has begun to develop shared services for CEBs but the report found there may be scope for further savings from these types of arrangements.

The report concluded that given the lapse of time since the last evaluation and the change in approach and circumstances in which they now operate, it may be useful to evaluate again the effectiveness of CEB interventions. In that context, members of the committee will be aware that the Government's action plan for jobs recently flagged the intention to replace the CEBs with a new network of local enterprise offices. The Accounting Officer may be in a position to update the committee in that respect.

Chairman

Will Mr. Murphy give his opening statement?

Mr. John Murphy

I will be covering the report of the Comptroller and Auditor General on Vote 34, Department of Enterprise, Trade and Innovation, as it was called then, for 2010; chapter 28 of the report on employment support and enterprise stabilisation schemes; chapter 29 on county and city enterprise boards.

Total gross expenditure by my Department in 2010 amounted to €1.151 billion, appropriations-in-aid were €81.724 million and there was a surplus of €41.824 million. The comparative figures for 2011 were gross expenditure of €845 million, appropriations-in-aid of €56 million and a surplus for 2011 of €56 million. Some expenditure reported upon up to the end April 2010 is in respect of programmes and services which transferred to the Department of Education and Skills, and some expenditure from 1 May is in respect of services which transferred from the Department of Education and Skills in respect of the programme for research in third level institutions. Public expenditure on research and development is now provided through my Department in a single funding stream in line with the strategy for science, technology and innovation.

I will turn briefly to the employment support and enterprise stabilisation scheme and the county and city enterprise boards, CEBS. The employment subsidy scheme, ESS, was launched in August 2009 to help employees retain jobs and employers to retain productive capacity. The objective was to provide an employment subsidy to vulnerable but viable manufacturing and/or internationally traded services enterprises engaged in exporting. The scheme involved payment of a subsidy to firms once they retained an agreed number of jobs. Companies could receive a subsidy of up to €9,100 for each subsidised job until the end of November 2010.

A key aspect of the scheme was the multiplier effect. This saw qualifying companies commit to retaining additional jobs. At the end of 2010, a total of €116 million was approved to companies to support the retention of 14,863 jobs, with a company commitment to retaining an additional 100,309 jobs. The first call for applications under the scheme was made in August 2009 and was restricted to exporters. This was challenged by the European Commission, which saw it as constituting export aid. The exporting restriction was removed for the second call in December 2009 and the scheme was extended to non-exporting companies in all sectors.

A total of 3,211 companies sought assistance totalling €236 million under the scheme and funding was allocated, after assessment and approval by the ESS committee, to 1,669 businesses. The underspend on this scheme arose from firms not being able to maintain the required number of committed jobs for a given claim period. Under the scheme there was no scope for retrospection or pro rata in relation to claims. Either the applicant could make a claim or the moneys could not be drawn down. The scheme expired at the end of 2010 in line with the terms of the EU temporary state aids framework, although a provision of €4.25 million was made in the 2011 Estimates to pay claims received in late 2010.

I will now turn to chapter 29. The 35 county and city enterprise boards are the primary initial contact point for business start-ups in Ireland. The role of the CEBs is to promote entrepreneurship at local level, assist the development of growth oriented micro-enterprises and enable them to transfer to the full suite of Enterprise Ireland supports. CEBs provide targeted supports through direct financial support and soft supports. They also encourage entrepreneurship through network development, awards schemes and entrepreneurial development work in schools.

In 2010, direct grants of over €11 million were paid out of approvals of approximately €14.5 million. At the end of 2010, almost 33,000 cumulative full-time jobs had been assisted and almost 11,500 seasonal or part-time jobs had also been assisted. On the training front, almost 24,000 participants were helped by CEBs during 2010. The report of the Comptroller and Auditor General identifies a need for a further evaluation of the effectiveness of the interventions supported by the CEBS and an examination of the scope for savings based on shared services or the structures employed. The action plan for jobs recognises that a fundamental restructuring of enterprise agencies is necessary in order to better target supports towards indigenous businesses with job-creation potential. There is much detailed development work to be done over the coming months to effect changes and to put appropriate new structures in place.

Effective and efficient use of scarce resources is the watchword of my Department in the current environment and is one which I intend to adhere to during my tenure as Secretary General and Accounting Officer. I know that this is also very much the philosophy of the committee. I will try to answer the members' questions and in the event that I do not have the information available, I will revert to the committee with responses within the next fortnight.

Chairman

Can we publish your statement?

Mr. John Murphy

Yes.

Chairman

I call Deputy Paul Connaughton.

Deputy Paul J. Connaughton

I welcome the witnesses. I will cover the ESS and ESF part of the Vote. Was Enterprise Ireland invited to the meeting this morning?

Chairman

The Accounting Officer representing Enterprise Ireland is Mr. Murphy.

Deputy Paul J. Connaughton

I would have thought it would have been better if its representatives were present to answer the questions, but I do not doubt Mr. Murphy will be able to give us the information.

Of all the companies that received funding under the ESS and ESF, do we have figures for how those companies are doing today?

Mr. John Murphy

I do not have comprehensive information on how all of those companies are doing. Spot checks were carried out by Enterprise Ireland, EI, to examine the extent to which companies had sustained jobs at the end of the scheme. We have some information on that but I can get further information for the committee if the Deputy wishes.

Deputy Paul J. Connaughton

How much of a sample did Enterprise Ireland take with these companies? How big was it?

Mr. John Murphy

I have information on that. It took a 10% sample of the companies. The total population was 1,378 clients under that scheme and it took a sample of 139. It wanted that to equate to a significant percentage, so in terms of the total payments that accounted for approximately €15 million out of a total of €94 million. The sample size was 10% of the number of companies and 16% of the amount of payments. With regard to the results of that spot check, the number that failed and therefore where a refund was due, was 16 companies. The total amount involved was €373,620. The number that failed as a percentage was approximately 11% of the sample, that is a percentage of companies, and approximately 2.5% of the amount of payments. That was the result of the spot check carried out by EI at the time.

Deputy Paul J. Connaughton

Is that spot check completed?

Mr. John Murphy

Yes.

Deputy Paul J. Connaughton

Does the witness believe the sample was large enough, considering the State money put into this scheme?

Mr. John Murphy

I think it is a reasonable sample. It was a random sample. It was a properly constructed sample in terms of enabling one to establish whether it was a reasonable sample of the total population.

Deputy Paul J. Connaughton

Considering the number of companies that got into the ESS and ESF, I presume a number of companies did not get into them.

Mr. John Murphy

Yes.

Deputy Paul J. Connaughton

Have those companies been followed up since? Obviously they were in difficulty at that point, which is why they came to the Department seeking funding.

Mr. John Murphy

Not that I am aware of in the context of this scheme. Obviously those companies could well be clients of Enterprise Ireland under other schemes, either before the scheme was launched or since.

Deputy Paul J. Connaughton

Was it possible for companies to receive both ESS and ESF funding?

Mr. John Murphy

Yes. The Comptroller and Auditor General's report gives a figure of 53 companies which benefitted under both schemes.

Deputy Paul J. Connaughton

Did any company go over the €500,000 limit?

Mr. John Murphy

One company got €522,000 due to a calculation error during the assessment process. That was an understating of €22,050 of ESS aid previously received. EI is seeking repayment of the excess.

Deputy Paul J. Connaughton

Has it been repaid yet?

Mr. John Murphy

I do not know right now.

Deputy Paul J. Connaughton

When was the overpayment discovered?

Mr. John Murphy

At the end of 2010.

Deputy Paul J. Connaughton

Should we not know by now if it has been paid back?

Mr. John Murphy

We can ask. I do not have the answer to that specific question right now.

Deputy Paul J. Connaughton

What are the headline criteria for getting into the ESS?

Mr. John Murphy

The principle criteria were that the company had to employ ten or more full-time employees at the date of application, had to have export sales - this condition was subsequently changed as a result of an intervention by the European Commission - comprising at least 30% of turnover and be engaged in manufacturing or internationally traded services. That was also expanded to a broader definition for the second call. The company should not have been in difficulty on 1 July 2008 but facing significant difficulties as a result of the global economic and financial crisis. The focus of the scheme was to support companies that otherwise would be viable but for the financial and economic crisis that erupted in the second half of 2008. The companies would consider redundancies at the point of application. They were required to commit to maintaining a number of full-time jobs until November 2010 and had to be able to demonstrate they had sufficient cash, taking into account the employment subsidy, to trade up to 31 December 2010 and beyond. They had to be judged to have sound, robust and sustainable business models and plans that were financially viable in the medium-term and assessed as capable of growth in a global upturn.

Deputy Paul J. Connaughton

The majority of companies claimed throughout the year and claimed the full funding. Around 19%, however, did not. Was there any follow up to find out why not?

Mr. John Murphy

They may have recognised they were not eligible. One of the conditions was that payments were made at quarterly intervals so the full number of jobs had to be there that quarter for a claim to be submitted. The companies may have recognised they were not in a position to claim.

Deputy Paul J. Connaughton

A company could be in the scheme, lose jobs and then be unable to claim at the end of the quarter.

Mr. John Murphy

Yes. Also there were companies that claimed but that were not eligible for that quarter but that may have been eligible for a subsequent quarter if they maintained the relevant numbers of jobs in that quarter.

Deputy Paul J. Connaughton

Do we have figures for the number of jobs lost in that area?

Mr. John Murphy

We have an estimate for the number subsidised and the number retained: 14,000 and 79,000, a total of 93,000. I do not have the number of jobs lost by companies that qualified for some periods under the scheme but not for others.

Deputy Paul J. Connaughton

Did EI do any research to find out that?

Mr. John Murphy

I am sure it would know the number for firms that claimed but were not eligible for some payments but it would not necessarily have the full details for firms that did not subsequently claim.

Deputy Paul J. Connaughton

At that point, if a company had been eligible at the start, in the interests of value for money, what happened that it could not finish the programme should have been followed up.

Mr. John Murphy

It would depend on whether it claimed or not.

Deputy Paul J. Connaughton

If it had claimed up to a certain point and then stopped claiming, would it not be in our interest to know what had changed?

Mr. John Murphy

Enterprise Ireland has a network of development advisers who work with client companies and I expect they would have followed up that. I do not know if they would have detailed statistics in respect of every firm that was initially assessed as eligible but that may not subsequently have claimed for whatever reason.

Deputy Paul J. Connaughton

When a company came to Enterprise Ireland seeking to be involved in this, how strict were the guidelines for acceptance?

Mr. John Murphy

The guidelines are as set out in the documentation. There was an ESS committee that assessed applications and business plans to ensure the scheme was properly targeted. A balance must be struck. We are talking about providing support to vulnerable businesses in the middle of a deep recession. A balance must be struck between having extremely tight criteria that can be tracked so we can establish with absolute certainty that there was full value for money and no company failures under the scheme while, on the other hand, providing support to businesses where we had to make a subjective judgment on their future prospects. It is inevitable in such a scheme that there will be failures.

Deputy Paul J. Connaughton

When this was announced, job losses were becoming more and more prevalent and the economy was dipping but was it strict enough for companies to get into it considering quite a number of companies did not get into it? The report by Deloitte in March 2010 found no formal guidance had been set down by Enterprise Ireland for the review of financial information submitted by the applicant to determine if it was in financial difficulty and therefore eligible for support.

Mr. John Murphy

The commercial assessors had available to them the supporting documentation that included the process documents, a process flow map, supporting assessment documents and instructions on how to complete the assessment form and guidelines on the scoring for business plan viability and potential future viability of the applicants. The scoring guidelines included descriptions of the factors that would influence each of these scores as well as indicating the level of scores that would be appropriate. There are examples in the documentation I have given to the committee.

Deputy Paul J. Connaughton

I understand Mr. Murphy was not there when this was happening but this money was put in to help companies to protect jobs on an annual basis. Quite a number of other companies came at that time to seek aid and it was found they were not allowed under the criteria but the Deloitte report states it was not sure financial proof offered by companies was sufficient to prove whether a company was in financial difficulty.

Mr. John Murphy

That is not quite what Deloitte is saying. It talks about the extent of detailed guidance provided to Enterprise Ireland, which was assessing business plans. There is an issue of timing here. Significant pressure existed at EU level to put in place appropriate emergency support measures recognising the impact of the recession. A balance had to be struck between what could be done within that EU framework and how quickly it could be done. We could have spent another six months designing the scheme, by which time a few hundred of the companies would have been out of business. Of the 3,200 that applied, only about 1,400 were found to be eligible. That suggests the criteria were reasonably strict and that a significant number of firms were not found to be eligible for assistance.

Deputy Paul J. Connaughton

Of those that are eligible, are there any issues with companies claiming too much or receiving funding they should not have received?

Mr. John Murphy

We mentioned one but I have no further details; I will get the details for the Deputy.

Deputy Paul J. Connaughton

I know of a case where €39,000 was paid to an ineligible company that was put into receivership after payment and was made and the Enterprise Ireland claim for repayment is now with the receiver. Has that been paid back?

Mr. John Murphy

It is being pursued with the receiver. I will check that for the Deputy.

Deputy Paul J. Connaughton

When will we get a result on that?

Mr. John Murphy

We will get details from Enterprise Ireland as soon as we can.

Deputy Paul J. Connaughton

Has there been a full evaluation of how the ESS worked regarding jobs retained and roll-out?

Mr. John Murphy

No, because the EU framework that supported the scheme expired at the end of 2010. It is clear there is no intention to repeat it and we have not devoted the scarce resources we have at our disposal to an in-depth review of a scheme we know we will not run again.

Deputy Paul J. Connaughton

Would it not be in our best interests to know how the money for the scheme was spent and whether it was successful?

Mr. John Murphy

We have general information. If, however, the Deputy is seeking a detailed evaluation, there was a reference to the wisdom of carrying out such an evaluation. We would not disagree that it is a good idea to evaluate every scheme, but in circumstances where resources are constrained and where we know there is no scope to run a repeat of the scheme, we have not conducted an evaluation at this point.

Deputy Paul J. Connaughton

As Mr. Murphy can imagine, from the viewpoint of the Committee of Public Accounts, we would like to know how taxpayers' money was spent and whether we got value for money.

Mr. John Murphy

We have the report of the Comptroller and Auditor General and the report of the spot checks by Enterprise Ireland.

Deputy Paul J. Connaughton

I know that a portion of the ESF funding, some €3.3 million, was spent on foreign market development for the companies in the scheme. Are those companies still involved in those markets, were the markets developed properly and are the companies still in business?

Mr. John Murphy

I will need to ask Enterprise Ireland for the detail in order to respond to the question and I will revert to the Deputy as quickly as I can.

Deputy Paul J. Connaughton

Has a formal review been conducted on the ESF funding?

Mr. John Murphy

Enterprise Ireland carried out a review of ESF funding and I have a copy of it which I will supply to the Deputy.

Enterprise Ireland carried out a review of the funding and followed it up quarterly with the client companies. This scheme ran from April 2009. In August 2011, Enterprise Ireland's interim review came up with its conclusions, in the knowledge that most of the plans made by companies are of three years duration, the time had not expired and some of the plans had yet to be fully implemented. The most significant outcome was that 159 or 74% of the vulnerable companies that received funding from the ESF were considered stable, while a further 48 or 22% were still vulnerable. Seven companies, or 3%, were liquidated.

As I said, some level of failure is inevitable in a scheme of this nature. An analysis of the employment figures at the time of the review, which would have been in the middle of 2011, show that there had been a net increase of 386 in the numbers employed in the ESF group of companies over the base level of employment and 131 companies or 66% had either met or exceeded their base employment targets. When measuring the current achievement of sales, export sales and jobs versus the three year targets, about 70% of companies have not fully met their targets. That reflects the challenges facing these companies and the reality that they are only mid way through their plan. Enterprise Ireland expected that approximately 77% would achieve their targets over the course of their three year business plans. Those are the key conclusions of the review that Enterprise Ireland carried out on the ESF in the middle of last year.

Deputy Paul J. Connaughton

Are the Department and Enterprise Ireland continuing to work with those companies who received the ESF funding?

Mr. John Murphy

Enterprise Ireland will continue to work with those companies.

Deputy Paul J. Connaughton

For the three year period?

Mr. John Murphy

Yes. These companies are part of the network of Enterprise Ireland's 8,000 client companies and will continue to have people who will work with them, regardless of whether they were in the scheme or not.

Deputy Paul J. Connaughton

Of the two schemes, how did they work in view of the urgency to implement them and the duration for which they ran?

Mr. John Murphy

I think the schemes worked very well under the circumstances. The main targets of both schemes have been achieved, and this is borne out in the figures. The economy was at its lowest point in 2009 and has gradually recovered since then. These schemes were introduced in a very difficult business climate and it was an EU response to an emergency not just in Ireland, but in the EU. Against that background, the results are very creditable.

Deputy Michael McCarthy

I welcome Mr. Murphy and his colleagues. I will dwell on the county and city enterprise boards. In 2010, more than 1,000 projects were approved for assistance. Some 31 companies received funding above €200,000. Some 41% of the financial support grants were in the form of refundable aid. Some of the enterprise boards are not reaching the 30% target for refundable aid. What is the reason for this?

Mr. John Murphy

I do not know the full answer to that question. To a certain extent, the work of the county enterprise boards is demand led. The county enterprise boards can give aid only to those companies that come to them and to companies that can be developed to the point where there is a solid business plan, and it makes sense to fund it. To a certain extent, the funding reflects the level and type of demands on the county enterprise boards. Refundable aid is discretionary and the county enterprise board has the scope to decide on the extent of funding because the aid is refundable.

Deputy Michael McCarthy

Can the Department do anything to help county enterprise boards that are not meeting the target?

Mr. John Murphy

Enterprise Ireland has been providing centralised support to county enterprise boards for a number of years. I mentioned in my opening statement that the Department has been reviewing the arrangements that best support start up microenterprises at local level. We are looking at the arrangements between county enterprise boards and the support they provide through Enterprise Ireland. We are also looking at what the local authorities do and are pursuing this under the action plan for jobs and in reflecting the commitments in the programme for Government. We will bring proposals to Government shortly to flesh out the details. Essentially, it proposed that there will be a local enterprise office in the local authority which will provide the point of contact on a range of supports to micro enterprise, including advice on other services a local authority provides, for example, planning, licensing and so on that affect people trying to start a business, as opposed to focusing on the narrow enterprise services,

First, we are seeking to focus on the supports that can be provided at the level of the local authority to people who wish to start a business. Second, we want to build on the support services Enterprise Ireland provides so that there is a consistent range of supports across the country through local enterprise offices, LEOs for enterprise support, which reflect the standards and governance arrangements and fit with the other schemes that Enterprise Ireland operates as companies move beyond the micro stage.

One of the issues we have been struggling with, particularly in the context of filling vacancies during the moratorium is that there are 35 county enterprise boards, each a separate statutory body. We do not have the flexibility to move resources around and or to deal with problems as they arise, which we ideally would like to have. We are also trying to address this issue when reforming the structure.

Deputy Michael McCarthy

That sounds good. When is it envisaged that the local authority will have a dedicated office in their area?

Mr. John Murphy

We are working on this issue with our colleagues in the Department of the Environment, Community and Local Government. It has to fit with the evolving policy on local government reform. We are working on the arrangement that would need to be put in place, and there is some detailed work to be done. We hope to bring proposals to Government shortly to deal with a number of these issues. We are working with Enterprise Ireland to identify the improvements that need to be made in the centralised services. Some work has already been done on shared services. We want to ensure that fits with what is happening in the local government system.

Deputy Michael McCarthy

There is a significant divergence in the expenditure on administration. In counties Louth and Leitrim 46% of its expenditure in 2010 went on administration, whereas this figure was 25% in Dublin City Enterprise Board. Why is the percentage of expenditure on administration as high as 46% in some county enterprise boards?

Mr. John Murphy

That illustrates the problem with the existing structure of 35 separate statutory bodies as county enterprise boards. There is an inevitable fixed overhead that goes with a statutory body. Each county enterprise board has four staff members, including a chief executive officer, a deputy chief executive level post, a business adviser and clerical support. Clearly, the cost of those officials will be higher, as a proportion of the overall cost of the county enterprise board, in a very small county than it will be in a larger county. That is one of the issues we want to address. We want to get better flexibility within the local government system.

Deputy Michael McCarthy

Does the Department have a target for a reduced percentage of administration? Does it envisage a benchmark in that area?

Mr. John Murphy

As long as we continue to have the current range of local authorities - I am speaking from an administrative perspective, as distinct from a political perspective - the same issue will apply across the local government system. The fixed overhead that is associated with administration accounts for a higher percentage of the total expenditure and output of the local authority in a small county than in a larger county. That will have to be addressed as part of local government reform. It is part of the same problem.

Deputy Michael McCarthy

The cost per job varies in each county. It is approximately €10,000 in County Leitrim and approximately €4,000 in County Clare. I accept the argument that has been made about the size of the county and the existence of fixed costs. How does the standardised measurement of cost per job compare with the cost per job in other bodies, such as IDA Ireland and Enterprise Ireland?

Mr. John Murphy

There are measurement issues in the first instance. Over the last number of years, a system for measuring the number of jobs created, and the cost per job, has been developed across the main enterprise agencies - IDA Ireland, Enterprise Ireland, Údarás na Gaeltachta and Shannon Development. The figure is based on a rolling seven-year average. The factors that are counted as part of that system are standardised. The system has been worked out with the assistance of Forfás over a number of years. The system has not been applied with the same degree of rigour in the case of the county enterprise boards. We want to bring the measurement of the county enterprise boards' cost per job into line with the system we use for other enterprise agencies. They might not be totally comparable because we are talking about micro enterprises in the case of county enterprise boards, whereas IDA Ireland deals with much larger investments and much larger firms. We have to accept some level of disparity between them. According to figures compiled last year, the cost per full-time job sustained over the period between 2005 and 2011 was approximately €14,000 in the case of IDA Ireland, €12,000 in the case of Enterprise Ireland and €6,000 in the case of the county enterprise boards. I do not have a figure for Shannon Development. As I have said, they are not directly comparable.

Chairman

Can Mr. Murphy give the exact figure for Enterprise Ireland?

Mr. John Murphy

The figure I have before me is €12,024.

Deputy Michael McCarthy

Is Mr. Murphy saying it is a question of how these costs are measured?

Mr. John Murphy

Yes.

Deputy Michael McCarthy

In other words, it would not be a case of comparing like with like.

Mr. John Murphy

The various factors are not directly comparable.

Deputy Michael McCarthy

Okay. Over 3,000 jobs that were supported by county enterprise boards were lost in 2009. The situation stabilised somewhat in 2010. Do we have any evidence for 2011? Are any figures available to us to indicate what the position might have been in that year?

Mr. John Murphy

The contrast between 2009 and 2010 is similar across all the enterprise agencies. It can also be seen in the figures of Enterprise Ireland and IDA Ireland. The number of jobs that were created was much higher in 2010 than it was in 2009. The number of jobs that were lost was much lower in 2010 than it was in 2009. That trend continued in 2011.

Deputy Michael McCarthy

Okay.

Mr. John Murphy

I am not sure I have figures for that year, however.

Deputy Michael McCarthy

If Mr. Murphy does not have them, he might make them available to the committee as soon as they are to hand.

Mr. John Murphy

I can confirm that in 2011, the number of jobs created by county enterprise boards was 7,253 and the number of job losses was 7,436. Therefore, the county enterprise boards recorded a net job loss of 183 in that year.

Deputy Michael McCarthy

The name of the Department has changed. It now has a strong focus on jobs and investment. What has been the focal point of the changes in the Department to reflect the emphasis in the programme for Government on investment in the economy and job creation? How have things changed?

Mr. John Murphy

At a political level, there is a very strong commitment, led by the Taoiseach, in relation to the importance of employment. The Minister is very much in the driving seat on this agenda. It was made crystal clear to me upon my appointment as Secretary General that the creation of jobs was to be the Department's priority. The action plan for jobs, which was published last month, is part of that. It sets out a range of actions that relate to all Government Departments and 36 State agencies. The Government cannot create jobs directly, but it can create the conditions in which employment creation can be sustained and maximised. Specific timelines are associated with many of the actions in question. A substantial monitoring process has been put in place. I co-chair a monitoring committee with the Secretary General of the Department of the Taoiseach. We will report to the Government through the Cabinet committee on economic recovery and jobs. We will publish a quarterly report on the implementation of the action plan on jobs. We will go back to the Government shortly when the monitoring committee's report for the first quarter of this year is published. There is a very clear focus on who has to do what. We have put structures in place to support the implementation of this broad and new strategy.

We are also in the business of downsizing the Department and rationalising our agencies to get a better and clearer focus on employment creation. For example, we are reforming the employment rights bodies and amalgamating the National Consumer Agency and the Competition Authority. We are seeking to better integrate Forfás with the Department so we have a better capacity for evaluating the performance of agencies, in particular, and so that our policy is more responsive to changes in the wider economy, including the international economy. As we are implementing the expenditure review, we have a tight focus on expenditure, including the expenditure of our agencies. There has been substantial reform in the big area of research and development. We have ensured that funding for research and development is brought through in one stream. The prioritisation exercises are ensuring that scarce public resources are being directed to research and development that really supports innovation and the creation of jobs. We have tighter criteria for funding and better evaluation of that funding. That process is led by Science Foundation Ireland, which is an agency of the Department that works with a range of other providers, particularly in the academic area.

Deputy Michael McCarthy

What are the job forecasts for 2012?

Mr. John Murphy

We have been reluctant to get into very specific targets, either at an annual or at a sectoral level. Having worked with the enterprise agencies, it is clear that there is a very strong pipeline for IDA Ireland and Enterprise Ireland for 2012. The progress that was made in 2010 and 2011 is continuing this year. We are working very intensively to continue that. There are vulnerabilities in the international economy. Ireland has an export-led economy. We depend heavily on our ability to trade successfully in foreign markets. Clearly, the risk of international recession is a significant issue we have to deal with. It might affect investment decisions that would have had the potential to lead to job creation in future years. We have to watch that, ensure we maintain our competitiveness and build on the improvements in competitiveness we have made. We have to make sure we have a good story to tell in terms of getting investment. We need to ensure we can provide the right range of supports to indigenous Irish companies to help them to grow and get into export markets. The action plan for jobs sets a global target that focuses on increasing the number of people at work. An interim target for 2016 is to have an additional 100,000 people at work. Approximately 1.8 million people are employed at the moment. We want to increase that number to 1.9 million by 2016 and 2 million by 2020. We believe that what is happening through the work of the enterprise agencies will support that strongly - certainly, for this year. We expect that the range of measures we will put in place will facilitate significant improvements in the years ahead. There are vulnerabilities here which we recognise. I have mentioned what happens in the international economy and I would include in that any uncertainties and continuing vulnerabilities in relation to the euro and all that goes with that.

Deputy Michael McCarthy

I will address one more topic before I conclude. Mr. Justice Peter Kelly, in granting a further extension to the investigation into Anglo Irish Bank recently, was critical of the resources available to the Office of the Director of Corporate Enforcement, ODCE. In particular, he referred to the number of gardaí available to the office. How frequent is the Department's contact with the Office of the Director of Corporate Enforcement and at what level does this contact take place?

Mr. John Murphy

The Office of the Director of Corporate Enforcement is an office of the Department. It is statutorily independent in the way it conducts investigations. As it is staffed by civil servants of the Department, a staffing complement is assigned to the director. In addition, in the case of the Garda, a number of gardaí are seconded to the ODCE. I have not been faced with a demand for additional resources from the Director of Corporate Enforcement. If I had been, I would have wanted to act on that. The director and I speak to satisfy ourselves that the investigation, particularly in the case of the annual investigation, is proceeding and that which can be done to meet milestones in terms of the provision of files to the Director of Public Prosecutions and conclusion of elements of the investigation is proceeding. For example, in the context of the comments of Mr. Justice Peter Kelly, I was aware in the run-up to the end of the director's term of office and intention to resign that the High Court hearing was coming up. One of the things I was concerned about was to establish the likelihood that a decision would be forthcoming that would facilitate the office to continue the investigation along a particular timescale that it has identified as appropriate. That decision was forthcoming from the court.

Deputy Michael McCarthy

To be clear, there was no request made by the Director of Corporate Enforcement or his office for extra resources. Despite Mr. Justice Peter Kelly's criticism of the fact that only 11 gardaí were involved in the investigation into Anglo Irish Bank, the office did not make a demand for additional resources from the Department.

Mr. John Murphy

No, the resources the Office of the Director of Corporate Enforcement has requested have been provided. It is dangerous to comment on the ruling of any judge, particularly an eminent High Court judge, but I do not think that was based on a forensic examination of the resources of the ODCE. I think that reflected a certain degree of frustration, which would be shared by the office, at the complexity of the case in question and the pace at which it can be investigated.

Deputy Michael McCarthy

To clarify this matter, on foot of the remarks made by the eminent judge in question, has a request been made for extra resources and, if so, has that demand been met?

Mr. John Murphy

The answer is "No" as far as I am concerned. I am not aware of a demand for additional resources from the Office of the Director of Corporate Enforcement in relation to the provision of gardaí. However, that would be something to be decided by the Garda Commissioner and Minister for Justice and Equality as opposed to me. I do not have control over Garda resources.

Deputy Michael McCarthy

Requests for other resources would naturally flow from the Office of the Director of Corporate Enforcement to the Department.

Mr. John Murphy

There has not been a request for additional resources.

Deputy Michael McCarthy

Why has the Office of the Director of Corporate Enforcement underspent its allocation by €2.5 million in the past two years?

Mr. John Murphy

That largely reflects legal costs. It is very difficult to estimate at what point bills for legal costs will arise. That in turn depends, for example, in the case of an investigation that proceeds to court, on whether a court makes a judgment that some element of costs should be met by the office and at what point that bill arises. We have to make a prudent estimate of what might be required and then one is in the hands of the pace at which investigations proceed and what decisions are made by the courts.

Deputy Michael McCarthy

Is it possible to make the money that was underspent available for resourcing personnel and expertise for other aspects of the investigation?

Mr. John Murphy

The Office of the Director of Corporate Enforcement, like every other office and agency of the Department, is subject to the limitations on resources that apply across all Government Departments and non-commercial State bodies that are funded by the Exchequer. The resources that we can provide for staffing and administration must take account of that. If I was faced with a demand for additional staff resources, I would have to look at that demand in the context of the resources available to me to be spread between the Department and the offices that are directly staffed by the Department. Likewise, employment control frameworks set by the Department of Public Expenditure and Reform apply. There is a number set for the Department which covers the offices staffed by civil servants and the Department and there is a number set for the total of non-commercial State bodies. I would have to try to juggle those numbers to try to meet the priorities as best we can.

Deputy Michael McCarthy

When did Mr. Murphy become aware that the Director of Corporate Enforcement, Mr. Appleby, intended to retire on 29 February?

Mr. John Murphy

He telephoned me in the middle of January to that effect.

Deputy Michael McCarthy

Did Mr. Murphy then notify the relevant Government Minister?

Mr. John Murphy

Yes, I notified the Minister. The reason Mr. Appleby did not submit a formal resignation at that point is there is a provision in the governing legislation for the Office of the Director of Corporate Enforcement that provides that the resignation of the director takes effect one month after it is submitted. Mr. Appleby did not want to submit a formal resignation at that point in time and preferred to wait until the last possible date. That partly reflected a concern to ensure that the outcome of a High Court hearing which was due on, I believe, 25 January would facilitate what the office envisaged was the timescale for continuing certain investigations. That was, in fact, the case.

Deputy Michael McCarthy

Would Mr. Murphy expect to receive such a telephone call from someone as senior as Mr. Appleby prior to the departure date? In other words, was the Department expecting-----

Mr. John Murphy

No, I was not expecting the call but the nature of the provisions that were in place for early retirement was such that there was an absolute deadline of 29 February. Anybody with a certain level of service or who was likely to be in the group of people who would consider early retirement was considering his or her position. A number of people would have contacted senior staff in the Department to say they were considering their position or whatever. It was not unusual from that point of view.

Deputy Michael McCarthy

Has the recruitment process to replace Mr. Appleby commenced?

Mr. John Murphy

Yes. The job has been advertised and there will be a short-listing of applicants shortly. The interview process will follow that.

Deputy Michael McCarthy

When is it envisaged that the new appointment will take up his or her position?

Mr. John Murphy

The intention is that, having regard to any notice requirements or whatever, a new director will be in place by the time the six month additional temporary appointment expires.

Deputy Michael McCarthy

Have there been many applicants for the position?

Mr. John Murphy

I do not know the answer to that question.

Deputy Michael McCarthy

I thank Mr. Murphy.

Deputy Paschal Donohoe

I welcome Mr. Murphy and all of his staff. I will address the role of the employment support schemes raised by colleague, Deputy Connaughton, albeit from a slightly different angle. My concern regarding the implementation of schemes of this nature is the displacement effect they may have on people working in companies that are not in receipt of the funding available to companies participating in the scheme. I will illustrate this by way of analogy, having had an experience of this displacement effect in my constituency. Several months ago, the Department of Justice and Equality undertook a worthwhile scheme under which people who were completing custodial sentences in Mountjoy Prison and elsewhere removed graffiti from public areas across the city centre. Within a week of the scheme commencing companies engaged in graffiti removal contacted me to point out they would go out of business if the scheme continued because they could not compete with work that was essentially being done free of charge. However, this work is not done free of charge as it is being funded by the taxpayer. I am concerned about the effect of the implementation of the employment subsidy scheme on other companies in the same sector which do not avail of the scheme and may find their sustainability and competitiveness eroded because they are not in a position to access the scheme. They might not be aware of it or might not meet the criteria. Has that concern played any role in the evaluation that has taken place with this scheme to date?

Mr. John Murphy

Displacement and dead weight are issues of concern when designing any scheme and would be taken into consideration across the range of schemes provided by EI. For example, it would not normally grant aid businesses in sectors where displacement is likely to be a significant factor. Although I was in a different Department at the time, I recall discussions at EU level at the time the scheme was being drawn up. The EU framework would, to a certain extent, have taken account of issues of dead weight and displacement and tried to ensure that the criteria would minimise that. However, we cannot completely minimise dead weight and displacement in such schemes.

With regard to the schemes relating to the Departments of Justice and Equality and Defence, the issues that arise with those types of scheme are that notwithstanding the risks of dead weight or displacement, there is a social policy reason for providing particular assistance to particularly vulnerable groups. That is the sort of consideration that arises in those schemes. I do not know the details of the particular scheme, but I would be-----

Deputy Paschal Donohoe

I was only giving that example to illustrate my point.

Mr. John Murphy

I appreciate that. At policy level a balance must be struck between whether some risk of dead weight or displacement is outweighed by the public good that would be served by providing particular assistance to a particular group of people.

Deputy Paschal Donohoe

Yes. My question was whether an analysis had been done to see if that balance had been achieved. Take as an illustration figure 131 in chapter 28. It goes through the different sectors which were able to avail of the ESF scheme. There were 363 companies in the wholesale or retail trade, 212 in real estate lending and business activity and 144 hotels and restaurants. These are the kinds of industries that are particularly susceptible to the displacement effect. The easiest way this can be managed within an open economy is to export the displacement effect so that it does not happen within our economy. All of these businesses are local trading businesses. Therefore, if a wholesaler or retailer takes advantage of the scheme, but their competitor does not, those on the scheme have an advantage which has been provided by the taxpayer. Has this been considered?

Mr. John Murphy

I know that in the case of hotels, enterprise and innovation schemes have focused in particular on the extent to which hotels were dependent on tourists as opposed to operating within the local economy. The original scheme was designed to target companies that were exporting.

Deputy Paschal Donohoe

That has changed.

Mr. John Murphy

Yes, it has changed. This brought about the imposition of a different policy constraint. If the scheme was restricted in order to avoid the concern raised by Deputy Donohoe, that might indirectly discriminate against other companies. Therefore, the second call was opened up, at the behest of the European Commission.

Deputy Paschal Donohoe

It is worth putting on record that the subsidies paid into companies were significant amounts of moneys. Paragraph 28.10 provides an example of that. The subsidy was €9,100 per annum towards full-time employees and €6,370 for part-time employees. This is a sizeable amount of money to be going into the cost base of a company, particularly a company trading within a domestic environment. I gather from Mr. Murphy that this is a concern of which people are aware. I feel that the evaluation that has taken place has focused on an evaluation of a sample of companies that participated in the scheme. However, the evaluation did not look at whether there were consequences of the scheme outside of the companies that received moneys that might have nullified the benefit, on a macro level, that would have accrued to the taxpayer. Am I correct that this consideration was not formally evaluated?

Mr. John Murphy

It would be extremely difficult to carry out such an evaluation. Bearing in mind the economic circumstances we were in, the position facing governments across the European Union was that they were "damned if they did, and damned if they did not".

Deputy Paschal Donohoe

I accept that.

Mr. John Murphy

It would be very difficult in the circumstances of a deep economic recession to establish whether if company "X" failed, that was because company "Y" got an ESF grant or for some other reason. It is extremely difficult to evaluate that. To give an analogy, in my last job, I participated in a review of the taxi industry. The view was that there was an over-supply of taxis and that some of this was driven by people who had got redundancy lump sums who had thought it would be great to become a taxi driver. It was impossible to establish to what extent that had an impact. It was also very difficult to separate what was happening on the supply side of the market from what was happening on the demand side. I am thinking specifically of the greater Dublin area, where the greatest problem appeared to be. Significant work was done to try to narrow down the factors and figure it out. However, it is very difficult to come to any firm conclusions on something like that. Certainly, dead weight and displacement are issues which are considered and are built into criteria generally for both the IDA and EI schemes and for county enterprise boards.

Deputy Paschal Donohoe

Okay. Looking at one of the early points in chapter 28, paragraph 28.3 relates to initiatives that did not fall within the scope of this report, including a job incentive scheme under which an employer created a new job and employed a person who had been unemployed for six months or more. This employer was fully exempt from the liability to pay employer PRSI for the first year of that employment. That is a very different kind of intervention to the one we have been talking about. The first intervention is one that can be availed of by anyone within a particular industry, but this one is a broad scale intervention that could apply to everybody within an industry.

Mr. John Murphy

That is right.

Deputy Paschal Donohoe

Has an evaluation taken place within the Department or across Government as to the efficiency of that intervention?

Mr. John Murphy

Does the Deputy mean the PRSI intervention?

Deputy Paschal Donohoe

Yes.

Mr. John Murphy

It is one of the things to which the Minister has drawn attention in terms of preparing the action plan on jobs. That exemption is potentially very valuable to employers where additional jobs are created. It has not been widely availed of by employers, but it is something we have sought to promote in the context of the action plan on jobs.

Deputy Paschal Donohoe

Do we know how many employers have taken advantage of it?

Mr. John Murphy

I can find that out. I have a figure on it that I can get.

Deputy Paschal Donohoe

Is it a significant number at this time?

Mr. John Murphy

No, it is less than expected having regard to the value of the exemption.

Deputy Paschal Donohoe

It could be a very potent intervention for-----

Mr. John Murphy

This is a scheme that is run by the Revenue Commissioners, but we can get the details on it.

Deputy Paschal Donohoe

I appreciate that it is not something on which the Department has the information, but will the Department come back to us with an update on the position?

Mr. John Murphy

Yes, we would be happy to do that.

Deputy Paschal Donohoe

The other intervention was the proposal to reduce the payment period by central Government Departments to business suppliers from 30 to 15 calendar days, to improve cash flow for enterprises. Have we an assessment of where we stand in that regard currently?

Mr. John Murphy

Compliance with that is in the high 90 percentage, possibly 98%. One of the measures we have sought to promote in the action plan on jobs is that a similar scheme would be developed in the private sector, because this is a significant issue for companies, especially when they face cash flow difficulties. It is a serious problem for smaller companies.

Deputy Paschal Donohoe

Yes, but within State bodies we think it is well in excess of 90% and towards 95%.

Mr. John Murphy

In Departments. We have been widening that to make sure-----

Deputy Paschal Donohoe

Within Departments.

Mr. John Murphy

Yes.

Deputy Paschal Donohoe

Do you have a feeling for where it would be within semi-State bodies at the moment?

Mr. John Murphy

We are in the process of collating that data. It varies from one State body to another. I am assured our own bodies are very good; I should hope they are. I am aware of disquiet about the rate of compliance among some very large bodies such as the HSE, and performance is variable across the local authorities.

Deputy Paschal Donohoe

I will move on to the market development initiative that is covered in chapter 28. Paragraph 28.45 deals with the broad implementation of the enterprise stabilisation fund, of which the market development initiative is a part. It states:

Early indications from Enterprise Ireland's first post investment report for the ESF suggest that significant business challenges lie ahead for the assisted companies to ensure that they can survive the present economic downturn. Nearly 80% of companies failed to meet first year sales targets set out in their three-year business plans.

Eighty percent of companies in receipt of moneys from the enterprise stabilisation fund, which is worth €78 million, from the Exchequer are failing to meet the targets they set in their relationships with the agency. The report also states that 70% could not meet their earnings forecasts. Do we have an understanding of how much of that figure is driven by the harshness of the environment within which these companies are operating or the lack of success they are having in responding to it? It is of concern to me that despite the existence of a scheme to support companies that are struggling - I do understand the need for it - four out of five participating companies did not meet the first year sales targets they agreed to.

Mr. John Murphy

As I mentioned earlier, that review was carried out in the middle of 2011, so it reflects a point-in-time estimate for firms that are in the middle of implementing three-year business plans. Enterprise Ireland has told us that the next formal review is scheduled for September 2012 and that it is continuing that process with the individual companies. A person is assigned to work with each client company, so Enterprise Ireland is keeping an eye on things. It also took the view in September of last year, when considering the review that was carried out in August, that although companies are facing significant challenges, it expects three quarters of them will achieve their targets over the course of their three-year business plans. The proof of the pudding is in the eating. We will get a further review in September 2012, and then we will be in a better position to assess the extent to which companies are likely to achieve those targets and the extent to which that reflects continuing challenges or other difficulties.

One of the things we are interested in as a Department is whether access to funding is a significant issue for those firms and whether the problem is deficiencies in their business plans or unexpected developments that could not realistically have been anticipated when they drew up their business plans. We will be considering all those elements, and we will be seeking evidence from Enterprise Ireland, because that feeds into other work we are doing in terms of improving access to finance. It is useful to have that kind of evidence to bring to the table in our discussions either with the Department of Finance or more directly with the banks.

Deputy Paschal Donohoe

On a related point, to return to my question about the operation of the employment subsidy scheme, have we defined an exit strategy for such schemes? In my experience, if a company is in receipt of funds from a scheme such as this, it is locked in. The money goes into its base and it is something it can use and take advantage of. Withdrawing that support can frequently be more challenging than was anticipated, because that money is helping the company to employ people and fund operations that it might not otherwise be doing. This may seem a hypothetical question at the moment, given the crisis we are experiencing, but at what point do we decide that a particular company should no longer be the beneficiary of a scheme or that the scheme should be ceased?

Mr. John Murphy

The employment stabilisation scheme was finite and was ended after a certain period of time. It expired at the end of 2010. Within the lifetime of the scheme, claims were made on the basis of performance quarterly, so companies either met the criteria, in which case they could claim for the quarter, or they did not. They could not submit a pro rata or retrospective claim. There were clear safeguards built in. That scheme is finished and there is no question of re-establishing it. In the case of the ESF, most of the support was by way of redeemable preference shares, to the extent that there was an investment in the company. Enterprise Ireland retains an interest, and the shares are repayable.

Deputy Paschal Donohoe

To return to the county and city enterprise boards, one of the striking things about the various annexes that are laid out at the end of Chapter 29 - one sees this a lot in charts showing the performance of different bodies - is that there can be massive spreads by region. Deputy McCarthy talked about the average cost per job, so I will not dwell on that point. For example, the chart entitled "Expenditure on Main Functions 2009 and 2010" shows a noticeable spread between the amounts spent in different counties. Does the Department have a view of what the ideal profile should be in terms of how much money goes in under the headings of financial supports, enterprise and capability supports and administration?

Mr. John Murphy

It is difficult to impose that across a network of 35 county enterprise boards. As I said earlier, there are built in fixed costs associated with that type of structure, which is one of the reasons we want to move away from it. As a matter of principle, we want to have the smallest amount, consistent with good governance, spent on administration and as much as possible spent on providing the appropriate balance of grant aid or financial supports, mainly refundable. We want to see the target of 30% being met. However, we also recognise the importance of soft supports such as advice and mentoring, especially in the start-up phase, for microenterprises. To a certain extent it will be demand-led. I do not think we have ever set down that it should be X%, Y% or Z%, other than seeking to ensure that at least 30% is refundable.

Deputy Paschal Donohoe

Mr. Murphy referred to the discussions taking place with the Department of the Environment, Community and Local Government regarding the reconfiguration and said he would be taking a recommendation for a future profile to the Cabinet sub-committee. At what point will that happen?

Mr. John Murphy

We intend, subject to the Minister's approval, to take proposals to the Government to set out an outline of the measures that need to be put in place. However, further detailed work will need to be done after that. In addition, there are about 120 staff involved across the county enterprise boards, so we also need to deal with the issues that arise in transferring people to new entities and so on. There is work to be done in this regard.

Deputy Paschal Donohoe

When will that happen?

Mr. John Murphy

We will be pursuing that in the coming month.

Deputy Paschal Donohoe

Before the summer.

Mr. John Murphy

I think we are having our summer now.

Ms Catherine Carroll

It will be started before the summer.

Deputy Paschal Donohoe

All right. Thank you.

Chairman

I wish to ask Mr. Murphy about correspondence from last year. We were waiting for a report into the spending of the Health and Safety Authority to be finalised by the end of 2011. The report has not come before the committee, which is disappointing to say the least. It allows to circulate in the public domain the articles and reports that we received regarding the excessive amounts spent on wine, dinner, flowers and transport by the authority as reported by the media and unchallenged by the Department. This is most unsatisfactory. It is possible that all of this happened, that the Department acknowledged it and it has corrected the processes and procedures in place to prevent anything like it from happening again or it continues to happen. We have no idea because we have no report from the Department. Surprisingly, it took a member of the public who became interested in the matter to inform the committee of the various trips abroad, one of which, between Paris and Dublin, cost the State €1,260 as far as I can make out. In addition, dinners two days apart cost the authority more than €2,000 each time and a restaurant received a tip of €300.

Let us examine the credit card payments. The amount of money spent over the years from 2007 to 2009, inclusive, on dinners, flowers, travel and so on is incredible. All of this took place when the economy was going wrong. One taxpayer became interested in the authority and its spending. A considerable amount of correspondence was sent to the Department with no response or little attempt to address the issues raised. For example, €4,086 was spent on travel on one day and it is noted as "unexplained". There are purchases from a health centre in Limerick amounting to €200. There are purchases in restaurants of more than €2,000 in two separate cases, one amounts to €2,220 and the other to €2,208. What action has been taken following the correspondence received by the Department on all of this excessive spending? What action has been taken against the individuals concerned? Were they correct to spend all that money? If not, have they paid back that money? What are the processes and procedures in place to ensure this does not occur again?

Will the Secretary General comment on the reason we have not received the report as promised? One key issue for this committee during my chairmanship will be to ensure a prompt response from Departments on any additional information required, issues raised by the public and so on. I remind the Secretary General that this is an opportunity for the Department to clarify these matters and the Secretary General should do so.

Mr. John Murphy

I wish to put some context on the matter. Several freedom of information requests have been made which required the examination of a considerable number of records dating back several years to 2005. The matter has been the subject of correspondence, including correspondence from the Minister to the Health and Safety Authority, HSA. A substantial amount of work has been done to investigate these records and to identify any transactions that could be regarded as questionable or not fully within the entertainment or travel and subsistence rules dating back to that period.

I understand that an update was provided by the Department to the committee in November 2011. Further reports were requested from the HSA. I got a response from the HSA in the past week and we have identified several follow-up questions which we have put to the HSA. As soon as we have the answers to these questions, I would be happy to supply a more detailed report to the committee.

I wish to put the scale of what is under discussion in context. We know from the thousands of records examined dating back to 2005 that the total credit card expenditure was approximately €625,000, amounting to 0.4% of the budget of the HSA in that period. Within those transactions, a small number of transactions were identified, some of which the Chairman referred to, which required further examination or explanation. These amount to something of the order of between €20,000 and €25,000. I am seeking further explanations in each case so that we are in a position to provide the committee with the report the Chairman is looking for. I will provide that as quickly as I can.

Chairman

I must press you on this matter. You say €625,000 was spent on credit cards. During what period?

Mr. John Murphy

That was from 2005 to 2011.

Chairman

You say that you will give a report to satisfy the committee. I realise you were not there for much of this time. I am following this up out of an interest expressed by a taxpayer. I am taken aback at the level of spending on a credit card or credit cards during the period. I would have thought that in the interests of the Department and its management you would be keen to see a comprehensive report of that period from the Health and Safety Authority and that you would be keen to ensure those practices are no longer in place. You may well say that the credit card queries amount to between €20,000 and €25,000 but it is difficult to explain that to a person who has just been refused a medical card because they are €1 over the limit.

We went through the investigation in 2009. I am baffled that when the Department was made aware of the freedom of information requests and of what was going on it did not conduct an inquiry into what took place. Although we may be examining 2007, nothing justifies the spending of €2,208 simply because it was the last meeting of a board. The event included spouses and senior executives. This shows there was a great splash of taxpayers money going on during that period. That took place in FÁS as well. I am concerned that the queries raised by the taxpayer in question were not dealt with efficiently and were not explained in detail in the media.

People are keen to know. They read a full page article on the matter in the Irish Independent on Monday, 8 August 2011. It seems from their perspective that nothing much has happened since then. I urge Mr. Murphy to bring forward to the committee a comprehensive report explaining how, within the processes of the Department, this spend was allowed in the first place.

I could not justify some of the expenditure. There are pages of credit card payments. The public wants to know what action was taken on the report and those that were found guilty of the misuse of credit cards. What procedures or protocols were in place that gave officials or whoever was using a credit card the belief they could spend taxpayers' money in this way? How soon can such a report be compiled?

It is not simply to answer our queries, rather it would show the committee and the general public that the Department has radically changed the procedure that allowed this to happen and now has new procedures in place. The report should explain some of the unexplained items recorded in the credit card payments.

Mr. John Murphy

I certainly would not want to convey the impression we are only interested in answering a few specific questions and not in the more general issues. The use of corporate charge cards and so on has been substantially reduced.

In the case of the HSA only two individuals have company credit cards. One is the chief executive and the other is the head of corporate services. Cards are mainly used for making travel and other such arrangements. Across the public service there has been a significant tightening up of arrangements governing travel and subsistence, meetings and entertainment. We would apply that in the Department and expect and seek assurances it is happening across our agencies.

In most of our agencies, including the HSA, the chief executive is an accountable person. We would expect in the corporate governance arrangements the chief executive would be answerable for that, to a certain extent to the Department but also to the board. He or she should also be an accountable person to this committee.

As I said, we sought a number of reports from the HSA on the specific issues raised relating to the pattern of expenditure and volumes of transactions. We received responses as late as 22 March. We are in the process of seeking further information in respect of some of that and will revert to the committee as soon as we have answers. We will include in a report information on the arrangements we put in place with the HSA, Department and our other agencies to cover this type of expenditure.

Chairman

How many credit cards are now in use in the Department and its agencies?

Mr. John Murphy

There are three in the Department and, as I mentioned, two in the HSA.

Chairman

I want to ask the Office of the Comptroller and Auditor General a question on the information that has been provided, based on a freedom of information request by a taxpayer, and the investigation that is ongoing within the Department. Why does it believe the information was not disclosed in the report? Can it assist the Department in bringing a report to the committee on the period of time in question and the issues raised in order that we can put some figures on it and assure the public the issue is in hand and will not happen again?

Mr. Seamus McCarthy

As far as I am aware issues were raised in management letters to the HSA in connection with the control of credit cards and the level of detail available to support amounts that were authorised for payment under credit cards. They were brought to the attention of the HSA. It is fair to say more emphasis has been put on that by the office in latter years. We may not have picked up the complete level of detail in the earlier years which are of interest and have been brought to the attention of the committee.

Foreign travel and credit card expenditure were examined in the 2009 audit and points were raised with management in the HSA. They have also been examined in the 2010 audits and are being examined in the 2011 audits. The issues were examined and the Comptroller and Auditor General took the view that no matters arose which required him to report publicly in regard to that. The 2010 audit was completed and a clear opinion was expressed.

Chairman

I ask that the full file of correspondence that has been given to the committee be examined by the Department and, where necessary, by the Comptroller and Auditor General.

Mr. Seamus McCarthy

We already have the material. It has been supplied and was reviewed in the context of the 2010 audit. As I said, in 2009 we identified some of the control weaknesses and raised them with management. As far as I am aware, since 2009 there was a significant decline in the level of expenditure presented through credit cards. I understand travel and entertainment expenses also reduced during that period.

Chairman

When does Mr. Murphy think we can expect to have a comprehensive report on all of the correspondence we received on this and his actions within the Department?

Mr. John Murphy

I will try to complete it as quickly as possible. I will get a response to the Chairman within the next few weeks.

Chairman

I understand the Department is busy and there are other pressing issues. Mr. Murphy might devote some time to dealing with this issue in order that the public can be reassured.

Mr. John Murphy

We have devoted time to dealing with this. There have been exchanges of correspondence with the HSA. I want to get to a point where I am satisfied with the explanations and level of detail I am getting and am happy to provide them to the committee. The HSA arranged an internal audit and an external auditor did a report on expenses and credit cards during the period under review. Its conclusions were that there was no systemic abuse of credit cards. It identified a number of transactions which required further explanation, and we have sought that from the HSA. I have also advised the chair and CEO of the HSA to make themselves available and be prepared to attend the committee because, as I pointed out, the CEO is an accountable person in his own right and we expect him to live up to those responsibilities.

Chairman

I do not want to dwell on the issue. However, based on the information I have a huge amount of money seems to have been spent and it is not possible for the Department to condone it. I ask that the volume of correspondence we received, particularly from the taxpayer who took an interest in the matter, is examined in the context of the new protocols versus those in existence at the time and we have a clear picture of what happened. I have dealt with the matter and will deal with it in a more detailed way once the report is available. When we have that we will ask Mr. Murphy to come before the committee specifically to deal with it.

Deputy Eoghan Murphy

I thank the Chair and apologise for not being here earlier; I had to be in the Chamber. I apologise if I am repeating something that was touched on earlier. I refer to the future plans of county and city enterprise boards. Does the Government plan to abolish them?

Mr. John Murphy

The plan is to dissolve the boards. We are providing for a new set of arrangements to ensure support for people starting businesses is better focused, building on the supports that can be provided through Enterprise Ireland and the local authority network.

Deputy Eoghan Murphy

That structure consists of an executive and board for each of the county enterprise boards. Will they be splitting between Enterprise Ireland and the local authorities?

Mr. John Murphy

The precise modalities have yet to be worked out. We will be bringing proposals to Government on the broad arrangements that we see should be put in place, but there will need to be more detailed discussion, particularly with the Department of Environment, Community and Local Government on how this sits with various changes that might be made within the local authority structure. We expect staff will have the option of becoming employees of a local authority or of Enterprise Ireland.

Deputy Eoghan Murphy

Why are we doing this?

Mr. John Murphy

We are doing this because the current arrangement, where we have 35 separate statutory county enterprise boards, is unwieldy and is not providing the full range of supports to people wishing to start businesses that Government would, ideally, like. In particular, the Government wants to see a better focus within local authorities on the supports that can be provided to people wishing to start a business, not just narrow enterprise supports but a wider range of services that local authorities can provide to people starting businesses. The Government wants to see a one stop shop in the form of a local enterprise office located within the local authority but providing a range of supports that would come through Enterprise Ireland. There would be a range of centralised supports providing advice on the criteria for evaluation, funding and so on, as well as building on the knowledge that is available at local level to facilitate those offices to work effectively.

Deputy Eoghan Murphy

If we move people who are working in enterprise boards into local authorities the boards will benefit from economies and efficiencies in administration and there will be cost savings there. It will also mean extra staff in local authorities. Are we anticipating redundancies as a result of this?

Mr. John Murphy

No. In fact, the number of staff serving in county enterprise boards has fallen in recent years, in line with general provisions for reducing numbers in the public service. The redeployment of staff would be subject to the provisions of the Croke Park agreement in any event. We are looking at getting a better set of arrangements for the supports provided to people wishing to start a business and better administrative arrangements of the resources available across the country. What we have at present is quite unwieldy.

Deputy Eoghan Murphy

Are we anticipating either savings or expenses from this move?

Mr. John Murphy

I am not in a position to put a figure on that. I would expect relatively small savings over time, maybe of the order of €500,000 in administrative costs over the next couple of years. It is difficult to put a figure on that.

Deputy Eoghan Murphy

The primary motive is not cost saving. We are not dissolving these boards to save money.

Mr. John Murphy

The focus is on a more efficient range of supports for people starting businesses that combines the best of what can be provided to local authorities. Another objective, particularly of our own Minister but which is shared by the Minister for the Environment, Community and Local Government, is to ensure that local authorities have a better focus on the impact they can have on people wishing to start a business, whether that is through planning, licensing, rates or various other impacts local authorities can have.

Deputy Eoghan Murphy

How much money is being spent on county and city enterprise boards at present?

Mr. John Murphy

It is approximately €30 million.

Deputy Eoghan Murphy

Who has responsibility for that money? Will it move to the Department of the Environment, Community and Local Government?

Mr. John Murphy

Funding for enterprise supports will remain a funding stream through Enterprise Ireland. It is critical that we do not lose that focus in making these changes. We want the range of supports that are provided through the new system to be consistent with the broader range of supports available through Enterprise Ireland. We want to ensure that the standards and governance arrangements that have been in place and which reflect the experience of Enterprise Ireland, particularly in dealing with SMEs over a long period of time, are retained.

Deputy Eoghan Murphy

Will Enterprise Ireland be giving the money to the local authorities?

Mr. John Murphy

It will be given through the local enterprise offices. That is the intention.

Deputy Eoghan Murphy

When this was being discussed in the Department was a case made for greater funding and support for the Dublin region, given the importance of the Dublin region as an economic driver for the country? I looked briefly at one of the annexes listing how spend was divided between the different counties. I thought there was not a sufficient funding bias towards Dublin. Was there any discussion about a separate case being made for Dublin?

Chairman

That is a policy issue, Deputy.

Mr. John Murphy

It is a policy issue. As a matter of fact, however, the funding that is made available to county enterprise boards partly reflects the population base in each county, and part of it can be competed for and depends on the extent of the ideas coming forward. It is not done on a geographical bias, as such.

Deputy Eoghan Murphy

The Department is now called the Department of Jobs, Enterprise and Innovation. Has the trade function left the Department?

Mr. John Murphy

No, we still have responsibility for significant elements of trade policy, including the World Trade Organisation, the World Intellectual Property Organisation and so on. The responsibilities that transferred to the Department of Foreign Affairs and Trade focus on trade promotion overseas. We are actively working to ensure better co-operation and collaboration between the work of Enterprise Ireland in supporting Irish firms to get into overseas markets, of the IDA in identifying and sourcing foreign direct investment and of our embassies in promoting our economic interests abroad.

Deputy Eoghan Murphy

Was there a movement of staff from the Department to the Department of Foreign Affairs and Trade?

Mr. John Murphy

It was very small, a handful. That Department is concerned with trade promotion as distinct from trade policy.

Deputy Eoghan Murphy

Can Mr. Murphy tell us the number of staff who transferred? Was it four?

Mr. John Murphy

It was one or two, I think. It was before I arrived in the Department.

Deputy Eoghan Murphy

Two? When did Mr. Murphy arrive in the Department?

Mr. John Murphy

At the end of November 2011.

Deputy Eoghan Murphy

The Department of Foreign Affairs became the Department of Foreign Affairs and Trade and we moved two people across to help in that, for trade overseas.

Mr. John Murphy

Yes. Most of what we do is through the overseas networks. Both Enterprise Ireland and the IDA, for example, have people located in offices overseas. Much of the work on that trade promotion is done through those offices, and indeed through the embassies.

Deputy Eoghan Murphy

So why did we call the Department of Foreign Affairs the Department of Foreign Affairs and Trade?

Chairman

Trade missions are conducted through the Department of Foreign Affairs and Trade.

Deputy Eoghan Murphy

Thank you, Chairman. I understand how it works. I am just wondering what structural changes were made in the Department when we made a change in name.

Mr. John Murphy

The structural change to our Department was minor. The structural changes in the Department of Foreign Affairs have been greater. That is a matter for that Department to answer for.

Deputy Eoghan Murphy

Was a greater change intended, in terms of moving more of the trade function from the Department of Jobs, Enterprise and Innovation to the Department of Foreign Affairs and Trade?

Mr. John Murphy

No. We retain trade policy.

Deputy Eoghan Murphy

There was never a discussion about moving more resources to the Department of Foreign Affairs and Trade to assist with its trade brief?

Mr. John Murphy

No. As I have said, most of the resources under our aegis that are devoted to promoting trade go through our agencies and not through the Department. Most of what our Department does is about trade policy. I also said we are working to ensure greater collaboration between the work of our agencies. Other agencies are involved. Bord Bia, for example, is involved in promoting the agrifood sector. Our embassies are also involved.

Deputy Eoghan Murphy

When those agencies work abroad do they work with Mr. Murphy's Department or with the Department of Foreign Affairs and Trade?

Mr. John Murphy

They work partly with Enterprise Ireland, for example in the case of developing the agrifood sector. That sector has been identified as having significant potential and Enterprise Ireland is heavily involved in that. There is close co-operation in organising trade missions, either specific missions that focus on that sector, for which the Minister for Agriculture, Food and the Marine would be the lead Minister, or on more general trade missions, such as the recent mission to China. The co-operation dimension is taken care of. There is close co-operation between Enterprise Ireland, the Department of Foreign Affairs and Trade and the other agencies that should be involved to ensure that happens.

Deputy Eoghan Murphy

What was the lead Department for the recent China visit?

Mr. John Murphy

It was the Department of the Taoiseach in that case because the invitation was to the Taoiseach.

Deputy Eoghan Murphy

Would that Department co-ordinate with Mr. Murphy's Department?

Mr. John Murphy

It would co-operate with us and the Department of Foreign Affairs and Trade would be heavily involved in it.

Deputy Eoghan Murphy

Mr. Murphy's Department drives policy. Would it set out the agenda and what is to be agreed or done?

Mr. John Murphy

To a certain extent, yes. There are other actors in trade policy. The Department of Foreign Affairs and Trade has an interest in trade policy. It is not solely our preserve.

Deputy Eoghan Murphy

Are the staff who moved to the trade policy section of the Department of Foreign Affairs and Trade communicating back to the Department of Jobs, Enterprise and Innovation?

Mr. John Murphy

There is ongoing communication. For example, the Minister for Enterprise, Jobs and Innovation is a member of the Export Trade Council, which is chaired by the Minister for Foreign Affairs and Trade. The various agencies feed into the work of the council.

Deputy Eoghan Murphy

Do export licences come within the remit of the Department of Foreign Affairs and Trade?

Mr. John Murphy

Is the Deputy referring to export licences for dual-purpose goods?

Deputy Eoghan Murphy

Yes.

Mr. John Murphy

Our Department has responsibility in that regard.

Deputy Eoghan Murphy

Was that function moved from the Department of Foreign Affairs and Trade to the Department of Jobs, Enterprise and Innovation?

Mr. John Murphy

No, it has always been the responsibility of our Department.

Deputy Eoghan Murphy

It is my understanding that applicants seeking export licences in respect of dual-use goods which fall into certain categories, such as defence components, must apply to the Department of Foreign Affairs and Trade.

Mr. John Murphy

No, they apply to us and we would consult the Department of Foreign Affairs and Trade.

Deputy Eoghan Murphy

Is that arrangement still in place?

Mr. John Murphy

Absolutely.

Deputy Eoghan Murphy

Does Mr. Murphy have any information on the number of applications received last year?

Mr. John Murphy

I do not have that information to hand, but I can certainly convey it to the Deputy.

Deputy Eoghan Murphy

It would be good to know the figures for 2011 in terms of how many applications were submitted in respect of dual-use goods, how many were granted, what they were granted for, the names of the companies in question and details of the destination companies.

Mr. John Murphy

I am not sure whether I have that level of detail readily to hand.

Deputy Eoghan Murphy

I assume it is available in the Department.

Mr. John Murphy

It may not be easy to compile the data under those specific categories. However, I will get whatever information I can for the Deputy.

Deputy Eoghan Murphy

I have some experience of the details contained in the licence applications in terms of what a company says it does and its indication of the end destination. I should think it will not be too difficult to compile the information I have requested. I would certainly appreciate it if Mr. Murphy could attempt to do so.

Mr. John Murphy

I will.

Deputy Eoghan Murphy

Thank you. Is the processing of work permits and visas a function of the Department of Jobs, Enterprise and Innovation?

Mr. John Murphy

The processing of work permits is a function of our Department, but not the processing of visas.

Deputy Eoghan Murphy

I understand there was a change in the work permit system last year in the form of an obligation to reapply for a permit where a holder has lost his or her job. For example, where a restaurant closes down and the chef, who has a particular food preparation skill, wishes to take up employment in another restaurant, will he or she have to reapply for a permit?

Mr. John Murphy

I will have to clarify that issue for the Deputy.

Deputy Eoghan Murphy

My understanding is that reapplication is required in such circumstances and that it is causing a delay of up to three months for some applicants which is, in turn, causing problems for certain industries.

Mr. John Murphy

Several changes were made to the eligibility criteria for new entrants to the work permit scheme from 1 June 2009. Various categories of workers were made ineligible for new permits, including domestic workers, heavy goods vehicle drivers and so on. This reflected an assessment of the extent to which it was reasonable to expect that such vacancies could not be filled by European Union or European Economic Area nationals. Another change is that no new permits are to be issued in respect of low-paid jobs, that is, those attracting a salary of below €30,000, other than on an exceptional basis. There was also a strengthening of the labour market needs test by way of doubling the mandatory period for advertising a job vacancy to eight weeks and the national press notice to six days. Tougher conditions were also introduced for the renewal of permits, including higher fees and a requirement for a labour market needs test on renewal.

In general, a permit is linked to a specific job, which provides for traceability. There is a balance to be struck between facilitating the individual permit holder and ensuring there is an appropriate regime in place, particularly in view of the large numbers of unemployed.

Deputy Eoghan Murphy

I appreciate that. This was an issue brought to my attention by the restaurant industry some months ago. As I said, some businesses have experienced a difficulty in recruiting chefs from restaurants which are closing down because the chef's work permit does not facilitate that transfer. This was leading to delays of up to three months before a chef skilled in particular food preparation methods could be hired. It is an issue the Department might review.

Does Mr. Murphy make any recommendations to the Department of Finance in terms of changes in taxation policy, for instance, that might assist the domestic economy, particularly in terms of job creation?

Mr. John Murphy

We are heavily involved in the area of economic recovery and job creation, working through the relevant Cabinet committee, in which the Department of Finance is represented. We are consulted in the context of any taxation measures being considered and were also involved in the tax strategy group. We had an interest in several changes that were announced in the 2012 budget, including the research and development tax credit and other tax measures. We were consulted on all such matters and had an interest in promoting some of the changes.

Deputy Eoghan Murphy

Does the same apply in respect of the changes in VAT and PRSI that were announced last year?

Mr. John Murphy

Yes.

Deputy Eoghan Murphy

Are any further changes under discussion?

Mr. John Murphy

Part of the action plan on jobs is a focus on a range of changes we might pursue over time. We will certainly follow up on those.

Deputy Shane Ross

I thank the delegates for attending the meeting. Will Mr. Murphy explain why we are giving money to trade unions?

Mr. John Murphy

Is the Deputy referring to the grant aid we provide for education and training?

Deputy Shane Ross

Yes.

Mr. John Murphy

This reflects a long-standing element of policy going back nearly 40 years to the effect that it is in the public interest to have trade unions that are effective. Ensuring the people involved are trained and educated in labour law and industrial relations makes for better use of the State's industrial relations machinery over time. That is the policy consideration.

Deputy Shane Ross

Does this grant aid go to the Irish Congress of Trade Unions or to the individual unions?

Mr. John Murphy

It is channelled through the Irish Congress of Trade Unions.

Deputy Shane Ross

I assume it is then distributed to the various unions, including the Services, Industrial, Professional and Technical Union, SIPTU, and the Amalgamated Transport and General Workers Union, ATGWU.

Mr. John Murphy

Yes.

Deputy Shane Ross

Would Mr. Murphy agree that these unions are not short of money? As I recall, their accounts would suggest the coffers are bulging.

Mr. John Murphy

I am not sure whether that is still the case given what has happened in the labour market in recent years.

Deputy Shane Ross

I am talking about the trade unions themselves.

Mr. John Murphy

The amount ICTU and the education divisions of the largest unions would spend in this area is significantly in excess of the type of funding we are in a position to provide. Moreover, the percentage of grant aid provided has, in recent years, been substantially less than what could have been claimed, because it is cash limited. The amount provided in the Estimate is the final amount; if the unions spend more than that we are not in a position to provide additional grant aid.

Deputy Shane Ross

Does the Department monitor what the unions spend?

Mr. John Murphy

Yes. We are provided with audited accounts in regard to education and training services, including staff costs, that are eligible for grant aid.

Deputy Shane Ross

As far as I can see, the State pays for the salaries of officials of SIPTU and ITGWU. Is that correct?

Mr. John Murphy

We pay a proportion of the salaries of those involved in education and training services.

Deputy Shane Ross

Does it make sense to Mr. Murphy that this cost should be borne by the State?

Mr. John Murphy

I accept the general policy consideration that it is in the public interest that both trade union officials and trade union members have access to good quality education and training services. The question of how much money is provided for that purpose is for decision in the context of the Estimates. The provision has decreased in recent years.

Deputy Shane Ross

It is in the public interest that everybody should be properly educated and trained. The question is whether this is money well spent and whether the trade unions have enough money to fund it from their own resources. It does not look like a huge amount of money in the overall scale of things, but it seems somewhat vague. According to the briefing we have it applies to a diverse range of courses, including health and safety. There is also reference to "activist development". What on earth is that?

Mr. John Murphy

As I understand it, it relates to the training of shop stewards.

Deputy Shane Ross

Why should the State train shop stewards?

Mr. John Murphy

If one talks to industrial relations professionals, they will state that in a dispute situation the people one must often work really hard to get on-side in terms of reaching a resolution are not the full-time-----

Deputy Shane Ross

Rather than a revolution.

Mr. John Murphy

To resolve an industrial dispute. Let us leave aside the politics of industrial relations. In industrial disputes, the issue which frequently needs to be addressed relates to the views, expectations and appreciation of people on the ground as distinct from the professionals - those for example, from IBEC or a trade union - who might be dealing with the dispute.

Deputy Shane Ross

Do the same sort of sums go to IBEC as well?

Mr. John Murphy

No.

Deputy Shane Ross

So IBEC gets nothing.

Mr. John Murphy

Nothing of which I am aware. IBEC has received some assistance over time but I do not have details of that with me.

Deputy Shane Ross

It is fair to say, therefore, that both IBEC and the trade unions are subsidised by the State. I accept that IBEC is not really subsidised by the Department.

Mr. John Murphy

In the context of IBEC, grant aid would have been paid to the IMI for a number of years. Assistance for management development would have been provided from a range of sources. In the public sector, outfits such as the Institute of Public Administration, IPA, also provide support to management, as employer.

Deputy Shane Ross

Basically, this is an example of trade unions being subsidised by the State.

Mr. John Murphy

For a particular purpose that is deemed to be in the public interest.

Deputy Shane Ross

Of course it is for a particular purpose. That purpose involves things such as activist development and advisory services, which sound particularly vague.

Mr. John Murphy

I can provide the Deputy with further detail on that.

Deputy Shane Ross

I am particularly interested in information on activist development. Is there any way Mr. Murphy might provide copies of the quarterly requests from ICTU in order that we might discover the matters to which these specifically relate?

Mr. John Murphy

The funding is provided on the basis of a quarterly claim.

Deputy Shane Ross

Yes, but the claim is for specific purposes.

Mr. John Murphy

Yes.

Deputy Shane Ross

Will Mr. Murphy provide specific details in that regard?

Mr. John Murphy

Yes.

Deputy Shane Ross

Okay. Subsidies are also provided to the unions under subhead P, which relates to trade union amalgamations. Why do they receive this money?

Mr. John Murphy

This has been in existence since the passing of the Trade Union Act 1975. There was a view at that time that the industrial relations system in the State, which is voluntarist in nature, would be facilitated through a reduction in the amount of inter-union rivalry. There was also a view that it would be in the public interest if the consolidation of trade unions could be facilitated. There has been very little activity on this in recent years. The amount in the subhead for this year is €10,000. The expenditure in 2010 was under €15,000. This would have been a more significant issue many years ago when there was a much larger number of trade unions.

Deputy Shane Ross

I do not understand why trade unions should be subsidised at all. These payments are for quite vague purposes and reference is made to simplifying merger procedures, whatever that means.

Mr. John Murphy

No, the payments are in respect of specific costs that would be incurred by a trade union contemplating a merger.

Deputy Shane Ross

So when trade unions want to merge, they come to the Department seeking money for that purpose and if the latter approves it provides money out of this fund. Is that the position?

Mr. John Murphy

No, they would be obliged to submit evidence of qualifying expenses that have actually been incurred in the context of pursuing a merger.

Deputy Shane Ross

Would those be legal fees?

Mr. John Murphy

There could be a number of things involved. There could be, for example, costs relating to the amalgamation of two pension schemes and there could be some legal costs. I do not have the precise details in respect of everything that is regarded as a qualifying expenditure but I can obtain them for the Deputy.

Deputy Shane Ross

However, it would not be outside the bounds of possibility that the legal fees of trade unions engaged in amalgamations and other similar costs could be paid out of this fund.

Mr. John Murphy

That is my understanding. However, I will obtain the detail for the Deputy.

Deputy Shane Ross

Can we afford this?

Mr. John Murphy

Again, that is a judgment call in respect of what is the value to the public interest of facilitating a consolidation of trade unions. As already stated, this policy originated at a time when there was a large number of trade unions. There has been very little activity under this heading in recent years.

Deputy Shane Ross

Is it the case that there was expenditure of €1 million last year?

Mr. John Murphy

No.

Deputy Shane Ross

Some €874,000 was spent not under subhead P but in respect of activist development, etc.

Mr. John Murphy

That was for training and education services.

Deputy Shane Ross

And for activist development, fees, administration expenses and the payment of the salaries of ICTU, SIPTU and ATGWU officials.

Mr. John Murphy

Who were engaged in education and training services.

Deputy Shane Ross

And activist development-----

Mr. John Murphy

Part of that relates to education.

Deputy Shane Ross

-----whatever that is.

Mr. John Murphy

They are all members. I have already explained that it essentially involves ensuring that shop stewards who are in positions of responsibility at local level receive training and education.

Deputy Shane Ross

It is fair to state, therefore, that we are subsidising both sides involved in social partnership, namely, the employers - via IBEC - and the trade unions.

Mr. John Murphy

Yes.

Deputy Shane Ross

I thank Mr. Murphy. There is one other matter in which I am interested and which relates to membership of various world organisations. The figure in this regard is €17 million, which seems extremely high.

Mr. John Murphy

Is the Deputy referring to subscriptions to international organisations under subhead W?

Deputy Shane Ross

Yes, of €17 million. What are the international bodies involved in this regard?

Mr. John Murphy

The most significant is our membership of the European Space Agency, which costs approximately €14 million.

Deputy Shane Ross

Some €14 million.

Mr. John Murphy

Yes.

Deputy Shane Ross

Why is Ireland a member of the European Space Agency?

Mr. John Murphy

It is because we obtain a significant amount of value through companies that are engaged in supplying services and components to the European space industry. We get substantially more than that amount back in terms of the contracts which Irish firms can access and obtain.

Deputy Shane Ross

It costs €14 million for our membership of the European Space Agency.

Mr. John Murphy

Yes.

Deputy Shane Ross

What do we receive in return?

Mr. John Murphy

A substantial amount. I will provide the Deputy with some details. In 2010 the European Space Agency placed additional new contracts with a total value of €9.2 million with 20 Irish companies and eight research groups in respect of a range of space-related activities, with industry accounting for over 80% of the return to Ireland. There were two new Irish start-up companies entering the European space programme, both exploiting university-based research in materials and communications systems, respectively. Some 30 of the most active Irish companies which participate with the European Space Agency were recently surveyed. We received responses from 19 of these which represent approximately 60% of the activities. The turnover of those 19 respondents grew from €51 million in 2008 to €71 million in 2010. European Space Agency-derived sales grew from €18 million in 2008 to €35 million in 2010. This included direct European Space Agency contracts and sales in commercial space and non-space markets. Most of these companies are predominantly exported oriented. The total employment in the 19 respondents to which I refer grew from 865 in 2008 to 1,130 in 2010. This figure is projected to increase to 1,600 in 2014. There is a significant benefit to Ireland through its membership of the European Space Agency.

Deputy Shane Ross

Is there any evidence that if Ireland were not a member of the agency, the companies in question would not obtain these orders?

Mr. John Murphy

As I understand it, the European Space Agency has particular arrangements in place with participating companies. If Ireland were not a member of the European Space Agency, those companies would be significantly disadvantaged in terms of their ability to access the relevant programmes.

Deputy Shane Ross

Is it the case that the agency would not take our telephone calls, our orders, etc.? I presume it would do business with us if we did not pay the €14 million.

Mr. John Murphy

It is essentially about positioning Irish companies with large aerospace supply chains and about building our credibility through association with this programme.

Deputy Shane Ross

Is the cost of membership €14 million per annum?

Mr. John Murphy

Yes.

Deputy Shane Ross

Does Mr. Murphy believe it is worthwhile paying this amount?

Mr. John Murphy

Yes.

Deputy Shane Ross

To what other organisations do we pay subscriptions? I see, for example, that we pay a subscription to the World Intellectual Property Organisation. What is that?

Mr. John Murphy

The World Intellectual Property Organisation exists to ensure that we have an enforceable global regime for protecting intellectual property. Probably the most significant issue for many companies considering investing in Ireland is the extent to which the intellectual property that goes with the businesses they are creating will be protected. It is quite a significant organisation.

Deputy Shane Ross

Therefore, the Secretary General considers the €17 million is well spent.

Mr. John Murphy

No. I did not say that. There is a range of these that we are reviewing. We are looking at the European Molecular Biology Laboratory.

Deputy Shane Ross

What did the Secretary General say he was looking at?

Mr. John Murphy

Our membership of the European Molecular Biology Laboratory, which costs us approximately €1 million a year. We are reviewing that and an associated payment in regard to the European Molecular Biology Conference, which is approximately €190,000. We are reviewing both of those.

Deputy Shane Ross

These organisations provide opportunities for people to travel-----

Mr. John Murphy

No.

Deputy Shane Ross

-----go to conferences and things like that.

Mr. John Murphy

They would be at a technical level because this is about scientific co-operation. What we would be looking at here is what is the overall benefit to Ireland of continuing such membership and participation.

Deputy Shane Ross

People make contact and presumably there is interaction between the Department's representatives and people from all the other organisations.

Mr. John Murphy

Yes. The representatives in this case probably would not be directly from the Department. They might come from one of our agencies such as the Science Foundation Ireland, SFI, for example, as opposed to from the Department proper.

Deputy Shane Ross

Okay, so the Department pays the membership and they go on the trips.

Mr. John Murphy

What we would be considering is what research programmes there are and to what extent they are of real benefit to Ireland, specifically in terms of creating business opportunities for Irish firms and so on, apart from the value of the particular research programmes in their own right.

Deputy Shane Ross

How is the €14 million membership fee that the Department pays for being members of the space-----

Mr. John Murphy

The European Space Agency.

Deputy Shane Ross

-----European Space Agency calculated?

Mr. John Murphy

I am not sure I have the answer to that off-hand, but it is on the basis of our GNP.

Deputy Shane Ross

So others are paying a lot more.

Mr. John Murphy

Yes.

Deputy Shane Ross

How many members are there?

Mr. John Murphy

I think there are 17.

Deputy Shane Ross

Seventeen. Therefore, it is non-negotiable.

Mr. John Murphy

If one is a member, one is a member on the basis of the GNP key, which is fairly typical of international organisations. It applies across the UN organisations for example.

Deputy Shane Ross

It is an awful lot of money. How much is it a week - €300,000? It is about that.

Mr. John Murphy

A rough estimate, because we get €2 back for every euro we put into it in terms of the business it generates-----

Deputy Shane Ross

The Secretary General cannot prove that not being a member would deprive the Department of the business?

Mr. John Murphy

I think we can establish that pretty satisfactorily.

Deputy Shane Ross

Can the Secretary General do that?

Mr. John Murphy

Yes. One must have ESA approval to get into most of these programmes.

Deputy Shane Ross

Okay. I would like some more details on that.

Mr. John Murphy

Yes.

Deputy Shane Ross

I just find it extraordinary.

I wish to ask the Secretary General about Enterprise Ireland. With regard to subheading L2, the temporary employment scheme, that relates to what are called vulnerable but viable subsidies for employment. It has fallen out of bed, as it were, this year.

Mr. John Murphy

The Deputy is referring to the employment subsidy scheme.

Deputy Shane Ross

Yes.

Mr. John Murphy

That ended at the end of 2010. It was designed to be an emergency measure.

Deputy Shane Ross

Right. Has the Secretary General any figures on the effectiveness of that employment scheme?

Mr. John Murphy

We have already discussed that here.

Deputy Shane Ross

I am sorry, I was not here.

Mr. John Murphy

We went into it in a fair bit of detail.

Deputy Shane Ross

Okay. I am sorry, that is my problem as I was not here. The Department has already been done. Chairman, they have done that, have they?

Chairman

Yes.

Deputy Shane Ross

Okay, I will finish on that note.

Deputy Kieran O’Donnell

I welcome Mr. Murphy and his colleagues. The title of the Department has changed such that its emphasis is now on jobs. What is the Secretary General's forecast for jobs for 2012 and beyond and could he give a breakdown as between the IDA and Enterprise Ireland in terms of small and medium enterprise jobs? That is my first question.

My second question relates to the enterprise boards which are now being restructured. A separate micro or small business section is being established within the Department. What are the plans for its establishment? How many staff will be in that section and what reporting structures will apply as it is important that they would operate more effectively? Will the new enterprise units report to the local manager or to the Secretary General?

My third question is what is the status of the loan guarantee scheme, the micro-finance scheme? What discussion has the Department had at European level, in particular with the European Investment Bank, on drawing down SME funding?

My questions are focused on jobs and establishing what the Department is doing to drive the jobs agenda and the various components in that respect. I understand the Department is carrying out a review of business regulation. I have always held a view that we complicate issues and that each Department and agency should be required to carry out an audit, on an annual basis, of all the regulations they have in place that affect business and to indicate those that are outdated. Such audit findings should go back to each of the central Departments and probably to the Department of Public Expenditure and Reform and obsolete regulations, which stifle business, should be removed. Targets should be set in that respect. The findings of such audits should be returned by all Departments and agencies to the Department of Public Expenditure and Reform by, say, 31 March or some other date every year. Too many returns come in on 31 March.

(Interruptions).

Deputy Kieran O’Donnell

That would have other connotations. I would opt for, say, the end of February. What I focused on is the need to drive the jobs agenda from the ground up. The weaknesses in terms of the job agenda is that the loan guarantee scheme needs to be put in place and regulation needs to be streamlined. The strengths in the economy are that the multinational sector and the export sector are doing exceptionally well and that is to be welcomed. I would be interested to hear the level of European funds we are drawing down from the European Investment Bank and the Secretary General's forecast for job creation. I want him to set out the forecast for job creation the Department has set for this year, how it will be achieved, the tools being used to achieve it and the overall focus in that respect in the Department.

As an aside, with regard to the Office of the Director of Corporate Enforcement, what resources are being allocated by the Department to bring the investigations by that office to a conclusion and which of those fall under the remit of the Department? The Secretary General might deal with those questions.

Mr. John Murphy

The Deputy has asked a lot of questions. Starting with the jobs agenda-----

Deputy Kieran O’Donnell

I want to hook around the jobs agenda and the Secretary General to indicate the progress being made in all those areas.

Mr. John Murphy

We have spent a number of months working intensively with our agencies and with other stakeholders to develop a plan for jobs that is much broader and deeper than what has gone before, as it were. The action plan for jobs, published last month, covers a wide range of actions to be taken across Government and across Government agencies. Some of the items the Deputy mentioned in terms of business regulation are part of that agenda.

In terms of targets, the action plan for jobs sets a broader target of increasing the number of people at work from approximately 1.8 million to 1.9 million in 2016 and to 2 million in 2020. A number of elements feed into that. The strategies and targets for job creation our enterprise agencies are following over the next number of years fall into that, as do other aspects of what can be expected to happen in the economy. We did not try to break down specific targets by year for every sector. That is an extremely difficult exercise to do with any credibility given the nature of the economy we have. In terms of business regulation, we are overseeing an exercise which is about reducing the cost of compliance to business, as distinct from the specifics of the number of regulations or the detail of a particular regulation. The critical issue is what is the cost to business. Probably the biggest elements of cost are accounted for by a relatively small number of regulatory requirements. We have tried to focus on those and we have been involved in running an exercise which is about benchmarking the administrative costs on business and reducing that. The target that was set was to reduce it by 25%. We are on target to achieve that for the Department.

We have done a number of things, for example, through the Companies Registration Office, to make it easier for companies to file online and to reduce costs in that way. We have costed those. For example, in the area of company law, we estimate that the various requirements on business would have cost approximately €489 million and that after we have introduced savings we would be able to reduce it by approximately €80 million. We are conducting a similar exercise with other Departments. In the course of this year we will focus on a number of the larger Departments that have a significant impact on business. We look, for example, at health and safety law and risk assessment. Through the Health and Safety Authority, HSA, we have brought in new tools whereby this can be done more easily by companies online. There is an online tool called BeSmart. We reckon that it can save business approximately €50 million a year. We have other guidelines for construction firms where there are particular health and safety requirements, as one would expect, whereby we reckon we can achieve savings for business of in excess of €60 million. We have benchmarked some of this and we have identified the regulatory requirements that have the biggest impact on business costs, and what we can do about that both in the Department and through our agencies and in conjunction with other Departments.

Deputy Kieran O’Donnell

I accept that great work is being done in the area. However, there are so many regulations for SMEs. If they have to fill out ten forms, even though some of them may be straightforward, it takes a great deal of time. I believe there is much duplication in terms of the existing regulations. If the Department is carrying out a review it should examine the individual regulations. A bit of spring cleaning never did anyone any harm. In terms of regulation it is something that could be examined. I do not wish to delay the meeting.

What is the status of the partial loan guarantee scheme, the micro-finance scheme and accessing funds from the European Investment Bank for SMEs?

Mr. John Murphy

A lot of work needs to be done to get a partial credit guarantee scheme on the ground. We require primary legislation. We are in the process of bringing the text of a Bill to Government. Assuming we get Government approval we would seek to get that through the Oireachtas as quickly as possible.

Deputy Kieran O’Donnell

When will the Bill go to Government?

Mr. John Murphy

Very shortly.

Deputy Kieran O’Donnell

Will it be in the next week or two?

Mr. John Murphy

Yes.

Deputy Kieran O’Donnell

Is that a full body of legislation?

Mr. John Murphy

Yes, that is required. We had hoped that we could do as much as possible on an administrative basis pending the introduction of the legislation but the legal advice is that we must have the legislation in place first.

Deputy Kieran O’Donnell

Will it be brought to Government?

Mr. John Murphy

Absolutely.

Deputy Kieran O’Donnell

I welcome that.

Mr. John Murphy

We have looked at the scheme's scope. What we are trying to do is to address two distinct barriers to lending. The first is the inadequacy of collateral. That is because our banks had become over-reliant on using hard assets such as property as collateral, as opposed to lending to businesses where one makes a judgment call on the strength of a business plan. The issue about providing a level of guarantee is that one is sharing some of the risk between the State and the lending institutions in the interests of getting more credit flowing to SMEs in particular.

Deputy Kieran O’Donnell

Is the Secretary General at liberty to give us the outline of the scheme?

Mr. John Murphy

I am not really in a position to give the full detail on it pending approval by Government. A significant amount of the details will be set out either in the legislation or the accompanying explanatory memorandum.

Deputy Kieran O’Donnell

My understanding is that the European Investment Bank, EIB, has signalled that it is willing and available to make investments for SME lending in this country. What stage are the discussion at and would it be possible to get an update on the position?

Mr. John Murphy

Yes. The funding is provided by the European Investment Bank through banks and financial intermediaries. I suspect the question might be better addressed to the Department of Finance as it leads in the area.

Deputy Kieran O’Donnell

Does the Department not have any involvement in the matter?

Mr. John Murphy

I am not saying that we have no involvement. For example, on the micro-financing initiative we have been talking actively to the banks about how they can support that. We will continue to do that. The specific channelling of EIB investment or support for lending to SMEs is being done through the financial intermediaries. The Department of Finance would be more knowledgeable about that.

Deputy Kieran O’Donnell

From the Department's engagement with the banks at SME level, does the Secretary General believe the banks are lending to the SME sector?

Mr. John Murphy

From the evidence, specifically from Mazars which has done quarterly reviews of the extent to which access is being improved or there are difficulties, and also the work of the Credit Review Office, there are difficulties both on the supply and the demand side. Enterprise Ireland has been working closely with the banks to assist them in understanding the way Enterprise Ireland goes about evaluating business plans for SMEs so that the banks are better informed of the process. We wish to support that in any way we can.

Deputy Kieran O’Donnell

With regard to the ODCE and its investigations and the resources being provided, does Mr. Murphy share people's frustrations with how slow the investigations are in terms of coming to a conclusion? What is the overall view on that? I presume the Department is currently in the process of recruiting someone to replace Mr. Appleby. Will the Secretary General give a general overview of the situation?

Mr. John Murphy

Yes. In respect of particular investigations, the ODCE is statutorily independent so it is not appropriate for me to comment on a particular investigation. The ODCE is staffed by civil servants under my Department, so to the extent that the ODCE requires resources, we provide them. It has been provided with the resources it sought. That is supplemented by additional resources from the Garda Síochána that are provided by the Garda Commissioner through the Department of Justice and Equality to the ODCE. It is not a case of throwing more money at the situation so that results would be achieved more quickly. The issue relates to the complexity of the investigation and the time it takes of necessity to produce files that can be provided to the Director of Public Prosecutions or others. That has been proceeding.

We are in the process of recruiting a new director to replace Mr. Appleby. I would expect to have that appointment in place before the end of the additional six months tenure of Mr. Appleby's tenure.

Deputy Kieran O’Donnell

Recently, Mr. Justice Peter Kelly was highly critical of the level of resources.

Chairman

We dealt with the issue.

Deputy Kieran O’Donnell

My apologies. I thank the Secretary General.

Chairman

In terms of the county enterprise boards, what analysis has been carried out of each board relative to the properties they have or the leases to which they have committed? Does the Secretary General know the extent of that and whether there is any exposure of the State on the possible cancellation or breaking of those leases?

Mr. John Murphy

The intention is that we would transfer those properties so that we would avoid cancelling leases. We want to avoid any exposure for the State.

Chairman

Does the Secretary General not envisage that there will be any properties that are surplus to requirements?

Mr. John Murphy

No. As I said earlier, we would expect that we would make some savings in the administration of deeds, moving from 35 separate entities to a more streamlined system. We want to avoid situations where leases are simply cancelled and there is exposure for the State.

Chairman

I was interested in the Secretary General's comment that some of the existing staff would come into offices provided by local authorities and that they would be more integrated. I presume all of them have offices outside of the local authorities. Do they own them or are the properties leased? Has such analysis been carried out?

Mr. John Murphy

Most of the county enterprise boards do not own anything.

Chairman

They have leased the properties. Has the Secretary General examined each of the 35 leases?

Mr. John Murphy

Yes. They are being looked at. The intention is that we would arrange for a transfer of the properties and the staff in the most efficient way possible.

Deputy Kieran O’Donnell

The Department is going to amalgamate some of those, so surely some of the properties would be affected.

Mr. John Murphy

A lot of them are already co-located with local authorities. It is not so much that they will be amalgamated. If we were looking at the county enterprise boards in isolation from the local authority structure we would be looking at rationalising the number of county enterprise boards, but we are not doing that. We are not looking at them in isolation from the local authority structure. We are trying to ensure that there is a better set-up at local level that combines the expertise and the knowledge of local authorities with what has been developed through the county enterprise board structure and at the same time that there is a level of funding support for people establishing new small businesses that takes account of the experience and the other supports available through Enterprise Ireland. That is what we are trying to achieve.

Deputy Mary Lou McDonald

My apologies for being so late. We had Dáil business which, coincidentally, was on capital carry-overs into 2012. As Mr. Murphy is probably aware, his Department sought a roll-over of over €18 million of capital. We are told that is in respect of Enterprise Ireland grants, science and technology in Ireland and micro finance. Can Mr. Murphy explain how this turn of events occurred and the reason there is such a carryover?

Mr. John Murphy

We have to look at it in the context of the total amount of money being spent by the agencies concerned. It is not unusual that there would be a carryover from one year to another. I would suggest, from my experience in previous Departments, that it is better to have that arrangement than to be frantically trying to spend money or release it at the end of the year. It is better to have a carryover arrangement because the nature of these programmes is that they do not all fit neatly into everything that is finished on 31 December and we start again on 1 January.

In the case of micro finance, which would be the biggest element of that, we had identified the provision of €10 million for the micro finance initiative but it was not possible to get that initiative up and running before the end of 2011. As I said earlier, we are working to get that scheme off the ground as quickly as we can. We are in discussions with the banks, and we are also in the business of preparing the necessary legislation. As I said earlier, we had hoped to do a number of these things as much as possible on an administrative basis initially pending legislation but we will have to put legislation in place to put these-----

Deputy Mary Lou McDonald

To clarify, I am not second guessing the merit of having a facility to roll over funding and a multi-annual budgetary framework is entirely sensible but we are in circumstances where many enterprises report to me, and I am sure to all the Members of the Oireachtas, that they find it incredibly difficult to access finance funding or grant aid. When we debated this matter earlier in the Chamber with the Minister I told him, and I say it now to Mr. Murphy, that I am alarmed by an underspend of that magnitude. That is not an invitation for reckless spending but it is a serious query on the efficiency of an operation when there is a clear demand. There are resources in place and they are not spent.

I understood from previous answers that legislation was needed for the partial guarantee scheme.

Mr. John Murphy

Yes.

Deputy Mary Lou McDonald

Is Mr. Murphy saying that is also the case in terms of the micro finance?

Mr. John Murphy

That is an issue we are exploring with the Office of the Attorney General and we would hope to put as much of this in place on an administrative basis as quickly as possible but to put that €18 million in context-----

Deputy Mary Lou McDonald

Before Mr. Murphy does that, I very much hope that we are not facing a situation where next year we will be revisiting the micro finance issue, which has been trumpeted by the Department and by Government and accepted as a very necessary measure, and that we will not be returning to a scenario where moneys are allocated and not spent. I am alarmed that Mr. Murphy is not sure whether he needs a legislative basis for this initiative. I would have assumed at this stage that that much would be clear.

Mr. John Murphy

The issue of whether or at what point legislation would be needed depends on the precise details of the scheme. It is quite a technical issue.

Deputy Mary Lou McDonald

Mr. Murphy's Department was allocated money for micro finance.

Mr. John Murphy

We identified €10 million late last year which was part of the €18 million carryover because part of getting approval for setting up the scheme was that we could identify resources to initiate it, which we did. Obviously, we recognised at that stage that the scheme could not be introduced overnight and that we would have to carry it over in 2012. We are working to introduce the scheme as quickly as possible.

Deputy Mary Lou McDonald

What does "as quickly as possible" mean?

Mr. John Murphy

Within the next couple of months we will have that scheme up and running. To put that €18 million in context, that is €18 million out of over €500 million of which €10 million we had set aside to launch the micro finance initiative.

Deputy Mary Lou McDonald

I know the context of it. It is €18 million nonetheless.

Mr. John Murphy

Yes, I know that but the committee needs to appreciate that that is a necessary part of multi-annual programmes of that kind of scale.

Deputy Mary Lou McDonald

That is the micro finance aspect. In terms of the Enterprise Ireland grants, Mr. Murphy said that €10 million of the €18 is in respect of micro finance.

Mr. John Murphy

Yes.

Deputy Mary Lou McDonald

From where did the rest of that €18 million come?

Mr. John Murphy

It came from a variety of sources. I will give the Deputy the details. There are some small underspends. SFI had an underspend on capital grants of approximately €7 million and some of that relates to reduced expenditure on existing commitments on grants that would have been awarded in previous years. There would have been some rescheduling of payments on research projects into 2012. In the case of Enterprise Ireland, there would have been some reductions of savings of approximately €9.25 million on the capital side and a smaller amount on the current side. Those would be the main ones. There are smaller ones in some of the other areas.

Deputy Mary Lou McDonald

Does Mr. Murphy take the point I am making to him?

Mr. John Murphy

Yes.

Deputy Mary Lou McDonald

I understand that these processes cannot always be perfectly anticipated, and that is the merit of having a flexible budgetary framework.

Mr. John Murphy

Yes.

Deputy Mary Lou McDonald

That said, Mr. Murphy's Department is very much front and centre in respect of public policy, not least at this time in terms of job delivery, support for SMEs and I am sure all of the aspects he discussed this morning. I express my disappointment that the necessity or otherwise of legislation for the micro financing is not yet clear and that in terms of the moneys allocated now to be transferred over we cannot be sure that Mr. Murphy will be in a position to allocate that money. That is just a statement of fact.

In respect of SFI and science and technology, all of Mr. Murphy's analysis reflects the fact that we need small, high end, innovative projects. They do not all necessarily require massive financing and in that spirit, the fact that there is €7 million unspent is cause for concern. Sometimes in this committee we are querying over-spending or sloppy spending. In this case I am questioning the non-use or leaving dormant resources that the Department has acquired in circumstances where almost half a million people are out of work.

Mr. John Murphy

If I could respond to that briefly, in the case of SFI most of this is a timing issue. The SFI, generally speaking, is awarding grants for multi-annual programmes of research that have a particular commercial benefit and so on. Inevitably, in the scheme of things there will be timing issues with the way those are rolled out. If I was to put pressure on SFI or other agencies in terms of how they should spend the money I fear we would be having a different set of conversations in this committee. There is a balance to be struck here. To the extent that we identify issues early enough in the year, we would certainly try to ensure that we can redirect the resources to where there may be demands that cannot be met. We rely on the co-operation of the Department of Public Expenditure and Reform in such instances. Generally speaking, where we are talking about productive investment in job creation that is merited, that co-operation has always been forthcoming. In the short time I have been in the Department, I have not come across an example of where we felt it necessary to redirect resources but were unable to do so, thereby failing to do something that could have been done.

Deputy Mary Lou McDonald

What was the total expenditure in respect of SFI? I was given a figure of €7 million-----

Mr. John Murphy

Is the Deputy referring to total under-expenditure on the capital side?

Deputy Mary Lou McDonald

Yes. Out of what total?

Mr. John Murphy

I have too many papers before me. It was out of approximately €302 million.

Deputy Mary Lou McDonald

Out of €302 million. Is that approximately 5%?

Mr. John Murphy

It is about 2% or 2.5%.

Deputy Mary Lou McDonald

Is it that low? I hope Mr. Murphy takes my point in the spirit in which it was made.

My second question relates to the county enterprise boards. The bulk of those whom my colleagues and I have directed to the boards have been told that there is no money left, the cupboard is bare and that the 2012 budget is already committed.

Mr. John Murphy

With regard to the 2012 budget, there has been no reduction in funding for county enterprise boards this year compared with last year. They got additional funding of some €3 million last year.

Deputy Mary Lou McDonald

That is actually my point. My point is not on cutbacks; I am saying that when individuals approach the county enterprise boards seeking support, they are told the boards do not have the money to support them. I have encountered a couple of cases in which the enterprise board in question acknowledged the merit, good sense and sound financial basis of a certain project but simply did not have the financial resources to assist. Now that we are approaching the end of March, do county enterprise boards still have capacity and resources to assist? Is everything already committed and done and dusted?

Mr. John Murphy

That is not the feedback that we are getting. If we got feedback to the effect that additional funding were required to enable the boards to approve grants, we would certainly consider it sympathetically.

Deputy Mary Lou McDonald

Has there been no such communication?

Mr. John Murphy

No.

Deputy Mary Lou McDonald

Would the Department be sympathetic?

Mr. John Murphy

Yes. I am sure my colleagues in the Department of Public Expenditure and Reform would be also.

Deputy Mary Lou McDonald

All right.

Chairman

Once an enterprise board makes a decision to assist a company, is that the final decision? Does the decision have to be cleared by the Department of Public Expenditure and Reform? Is the decision still made at that level?

Mr. John Murphy

Yes.

Deputy Mary Lou McDonald

In the event that grants are being made available by the county enterprise boards, what is the timeframe? I accept that it varies from one case to the next. Does the Department monitor the grants carefully? I am trying to determine the efficiency and responsiveness of the service.

Mr. John Murphy

To a certain extent, a lot of this depends on how quick the company whose grant is approved actually goes about drawing it down and meeting the conditions set out for the grant. This is one of the variables. Enterprise Ireland has an oversight role regarding the county enterprise boards also. I do not have information available to me such that I could say county enterprise board A has had such an experience and county enterprise board B has had another.

Deputy Mary Lou McDonald

Is it that Mr. Murphy does not have it to hand but that the Department has it?

Mr. John Murphy

I do not know. I am not saying I do have it but I can find out.

Deputy Mary Lou McDonald

The Department should have it. I accept entirely it is a matter for individual enterprises to draw down the funding and meet all the requirements but the Department should not in any way have a laissez-faire approach in respect thereof. The objective is to identify good projects that can get people back to work and facilitate people with the draw-down procedure. The Department, the enterprise boards and every other relevant party should be proactive in this regard. Of course, money should not be drawn down if a project does not cut the mustard or something goes wrong - one can take that as read - but there should not be circumstances in which funds are not drawn down and put to productive use because of a glitch in the system or because people are stepping a couple of paces back. The kind of information I have asked for would be very helpful to the Department and this committee in monitoring precisely what is occurring. This would help to identify a pattern, for good or bad.

Mr. John Murphy

I will try to obtain that information. I might ask one of my officials to contact the Deputy to clarify exactly what information she believes would be most helpful.

Deputy Mary Lou McDonald

We can certainly make contact in that regard.

Chairman

Does Mr. McCarthy have anything to add?

Mr. Seamus McCarthy

Regarding the point the Accounting Officer made on the evaluation of schemes of this nature, I fully accept the point that it is quite difficult to identify and quantify potential deadweight or displacement losses. The point of making the recommendation was that consideration would be given to carrying out reviews or evaluations of these schemes. It may not be that the scheme in question will be rolled over or continued in the short term but it presents a good opportunity to identify lessons on how job subsidy or equity investment schemes can be designed and implemented to good effect.

Chairman

Does the committee agree to note Vote 34, concerning enterprise, trade and innovation, and dispose of chapter 28, concerning employment support and enterprise stabilisation, and chapter 29, concerning county and city enterprise boards? Agreed.

I thank the witnesses for attending.

The witnesses withdrew.

The committee adjourned at 1.10 p.m. until 10 a.m. on Thursday, 26 April 2012.