Vol. 516 No. 5
91 Mr. Perry asked the Tánaiste and Minister for Enterprise, Trade and Employment if she will clarify the proposed new guidelines issued which will reduce the level of direct grants available to small businesses through county enterprise boards; and if she will make a statement on the matter. [8170/00]
There has never been automatic entitlement to grant assistance from the State's enterprise agencies or boards in the history of this State. Financial incentives are provided to entrepreneurs to encourage the creation of well-paid and sustainable jobs and to offset location or other competitive disadvantages.
At present, there is virtually full employment in the economy. In parallel, there are very serious labour shortages nationwide. Interest rates, which are critical to investment decisions and business confidence, are at a traditionally very low level. These circumstances contrast more than favourably with the position in October 1992, when the city and county enterprise boards were first established by us.
The enterprise boards support for the development of micro-enterprises, that is, groups of ten employees or less, for the period 2000-06 will be determined by the productive investment subprogramme of the Border, midlands and western, BMW, and southern and eastern, S & E operational programmes of the national development plan. In the BMW region, because of its dependence on traditional and declining economic sectors, the role of the county and city enterprise boards in job creation will continue to be the primary task.
At the moment, consultation and discussions are taking place between officials of our Department of Enterprise, Trade and Employment and the management of the city and county enterprise boards, on the new operational programme. The relevant decisions will be taken by us before the commencement of the new programme in June next.
These operational programmes envisage a progressive shift by the boards from the provision of direct financial assistance to softer forms of support such as advice, mentoring and management development and increasing recourse to refundable aid. This change in direction is designed to move the focus of the boards to higher value-added jobs in manufacturing and international services, and to increasing competitiveness through access to e-business and the promotion of quality management and best practice. The boards will in future offer an integrated package of supports geared towards the development needs of micro-enterprises.
Micro-enterprises, in common with other commercial operators, will benefit significantly from the proposed introduction of the low rate of corporation tax of 12.5% with effect from the year 2003.
Will the Minister explain why the new guidelines to enterprise boards reduce capital grants from 50% to 35% of the cost of a job in the BMW region and to 30% in the rest of the State? Will he explain why employment grants can only be given in exceptional circumstances where it can be demonstrated that labour shortages do not exist? The rate is being cut from £5,000 per job to £3,500. Does the Minister agree that this move goes against the point of keeping Objective One status for the disadvantaged regions?
The EU agreed to total grants of up to 55% for small businesses compared to 27.5% in the eastern and southern region. The double grant rate is not being maintained which is a major loss to small companies intending to create jobs. Does the Minister agree these changes only apply to micro-enterprises creating one to ten jobs and that this directive does not apply to Enterprise Ireland and the IDA? I am bitterly disappointed because it is from small acorns that large oaks grow, and this Government does not endorse that.
I do not think the Deputy was listening. I said that consultations and discussions are going on at the moment between officials in our Department and the management of the boards. Initial proposals have been made regarding those discussions but we will take the final decision at political level when we receive reports from the officials engaged in those consultations.
We have to take into account the fact we cannot look at the micro-enterprise in the context of grant aid only. If one compares the grant aid proposed for foreign direct investment and indigenous investment for medium to large companies with micro-enterprise operators, one will understand there is a much greater opportunity for the bigger companies, both foreign corporations and our own larger companies, to spend much more money on training, e-commerce, mentoring, management, advice and consultancy than the smaller micro-companies, which have a much lower base and a lower volume of turnover and which have a greater need for cash support.
Consequently, we are looking at a situation whereby we can make a much greater package of measures available to smaller companies. When we receive the information from the management of the various boards, we will take the final decision.
That was a longwinded reply. Is the employment grant being reduced from £5,000 to £3,500? Is the grant being reduced from 50% to 35% in the west?
No. I am very disappointed that Deputy Perry said I gave a longwinded reply. I am delighted to see his party's conversion to the boards because when I conceived this idea in 1992, his party spokesman went on television and opposed the establishment of the boards. Now that the boards have exceeded by 250% their initial job targets, there are many converts, which I very much welcome.
Be assured that we have the utmost commitment to the boards and that the Tánaiste and I will take on board the advice available from our officials and the management of the boards. We will take the positive decisions necessary in due course while taking into account the needs of a modern economy and the efforts required to stimulate economic activity in the more disadvantaged regions.
