Committee on Budgetary Oversight díospóireacht -
Wednesday, 14 Feb 2024

Temporary Supports for Business: Discussion

An Cathaoirleach

I welcome Ms Anne-Marie Walsh, Ms Sinéad Ryan, Ms Orlagh Collison and Mr. Colin O'Connor from the Department of Finance. I also welcome Ms Maureen Marray and Ms Geraldine Hegarty from the Revenue Commissioners. Before we begin I will explain some limitations to parliamentary privilege and the practice of the Houses as regards references the witnesses may make to other persons in their evidence. Witnesses are protected by absolute privilege in respect of the presentations they make to the committee. This means they have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty, as Chair, to ensure that this privilege is not abused. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks and it is imperative that they comply with any such direction.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable. I also remind members of the constitutional requirement that they must be physically present within the confines of the place which Parliament has chosen to sit, namely Leinster House, in order to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Any member who attempts to participate from outside the precincts will be asked to leave the meeting.

I now invite Ms Walsh to give her opening statement.

Ms Anne-Marie Walsh

On behalf of my colleagues from the Department of Finance I thank the Chair and the committee for the invitation to discuss temporary supports for businesses coming under the remit of the Department, in particular the temporary business energy support scheme, TBESS, and debt warehousing.

I will begin by outlining the TBESS which was announced in budget 2023 and introduced in the Finance Act 2022. It was aimed at assisting businesses over the 2022-23 winter period with the increase in energy costs caused by the Russian invasion of Ukraine. The scheme was funded by the Department of Enterprise, Trade and Employment and was administered by Revenue. The Department of the Environment, Climate and Communications provided costings for the scheme. It was difficult to estimate at the time of inception but based on the trajectory of energy prices at that time, the scheme was expected to cost up to €1.2 billion. The scheme was designed to fall within the parameters of the EU temporary crisis and transition framework for state aid measures. Accordingly, state aid approval for the scheme was required before it could be commenced.

The scheme provided support for businesses that carried on a trade or profession chargeable to tax under Case I or Case II of Schedule D, including self-employed individuals, companies and partnerships.

Charities and sporting bodies that carried on certain activities were also included in the scheme.

The scheme operated by reference to bills for the metered supply of electricity and natural gas. Originally, to be eligible to make a claim, a business had to demonstrate that the average unit price for electricity or gas on the relevant bill had increased by 50% or more as compared to the average unit price in a reference period in addition to satisfying a number of other conditions. Once eligible, the business was entitled to claim a payment amounting to 40% of its eligible cost, subject to a cap for each monthly claim period.

Following a review in early 2023, the scheme was extended by ministerial order to 30 April 2023. The Finance Act 2023 further extended, and made a number of enhancements to, the scheme. These included a reduction in the energy cost threshold to 30%, an increase in the amount of the payment to 50% of eligible costs and an increase in the monthly caps a business could claim. The scheme opened for registration on 26 November 2022 and for claims on 5 December of that year. Payments began once the scheme was commenced following the passing of the Finance Act in mid-December 2022. The scheme ended on 31 July 2023 and businesses had until 30 September 2023 to submit their claims. While costing much less than originally anticipated, largely due to the reversal in the trend in energy prices, €153.8 million was paid to 25,300 businesses across the country under the scheme.

I now move on to the temporary debt warehousing scheme, which was announced by the Government in May 2020 to provide a vital liquidity support to businesses suffering a downturn due to the Covid-19 pandemic. The scheme initially applied to VAT and employer or PAYE liabilities accumulated by businesses during the pandemic. It was later expanded to include certain self-assessed income tax debts and overpayments of the wage subsidy schemes. On its introduction, the scheme provided that no interest would be charged on tax debts for the initial Covid-19 restricted trading period or 12 months thereafter. Interest would then be charged at the reduced rate of 3% until the debt was repaid.

In June 2021, the Government agreed that the period during which debts could be warehoused would be extended to the end of 2021 with no interest chargeable during 2022. A further extension was agreed in December 2021, allowing businesses eligible for the main Covid support schemes to warehouse debt up to 30 April 2022, interest-free until 30 April 2023. The various legislative changes have been outlined in the briefing document provided.

In October 2022, in light of the challenging economic situation for businesses, Revenue announced an extension to the scheme. As a result, businesses now have until 1 May 2024 to make arrangements to pay their warehoused debt. Last week, the Minister for Finance announced that the 3% interest rate applying to the debt will be reduced to 0%. The necessary legislation will be introduced at the next available opportunity, and in the interim Revenue has confirmed that it will operate the reduced rate on an administrative basis.

The total debt in the warehouse has decreased substantially since January 2022, when more than €3 billion was warehoused for more than 100,000 customers. By 31 January 2024, a total of €1.71 billion was warehoused for 57,244 customers, of which 70% have outstanding liabilities of less than €5,000. The scheme is administered by Revenue, which is actively managing the warehoused debt and engaging with taxpayers.

For businesses seeking information on either scheme, comprehensive information is available on the Revenue website, as well as statistical data. I hope that this overview and the briefing papers provided to the committee members are of assistance in framing discussion at this meeting, and we are happy to engage with any questions from members.

An Cathaoirleach

I thank Ms Ryan very much. I call Ms Marray.

Ms Maureen Marray

I thank the Cathaoirleach for the opportunity to make my opening statement. I understand the purpose of this evening’s meeting is to consider the costs and effectiveness of a number of business support schemes and how the budgetary impact of each scheme is evaluated before, during and after implementation. I am accompanied by Geraldine Hegarty, principal officer in Revenue’s collector general’s division.

Revenue’s role is to serve the community by fairly and efficiently collecting taxes and duties and implementing customs controls. In doing so, Revenue is responsible for implementing the tax legislation in place. While Revenue supports the Department of Finance by providing input, advice and data to assist with policy consideration, Revenue does not have responsibility for evaluating the budgetary impact of policy decisions, including those related to temporary supports for businesses.

As part of the national response to the Covid-19 pandemic, Revenue played, and continues to play, a significant role in the delivery of critical Government supports to affected businesses. Revenue’s contribution in this regard was through the administration of a number of business support schemes. The debt warehousing scheme is the only Covid-related scheme administered by Revenue currently still in operation. More recently, against the backdrop of the exceptional increase in energy costs arising from the invasion of Ukraine by Russia, Revenue administered the temporary business energy support scheme, TBESS, on behalf of the Government. In its administration of business support schemes, Revenue implements the legislation in place through effective system design, providing extensive guidance, ensuring compliance via both service and compliance work and the publication of relevant information and statistics.

TBESS was administered by Revenue and provided support to qualifying businesses in respect of increased energy costs relating to the period from 1 September 2022 to 31 July 2023. The time limit for making a claim under the scheme expired on 30 September 2023. At the end of December 2023, just over 25,300 businesses had availed of the scheme with an associated cost to the Exchequer of €153.8 million.

The debt warehousing scheme was introduced in May 2020 to provide vital liquidity support to businesses impacted by the Covid-19 pandemic. The scheme allowed for the parking of certain tax liabilities relating to periods during which trading was restricted by public health measures. On 5 February 2024, the Minister for Finance, Deputy Michael McGrath, announced that the interest rate applicable to warehoused debt was reducing to 0% and that the necessary legislation to implement the reduction will be introduced at the next available opportunity. Revenue has confirmed that it will operate the reduced interest rate on an administrative basis pending the legislative change. Revenue has also confirmed that, where a business had already paid warehoused debt which was subject to interest at 3%, it will get a refund of that interest.

The balance in the warehouse peaked in January 2022 at €3.2 billion. At the end of January 2024, approximately 57,200 taxpayers were availing of the scheme with €1.71 billion warehoused. Almost 40,000, or 70%, of those availing of the scheme have warehoused debt of €5,000 or less. Revenue’s approach to the payment of warehoused debt from 1 May 2024 will be flexible and tailored to each business based on its capacity to pay. Revenue will work with businesses so they can continue to meet current liabilities as they arise and secure the viability of their business into the future.

To conclude, I would like to take this opportunity to draw the committee’s attention to section 851A of the Taxes Consolidation Act 1997 and the obligation of my colleague and I to uphold taxpayer confidentiality. Subject to this constraint, I am happy to answer the committee’s questions. I thank the committee.

Deputy Rose Conway-Walsh

I thank the witnesses for their statements. Starting with those from Revenue, is the number of business closures increasing? I refer to the number of notifications Revenue is getting of businesses closing.

Ms Maureen Marray

To date, we have published the number of insolvencies that have happened to the end of January 2024. We know that €86 million of debt that was previously warehoused has closed because of insolvency. Revenue does not anticipate an increase in insolvencies. We can offer flexible payment arrangements to businesses when they engage with us coming up to 1 May 2024.

There is sufficient flexibility in those payment options to allow businesses to deal with their warehoused debt and maintain their current taxes for the future and in so doing secure the business's viability going forward.

Deputy Rose Conway-Walsh

Even with having all that flexibility and trying to do everything possible for businesses, Ms Marray is saying we still lost out on €86 million because of the closures. Is that right?

Ms Maureen Marray

Some of those insolvencies would be because the business was not viable. It would not necessarily have been because of the warehoused debt. The business model for that business just was not viable.

Deputy Rose Conway-Walsh

Yes.

Ms Maureen Marray

Business closures and failures and business start-ups are, in many ways, just part of the natural business economic cycle. We would expect that in any given year there would be a level of insolvency. There has been an increase compared with before Covid, but it is not exceptional and is a standard increase in insolvencies that one would expect.

Deputy Rose Conway-Walsh

Ms Marray is obviously following the trends and will be able to tell if she is back here in three months time if that is trend that is increasing and all that.

Ms Maureen Marray

Yes.

Deputy Rose Conway-Walsh

Is she noticing particular sectors that are impacted more than others?

Ms Maureen Marray

The three main sectors that have debt warehoused are wholesale and retail, construction and accommodation and food services. It is no surprise they are the sectors with the most warehoused debt as they were the ones subject to the most severe restrictions. The insolvencies we have seen to date are in those sectors. Those are the trends we have been seeing to date.

Deputy Rose Conway-Walsh

Okay. I move to the LPG and the justification for that being excluded from the TBESS. Was any assessment carried out by the Department or Revenue into how LPG and kerosene could have been incorporated into the scheme?

Ms Sinead Ryan

All the energy sources were considered at the time. However, it was decided when the TBESS was introduced that the scheme would be based on the metered supply of electricity and natural gas and that metered connection was a very important feature for the administrability of the scheme. We also understood at the time the level of increases seen in the gas prices were not on par with those seen with oil and LPG and because of the requirement to have a metered connection it just was not possible at the time to extend the scheme. That is why the Department of Enterprise, Trade and Employment was tasked with creating a separate scheme for those businesses and they announced the business users support scheme for kerosene that launched last September.

Deputy Rose Conway-Walsh

There were still so many restrictions. What we need to try to achieve is where schemes are announced like this, to assess how they are tested in terms of the takeup. Ms Ryan said it cost less than for the TBESS and has given the figure for the number of businesses. How does that compare with the number of businesses the Department would have estimated at the beginning when it was doing its calculations about how much it was likely to cost? I mean the number of businesses rather than the amount.

Ms Sinead Ryan

On the costing of the scheme, following the budget day announcement when the parameters were decided, the Department of the Environment, Climate and Communications carried out a detailed costing exercise for the scheme. That was based on 400,000 businesses being potentially eligible for the scheme. That figure was chosen on the basis of Revenue data where there about 500,000 businesses within the case 1 and case 2 parameters and it was considered reasonable to apply a discount to that because certain businesses would not be encouraging the energy costs, such as, for example, a plumber or anyone working on the premises of other businesses. As set out in the note provided, the original cost was not calculated then by reference to how much each business would pay or by an average unit price because there was not one available - there is not one particular average unit price. There is a very wide variation in terms of the type of business, the energy category they are on, the different prices they pay and of course the consumption they have across the various ranges. A small number of customers can account for a disproportionate amount of consumption. A bottom-up approach was taken by the Department of the Environment, Climate and Communications, where it went back out to customers and suppliers to try to determine what the average unit price paid would have been at September time. That was used as a baseline and applied to the potential pool of 400,000 businesses.

There were an awful lot of factors at play that then led to the cost not reaching the mark that was expected. As the Deputy will have seen from the note the costing was based on a worst-case scenario for energy prices and consumption. While the prices rose somewhat they subsequently fell and that worst-case scenario did not happen. There was a milder winter than anticipated, mitigation measures were taken across Europe with storage capacity, the average unit prices of businesses varied-----

Deputy Rose Conway-Walsh

Yes, I know all those factors and it is difficult to predict, but when Ms Ryan mentions 400,000 and then the actual takeup is 25,000 it is a huge gap. Has anything been learned about the design of those schemes? If we were to be in a similar situation in six months time, what should be done differently around the design of a scheme to increase the takeup? We had real difficulty in rural Ireland with the LPG exclusion because many retail businesses, restaurants and other small businesses do not have gas connections. Straight away, therefore, they were discriminated against. We were delighted then when there was a scheme, but we still found there were so many people who just could not meet the criteria. On the auditing of it, that is, Revenue's aspect of it, businesses were basically telling me they had all the evidence. It should not be a case of just having it metered. Businesses were absolutely convinced they had all the documentary evidence, which I saw, to be able to support the idea they were not trying to take advantage of the system or find a loophole. Is there anything the Department of Finance would do differently if the scheme was done again in future?

Ms Sinead Ryan

The scheme was designed in a very short timeframe-----

Deputy Rose Conway-Walsh

Yes.

Ms Sinead Ryan

-----to assist the businesses and I suppose it was designed to try to be as broad-ranging as possible. That was a requirement of the temporary crisis framework for state aid as well. I am sure if another similar situation arose there are things we could learn, but really there were an awful lot of circumstances outside our control that led to the lower than anticipated uptake.

Deputy Rose Conway-Walsh

Was there data used explicitly for taking the comparison dates? What was the rationale for the exact dates used for the comparisons?

Ms Sinead Ryan

As I have mentioned, the scheme came under the EU temporary crisis framework which was targeted at the impact of the Russian invasion of Ukraine. The framework was drawn by reference to that, so a comparable period just before the invasion and then thereafter. The scheme was not aimed at the general rise in energy prices. It could not be, because of the terms of the temporary crisis framework. That is how the reference period was identified. It was the pre and then then the post period that helped identify it.

Deputy Rose Conway-Walsh

Okay, I thank the officials.

An Cathaoirleach

Before we move on, is there any correlation between the businesses that did not avail and those that are now in difficulty due to their warehoused debt? Is there any way of-----

Ms Sinead Ryan

I do not think we could make-----

An Cathaoirleach

-----drawing any statistics from that cohort?

Ms Sinead Ryan

I do not think we would make that correlation, but I will say businesses that were availing of, or are availing of, the debt warehousing or phased payment arrangements were entitled to TBESS, so-----

An Cathaoirleach

Did they all take up that entitlement?

Ms Sinead Ryan

I could not tell the Cathaoirleach that.

An Cathaoirleach

Do we have any percentages on that?

Ms Sinead Ryan

I would not have that information.

An Cathaoirleach

All right. Deputy Canney is next.

Deputy Seán Canney

I thank the officials for their opening statements. Many small businesses more or less looked at the support scheme and found they could not be eligible for it no matter what they did. To return to the framing of the scheme, it was done in a way, it seemed, that was trying to keep people out rather than get them in. It has left a bad taste and also left businesses trying to recover from an expectation they had they would get support and the fact the support was not there when they went after it.

The most damning thing with the scheme is that as a temporary support it did not hit the spot, if one might put it that way. We now have small businesses still struggling to come to terms with whether they will be able to survive a year or two afterwards and are still feeling the effects of it. When we talk about the numbers that took up the scheme, it was not a great day at the office for whoever invented or put together this scheme. We can also say it was done in a way to try to help people but all of the criteria that were set out seemed to exclude rather than include people and it has left a bad taste in people's mouths. Is it not time right now to re-evaluate what happened with that scheme because effectively it was a failure when only 1,000 picked up on it? Then on the other side of the coin, there is the debt warehousing that happened. Some 70% is still owed. They are small amounts of money when you read about them but it is probably all small businesses that owe these and it is big money to them in relative terms, as well as trying to keep on top of their existing and ongoing obligations and commitments. The one thing that businesses keep saying to me is that it is not understood by politicians or by Departments the difficulty they are having now. They are debating on an ongoing basis whether it is worth their while keeping their businesses going or if they should just close them, go to work some place where they get a weekly wage and guarantee something for their families. Will the witnesses comment on that? I am trying to portray the feeling of the business people I know. I will come back on one or two other things as well after that.

Ms Sinead Ryan

Throughout the duration of the scheme, three assessments were carried out in line with the legislative requirement, the first one being in January 2023, and on foot of that a number of amendments were made in the Finance (No. 2) Act 2023 to broaden the scope of the scheme. After those changes were made, in order to qualify, instead of seeing a 50% increase in their average unit price, this was reduced to 30% for businesses and that was the benchmark after that point to get into the scheme. It was backdated to the beginning of the scheme. There were changes made to the scheme mid-process. We were confined to a certain extent also by the temporary crisis framework but every endeavour was made by reducing the entry levels, increasing the amount of payment, increasing the monthly caps and extending the scheme on a number of occasions so that businesses could be included. There were a number of assessments done on the scheme which I have provided to the committee and on which I am happy to comment. We were conscious of that throughout the process.

Deputy Seán Canney

With the pressure now on small businesses - and we are hearing this all the time - what type of research has been or is being done by the Department, perhaps with Revenue, to assess the state of SMEs at the moment? When you look at the returns for SMEs for 2022 or what their estimates might be for 2023, does the Department see a drop, more insolvencies and people going out of business? I know the Department advises the Department of Finance but is there anything there to say we are going to hit a crisis point unless some sort of support is put in place to help the SMEs as a matter of urgency? In what way do the Departments deal with each another in this kind of thing? The witnesses said that policy is not determined within Revenue and I agree with that but do they offer the research they have? For instance, how many small businesses availed of the warehousing of their debt and the temporary business supports? The Department would have that information. Is that not shared with the Department of Finance to see how the scheme did or did not work?

Ms Anne-Marie Walsh

I thank the Deputy. I will come in on the warehousing scheme in particular. That is something that the Minister, in arriving at his latest decision to reduce the interest rate further, is very conscious of in allowing all, but in particular, small businesses, sufficient time and space to address their debt and give them certainty and assurance around that. Regarding ongoing monitoring and research, as well as analysing the data Revenue provides us on the take-up of the warehousing and the other schemes as they become available, we, and colleagues in the economic division, also monitor the independent reports such as the PwC insolvency barometer. This work is ongoing but is something of which the Department and the Minister were very conscious in coming to that decision on the warehousing.

Ms Geraldine Hegarty

I will add that the insolvencies are something we constantly monitor. While we have seen an increase after Covid, it is certainly not at the levels the media had expected but it is something we will monitor. Should it get to that stage where there will be a cliff edge or huge drop, we will anticipate that and engage with the Department of Finance. At the minute, it certainly does not seem like there is a crisis point. The debt warehousing is a huge support to those smaller entities and will be a huge cash-flow support for them but it is something we monitor. Regarding the TBESS and the schemes in general, as part of promoting them or engaging with taxpayers, we promote across a variety of different avenues between print media and radio, as well as engaging with practitioner and representative bodies to get messages out on how we can support and what schemes are available to encourage that participation.

Deputy Seán Canney

Do the witnesses think we have come to a stage where we need to put supports in place for the SMEs as a matter of urgency based on what we are being told on the ground and what is being told to us by the representative groups for these organisations? Is there research being done by the Department that tells it that this is not correct? What is it doing to try to find out - perhaps with the Department of jobs and enterprise - what is happening and what needs to be done, and not just waiting for the next budget? I am getting the impression it is fairly urgent at this stage. That question is perhaps one for the Department of Finance.

Ms Sinead Ryan

The Deputy mentioned the Department of Enterprise, Trade and Employment and it has a number of schemes in place to support businesses at the moment, for example there is the Ukraine enterprise crisis scheme, the growth and stability loan scheme, the UK credit guarantee scheme, a micro-enterprise loan scheme, and the increased cost of business support scheme which is due to be rolled out this year. Therefore, a lot of work is ongoing about which the Department would be best placed to speak but there are a number of supports in place for businesses both in terms of financial and practical supports.

Deputy Seán Canney

I will make one other quick point. Governments take great publicity from the increase in the minimum wage but that has a serious effect on small businesses trying to find the money to pay this increase in wages. For instance, with the PRSI contribution that has to be made, should the bands be adjusted while the minimum wage goes up, and probably rightly so? As well as paying out the increased minimum wage, the SMEs are also having to pay additional PRSI because the thresholds are there to go to the 11%. Is there any move or any appetite to look at that for instance so that it will help SMEs?

Ms Anne-Marie Walsh

Ultimately, those are political and policy decisions and our role is to advise the Ministers on our work, research and our trends.

Deputy Seán Canney

Would the Department be advising the Government on that?

Ms Anne-Marie Walsh

The Department of Social Protection looks after PRSI so-----

Deputy Seán Canney

I know that. This is where I do not want to hear that somebody else looks after something.

An Cathaoirleach

What the Deputy is asking is that if questions were asked of Ms Walsh from a political perspective, would she respond positively?

Deputy Seán Canney

There is no comfort for SMEs to say that the Department of Social Protection looks after the issue. It all comes into the Exchequer. This is why we, the Regional Group, today proposed in the Dáil that a task force be set up so that all the Departments will knit together to see how they can legitimately help small businesses in a tangible way, rather than have schemes that are not suitable being announced. I am mighty critical of the schemes we have had, and rightly so.

An Cathaoirleach

In addition, perhaps the witnesses could compile the detail or data in respect of the various schemes to show what was the estimated take-up and what was the actual take-up and what were the costs and shortfalls compared with the original estimates. That would address Deputy Canney's point in that the Department would identify which schemes are succeeding and which are not. The ultimate aim of any of these schemes is to assist SMEs and family businesses and give them the opportunity to survive. If they are not availing of the schemes, the commitment originally made is not being realised. Perhaps the witnesses would carry out that assessment and return the information to us and we then can hand it to the political masters with a view to bringing in schemes that are more effective than those that have been produced already.

Ms Sinead Ryan

We would be happy to provide information on the schemes within our remit. We can speak to our colleagues in the Department of enterprise.

An Cathaoirleach

I thank Ms Ryan. I note that Ms Hegarty said she would anticipate and engage with the Department of Finance if the Revenue Commissioners believe that a crisis is emerging. We in the political sphere believe a crisis is emerging. I am the product of a small family business which reared and educated me and a few others and was good to us in times when retail and that type of business were different from what they are now, and I accept that. However, it is surprising and disappointing to hear that it was anticipated there would be 400,000 recipients and the figure that materialised was only 25,000, even after the 50% rate was reduced to 30%. The payments and caps were increased. There were monthly payments. The deadline was extended. The rate on late payments was reduced from 3% to 0%. The deadline was extended. Other schemes have also been mentioned and yet family businesses and small businesses are facing considerable difficulties in addition to the normal run of events in January. Energy costs remain high. Rising prices are associated with the delivery of their products and services. As has been said, the availability and cost of staff are issues. Auto-enrolment is coming in this year. Tax debt warehousing and VAT rates are also issues. We believe there is a need for a new package to help that sector. We think that is possible and may be probable because of the lack of take-up of other schemes, which, in hindsight, might not have been properly designed to deliver for those who need help most. Some 70% of those availing of the debt warehousing scheme have a debt of €5,000 or less. That might not seem much but when it is combined with all those other factors, it is the difference between staying in business and not staying in business. We, as a committee, believe it is crucial that an assessment take place sooner rather than later. The statistics should be imminent and that will allow us to make the political argument to those in government that we should bring forward a package which is vital for that sector. I am sorry to have taken up the Deputy's time.

Deputy Patricia Ryan

I thank our guests. Like Deputy Canney, I know people who are concerned about their businesses and may be thinking of packing in the business and going to work for somebody else. I would be concerned about that for various reasons. I will ask two quick questions consecutively, if that is okay, because it is late in the evening. With regard to the once-off measures provided to businesses post Covid, such as the deferral of rates payments, is any consideration being given to a repetition of these supports, given that many businesses, especially SMEs, are still struggling to survive when facing crippling energy bills, increased costs for raw materials and products and rising insurance costs?

I am going back to issues similar to those discussed by Deputy Canney but perhaps I am asking in a different format. Regarding the increased costs of business grants announced by the Government in budget 2024 and recently capped at €5,000, how does the Department see that amount enabling most SMEs to mitigate their increased costs, given that those SMEs have been hit with the increased cost as a result of the increase in the statutory minimum wage? It is right that the minimum wage is to rise but the increase, even in respect of one employee, would effectively negate the benefit obtained.

Ms Sinead Ryan

The Deputy referred to the increased cost of business scheme that falls within the Department of enterprise. I understand that scheme is targeted at SMEs and those businesses will receive up to 50% of the rates they pay, subject to a cap of €5,000. It is targeted at those businesses. In respect of the Deputy's first question-----

Deputy Patricia Ryan

The first question was about the once-off measures provided to businesses post Covid, such as the deferral of rates payments. Is any consideration being given to providing those supports again, given the rising costs of material, etc? Is anything coming down the road by way of a repetition of those supports?

Ms Sinead Ryan

A repetition of what?

Deputy Patricia Ryan

A repetition of the once-off payments.

An Cathaoirleach

Will there be any new schemes?

Ms Sinead Ryan

I cannot really comment on the rates scheme that was in place. I understand the cost of business scheme is measured based on rates. From the Department's perspective, it is not something we are currently looking at.

An Cathaoirleach

I thank the witnesses for their presentation and the manner in which they have answered our questions. As I said, there is some information they might be able to furnish to the committee in the short term. Deputy Aindrias Moynihan may wish to contribute.

Deputy Aindrias Moynihan

I thank the witnesses for their presentations and the constructive discussion. A lot of information has been shared. I am sure we are all seeing, because I know I am, businesses that are under phenomenal pressure. These are small family businesses that would, over the years, have weathered a whole range of different storms but have now hit a perfect storm as a result of a whole range of pressures caused by wages, auto-enrolment, energy costs and many other things. The key point is that any move from here needs to take account of the need to support those businesses. During the pandemic, useful and positive supports were in put in place. They made the difference and were lifelines to keep businesses going that were vital at the time. The tax warehousing scheme was one such support. There was not the same level of take-up for all of those schemes that we might have anticipated. I hate the word "learnings" but I am trying to figure out if there are lessons or things to be taken from those earlier schemes and their take-up that we can apply to the forthcoming scheme. It is capped, it seems, at just over €5,000. I am not sure whether that amount will make or break some of the businesses that are on verge of closing. I am trying to figure out if there are lessons to be taken from the previous schemes.

Are the witnesses seeing the trends and the ways in which some sectors are being hammered and are under much greater pressure than others? Are the figures showing that the current level of business closures is far ahead of other years? Are the witnesses seeing a trend in that regard? We are seeing that in the hospitality sector in our areas but many other small, family businesses are also being impacted. Is that filtering through in the figures to which the witnesses have access or is the situation comparable with other years in respect of business that are, unfortunately, closing? I am trying to get a handle on what the witnesses are seeing and what is going to be applied to forthcoming supports that could help businesses under phenomenal pressure.

Ms Anne-Marie Walsh

I will respond and colleagues may want to contribute also. Rather than those one-off targeted schemes, the response of the Government of late and in budget 2024 has been to pursue more general measures, such as the decrease in the VAT rate on gas and electricity, the extension of the excise rate reductions and other measures targeted towards the general business environment.

The Deputy asked about insolvencies specifically. We see the trend that insolvencies are increasing and there is an inevitability about that. As the Covid and pandemic supports unwind, insolvency rates, which were artificially low during 2020 and 2021, are coming back up. Again, we are not seeing anything immediately in the data we are studying that suggests that it is at crisis point. The support has been provided for general measures to support the many, rather than for targeted one-off schemes. We continue to look at the data and work with our colleagues in the other Departments, and we provide the information and advice to the Ministers, the senior officials groups and so on. We are actively monitoring the position.

Deputy Aindrias Moynihan

From what I understand, the Department is seeing the upwards trend, as are most people in the country, but it has not yet reached crisis point. We do not want it to reach crisis point, so how far off is that? What is the trend the Department is seeing? Are we on the verge of a crisis? Many families have had a personal crisis when closing and losing their businesses. I am trying to figure out how far off is the threshold or crisis point for the Department. Are we trending towards that? Is it comparable with anything in previous years?

Ms Sinead Ryan

Insolvency levels increased by about one third last year compared with 2022 but that was on the back of insolvency rates having dramatically fallen during the pandemic because of the various supports that were available, as Ms Walsh mentioned. The rates from 2020 to 2022 were artificially low and they are now just re-normalising really. The insolvency rate for 2023 was still below the 2019 rate. There has not been an increase from what would probably be considered the norm.

On a sectoral basis, it is split, based on some of the information we have, but the pattern is not abnormal for Ireland. That is our understanding at this point.

An Cathaoirleach

I thank the witnesses for their presentation and the manner in which they responded to members' questions. They have noted our requests for information. We will use that as we see fit to assist those who have been making this point to us.

We appreciate and thank the Department's staff for the manner in which they responded to the Government's policies to make assistance available and the manner in which they administered the business supports provided during the Covid pandemic and again during the cost-of-living-crisis. They are asked to administer something and that is all they can do. The detail around the effectiveness or otherwise of those supports is for the committee to consider and only when we have that information can we address those issues. I extend our thanks and appreciation to the witnesses and their staff.

Ms Sinead Ryan

I thank the Cathaoirleach. To clarify, we provide an evaluation of the schemes within our remit and the cost versus shortfall. We can ask our colleagues in the Department of Enterprise, Trade and Employment to do the same.

An Cathaoirleach

Yes. Perhaps Revenue could give us an evaluation of the closures we are witnessing, including where they are happening, what the trend is and, if possible, what the main contributing factors are. We will leave it to its discretion to provide as much information as it can within the confines of GDPR and everything else.

The select committee adjourned at 6.45 p.m. until 5.30 p.m. on Wednesday, 28 February 2024.