JOINT COMMITTEE ON JOBS, SOCIAL PROTECTION AND EDUCATION díospóireacht -
Wednesday, 13 Jul 2011

Priority Issues of Department of Jobs, Enterprise and Innovation: Discussion

Chairman

Apologies have been received from Senator Averil Power and Deputy Michael Conaghan. I propose we proceed with the discussion with the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, immediately and then go into private session to deal with correspondence and related matters. Is that agreed? Agreed.

I welcome the Minister, Deputy Bruton. The Minister of State, Deputy Sean Sherlock, will join us shortly. I also welcome the Minister of State, Deputy John Perry, and his officials. We are very happy to have them at the meeting and we thank them for fitting us into their schedule. This is the first meeting which the Minister, the Minister of State and officials have attended and we are looking forward to working with them. It is an important Department in terms of job creation, enterprise, culture and so on.

There are many issues on our draft agenda for the coming autumn term. We look forward to getting feedback. We also look forward to being productive and working with the Minister, Minister of State and the officials as well as scrutinising the proceedings of the Department. We will try to work in partnership with the Minister and Ministers of State.

I ask the Minister to make his opening statement on his priorities as Minister for Jobs, Enterprise and Innovation, after which the three Opposition parties' spokespersons can ask questions. The Minister and Ministers of State can respond to each spokesperson followed by questions and responses from other members in the order they raise their hands.

Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official by name in such a way as to make him or her identifiable.

Minister for Jobs, Enterprise and Innovation (Deputy Richard Bruton)

I thank the Chair for the invitation and opportunity to build a good relationship with the committee. Its work will be important to the success of what we are trying to do and I hope we can build a good relationship in which we can develop some new ideas and bring them to fruition.

I do not intend to give a long introductory presentation but I would like to outline our priorities. I do not need to tell the committee the huge nature of the employment challenge we face. In the past three years we have lost 350,000 jobs. We are facing a very high rate of unemployment. At its peak it was 14.5% and it is a little lower now.

Ireland took a wrong turn. We sought to build prosperity on the back of property, lending and so on and forgot what it takes for a small open economy to thrive. We now have a huge challenge of having to reinvent ourselves as a country. It has to be very clear that the reinvention of a strong employment economy will have to start with successful enterprises. Enterprise rather than speculation and innovation rather than arbitrage in the markets will drive the success of this country.

I have identified five themes around which I hope to set out our stall for the committee as to what it is we are about. One is cost competitiveness and another is having a supportive environment for business, in terms of the agencies helping companies to build the capability and the regulatory environment within which they operate. The third theme is the need to drive export-led growth. Everyone recognises that the domestic economy is going through a difficult period and the way for us to rebuild has to be to export-led growth. The next theme is access to finance and I do not have to tell the committee about the challenges on that front. The final theme is the innovation agenda.

I will be brief and leave more time for interaction. The National Competitiveness Council reported significant improvements this year in the competitiveness in this country. The easiest measure is the GDP deflator which is down 10%. It is a summary of all sorts of measures. Property costs have reduced much more. The council warned us that this could be a cyclical downturn rather than a serious structural adjustment in costs which is why the Government has set out a number of areas where we need to make structural changes.

The committee will know of the reforms that are imminent to the legal cost structure. The Government is also examining the upward only rent problem. My Department has a radical reform package for JLCs and so on. There are many areas of structural change that need to be pursued to ensure that we are competitive. I have circulated the recommendations of the National Competitive Council to all my colleagues so that each Minister can then respond to future cost-competitiveness challenges.

I refer to the need for a policy to support successful enterprise. This is the core work of the enterprise agencies. It is heartening to finally see that employment numbers in Enterprise Ireland companies have begun to increase in the past number of months following a prolonged period of decline. One swallow does not make a summer. However, export markets have seen a successful 18 months and this has been seen in traditional sectors such as food as well as in the strong indigenous sectors such as software. These exports must be protected and all policy instruments will be scrutinised to ensure best value from the area overseen by Enterprise Ireland.

As regards IDA Ireland I am heartened to report that the pipeline is strong. I visited the United States recently. Business in the US recognises Ireland's better message of cost competitiveness and the new orientation towards exports. Our traditional strengths used to be low tax and labour costs but this has changed to include research which underpins half of the jobs created in IDA companies. We have come of age as an economy but the tax regime remains crucial.

The other dimension of policy environment is to have a well-functioning regulatory system. This can be a good source of competitive advantage. Businesses which deliver goods and services to a high standard in very competitive markets will be more alert to new opportunities and will develop dynamically. It is crucial that the Department ensures effective regulation which does not impose unnecessary administrative burdens. It is an important part of the Department's remit to achieve a reduction in red tape. However, we must ensure that competition prevails and I refer to more competitiveness in sectors such as the legal and medical professions. The Department must also be alert to other areas in which there may be challenges to the application of good competition. Approval from Government has been received for the publication of the heads of a Bill to merge the Competition Authority and the National Consumer Agency. This will be an effective way to drive a competitive market with high standards of consumer protection.

The Government is pledged to reform but to retain the JLC system. We recognise that a balance needs to be achieved between the protection of vulnerable workers by restoring the national minimum wage rate and the retention of a reformed JLC mechanism as a means of ensuring orderly protection in those sectors.

The courts have recently struck down the JLC system. We had hoped it would be possible to provide emergency protection to workers but the Attorney General has advised those routes are not open to us. The Office of the Attorney General will prioritise this work over the summer period in order to present a Bill to Government that will be legally robust, will protect workers and will be sufficiently flexible to exploit areas of opportunity.

Allied to this area of labour regulation, the Department recognises that the present system which includes five regulatory authorities in the employment rights area needs to be more effective. A process of consultation has been commenced to create a unified structure with a first point of entry which is uniform and well-managed, along with an appeals system. The need for reform has been long recognised and there is consensus among all the parties involved that this reform is overdue.

The programme for Government has prioritised export-led growth to new markets such as the BRIC countries, Brazil, Russia, India and China. The Minister for Foreign Affairs and Trade is now responsible for trade promotion. We will be enlisting the entire diplomatic machinery to help drive export growth. It is vital at this time of weakness in our domestic markets that we leave no stone unturned in opening up export opportunities. We need to look at the policies which support companies which traditionally operated in the domestic market to help them move to the export market.

The fourth theme I have identified is access to finance. This has been one of the very difficult issues for small business. Large international business continues to be able to provide its own banking. The credit crunch has had a significant impact on small business enterprises. The Government moved resolutely to restructure the banks to make two pillar banks which are focused on the domestic economy. These banks are well capitalised, have a low ratio of loan to deposit and are in a position to lend. The Minister for Finance has set up a structure in his Department to ensure these pillar banks meet objectives and timelines for lending to individual sectors. This will be crucial for rebuilding access to finance.

My Department has identified some failures in the market which the Department will need to address. I refer to the partial loan guarantee scheme. For instance, some companies with a viable business, for one reason or another, such as a lack of knowledge of the sector on the part of the banks, are being squeezed out of the credit market. The Department is developing a partial loan guarantee scheme the design of which is out to tender. We hope to move rapidly on its development.

A micro-finance scheme was also included in the programme for Government. The Department is in the process of developing this scheme. The closest model is First Step which is aimed at unemployed persons who need assistance in setting up a business and which develops a financial package for those individuals who are weak when approaching the banks for credit. We need to develop and extend this model.

I was last in this Department 14 years ago and at that time the country had a very weak scientific base which was virtually non-existent. The country is now a serious competitive player in this area. It is always a challenge to decide which research project is the one that will deliver the goods. The priority of every Government is to try to maximise the commercialisation and the spin-off from research. We are focusing on research with clusters in key areas where Ireland seems to have competitive advantage and this is linked to the ambition set out in the programme for Government to develop sectors such as digital content, digital gaming and renewable energy. These are sectors where there are legitimate grounds for believing Ireland has a competitive edge and these areas will be prioritised for research and development. A review is being undertaken by Jim O'Hara, former chief executive officer of Intel Ireland. This will help to direct our research and development expenditure in as effective a direction as possible. There are many issues involved in improving the environment for research and its commercialisation.

This has been a bird's eye view of the Department's policies. I hope my overview has met members' needs and has not strained their patience.

Chairman

I thank the Minister for his opening statement. I propose to invite each of the Opposition spokespersons in turn to make a contribution, with each having approximately five minutes. I hope we will have time at the end of the meeting for further questions, but we are obliged to finish this part of the session by 10.40 a.m.

Deputy Willie O’Dea

I apologise for being late. I understood the Minister was not coming in until 11 a.m. and was unaware the arrangements had changed. Is the Chairman proposing that the proceedings should finish in their entirety at 10.40 a.m.?

Chairman

This part of the meeting must finish by 10.40 a.m. We will thereafter commence our consideration of the Estimates at 11 a.m., with the Minister continuing in attendance.

Deputy Willie O’Dea

That is fine. I welcome the Minister and his officials and assure him that the committee will assist him in any way possible. The scale of the problem he faces in dealing with the unemployment crisis is truly momentous. Since 2007, one in seven, or 300,000, of the jobs that were so assiduously created during the period of Ireland's greatest economic growth have been lost. Most commentators expect employment to fall again in 2011. The Department of Finance estimates there will be 20,000 to 30,000 job gains per annum for the period 2012 to 2014. However, that will be insufficient to reduce unemployment given that the number of school and college leavers will equate to the number of new jobs plus retirees.

The Minister is correct to emphasise the importance of the export sector to economic growth. However, some of the main gains in this sector are in the least employment-intensive industries. As such, we cannot depend exclusively on the export sector to solve our unemployment problem. In the meantime emigration continues apace, with the ESRI estimating that 100,000 people will have left the country in search of work between April 2010 and April 2012. Perhaps the most alarming statistic is that the proportion of those out of work who have been unemployed for 12 months or more has increased from one in five only two years ago to one in two this year. It is a frightening statistic.

The Minister mentioned that measures to enhance cost competitiveness are a priority. While we have had competitiveness gains in recent years, in too many cases those cost decreases have largely been as a result of cyclical rather than structural factors, such as currency fluctuation. Has the Department identified what proportion of our lack of competitiveness in recent years was attributable to the strengthening of the euro at various times against the currencies of our two largest trading partners, the United States and the United Kingdom?

The energy subsidy to large users of energy has kept prices down artificially in that area, but that is due to end next year. Even with the subsidy, energy costs in this country remain relatively high compared with those of our competitors. If the structural barriers which prevent costs from adjusting to lower growth are not removed, recent competitive gains will be rapidly eroded once the economy begins to recover. Given Ireland's reliance on trade and the open nature of our economy, international cost competitiveness is a crucial determinant of our economic well-being. Exports account for half of all sales made by Irish companies. What is the Minister's view on suggestions that, considering the public service obligations, PSO, levy accounts for 5% of electricity costs, subsidies for peat-generated electricity should be phased out? Does he agree that standard guaranteed price supports are not sustainable in the medium to long term and that a premium on the wholesale price offers a more efficient mechanism of support?

Will the Minister comment on the fact that the tax wedge, which is the difference between what it costs to employ a person and what the employee receives in take-home pay, has increased dramatically to 50% in the last two or three years? This is directly adding to the cost of labour and is something the Minister for Finance must take into account in the forthcoming budget.

In regard to exports, up to 90% of exports from this State are from companies which have set up here as a result of foreign direct investment. This highlights in a stark way the weakness of the indigenous sector. While exports last year recovered 70% of the ground lost during the downturn, world trade volumes have already surpassed pre-crisis peaks. In other words, Irish companies have actually lost market share. Moreover, home grown exports account for only 10% of GDP. Without the exports of foreign companies, Ireland would be the most closed economy in the EU.

In the services exports sector, which is of growing importance, there is a problem of sectoral narrowness in that one third of exports are computer services and a further 10% are financial services. There is huge potential for growth and diversification in this area given that the global trade in exports increased from €1.4 trillion in 2000 to €3.3 trillion in 2009. Will the Minister elaborate on the status of the credit guarantee scheme? Has the Government factored in the approximate cost per annum to the economy? To which sectors will the €100 million micro-fund apply?

The Minister indicated his expectation that the industries under his remit will perform much better in the coming years than they have done in recent years. Perhaps he is relying on an upturn in the world economy in framing that expectation. When I sought to discover, by way of parliamentary question, how much additional financing will be devoted to these agencies in the coming years, I was told that no such increase in funding is planned. As such, I do not understand how their performance is expected to improve to such a degree. It is baffling.

In regard to the joint labour committees, the Minister says he was advised that an appeal of the recent High Court judgment is unlikely to succeed. However, was he advised that it would have been a good idea tactically to put in a notice of appeal and to ask for a stay on the order so that the Government might have time and space to draft the appropriate legislation? Has that option been considered? More than 200,000 families throughout the State are facing an extremely uncertain summer as a result of this ruling. People who are taken on after the date of the High Court decision are unprotected, as are those workers who change jobs within a JLC sector. Moreover, the notion that people already in the system will be protected because they have a contract is illusory.

Up to last Thursday, when the High Court decision was handed down, if a person's wages were reduced or anything else was done which impinged on the terms of his or her contract or his or her entitlements under a JLC agreement, that person could report the matter to the National Employment Rights Authority. Now we have a situation where individual employees must take a case for breach of contract if their wages are reduced or their employment is interfered with by the employer. We are talking about hotel chambermaids, migrant workers, part-time workers and young people, who will find it practically impossible to take such action.

I ask the Minister to address the points I have made. I hope to turn to more detailed matters later in the meeting.

Deputy Richard Bruton

There is a good deal to cover in the Deputy's opening contribution. While he is correct that export businesses tend to be less employment-intensive, they nevertheless remain the key vehicle for winning back market share and refloating the domestic economy. While other sectors, such as construction, are more employment-intensive, that route is not open to us and we must build on what is available to us as a small open economy. In fairness, that is reflected in the Deputy's subsequent comments on the need for Ireland to rebuild its export market share.

I was somewhat disappointed to find, on returning to the Department after 14 years, that the export share of indigenous companies has not grown at all and that we have not been building market share in that area. I agree with the Deputy that a key objective of policy must be to facilitate Irish companies in building market share. Enterprise Ireland fosters a great deal of the growth of many of these high-potential start-ups, which are often bought out and are no longer indigenous companies. They can be very successful but their value transfers to the other side of the balance sheet. The Deputy is correct. Building market share and ensuring that the policy instruments which assist companies to internationalise their business are well developed are both very important.

The Deputy is also correct in that we would love to be in a position to throw money at agencies and to do more of everything. He, more than most, is aware of the reality that we are going to be obliged to do more with less in every area, including that which relates to the operation of our enterprise agencies. We will be obliged to develop more effective policies. We are involved in a continual struggle in that regard. Most operations will operate in an environment in which they will be obliged to improve each year in order to deliver better performance on either the same or fewer resources.

The Deputy raised a number of issues that arose at the National Competitiveness Council in the context of the tax wedge, the PSO levy, etc. Those are matters which would really be properly addressed to other Ministers. As stated at the outset, however, I have sent the recommendations to each Minister and requested responses in order that we might identify the policy changes we might feasibly make in order to improve our competitiveness in both the short and the long term. It is important that reports such as those produced by the National Competitiveness Council and other bodies are not left on the shelf. We must ensure that any policy changes we can make will be implemented.

The tax wedge is a matter for the Minister for Finance to deal with in the context of the forthcoming budget. The Minister has inherited this particular problem and the Government is obliged to hit a number of financial targets that have been set for it. The constraints that are in place are very real. We must seek to be imaginative within those constraints. The jobs initiative shows what can be done by being somewhat innovative. By cutting the lower rate of VAT for three years we have provided a fillip to labour-intensive activities. There are other steps, such as cutting the lower rate of PRSI and ending the travel tax, which will assist in generating a short-term response. We are in the business of creating tailored, forensically-designed tax changes rather than bringing down the entire tax structure.

The Deputy inquired as to whether we considered making an appeal. We examined this matter but the legal advice available indicated very strongly that the grounds for an appeal were not sufficiently robust and that an attempt to seek a stay would leave us vulnerable and would be a legally-dangerous route to take. The advice indicated that this would not be a sound way to proceed. We also gave careful consideration to the introduction of emergency legislation. However, due to the fact that the findings of the court were so unequivocal regarding the flaws or weaknesses in the JLC system, drafting legislation in which we would seek to reinstate the orders that had been found to be constitutionally invalid would be an extremely precarious exercise. We would be obliged, if we chose to proceed in this regard, to try to rebuild parts of the system. In addition, there would be a need for systems of appeal. We considered the matter but the strong legal advice available to us indicated that this was neither a strong nor credible way to proceed. We were advised that the only robust way to move forward is to design a new system - a sort of JLC mark II - over which we will be able to stand, which will be robust in the context of legal challenge, which will provide protection for workers and which will contain the reforms that have been identified as being necessary.

The Deputy inquired as to the cost of the temporary loan guarantee scheme. It is too early to make a call in that regard. The nature of the scheme is that viable businesses that have been refused loans will be identified and that the State will take a percentage of the risk. A final decision will have to be made with regard to what will be that percentage. In other jurisdictions, the percentage has been approximately 75%. It is run on a competitive basis. Clearly, the ultimate cost will depend on the number of guarantees that will be called where loans fail to deliver. There will be a charge for the insurance. Some jurisdictions have kept the costs very low. Our aim would be to keep matters tight. Until a final design is put in place, it is difficult to state what will be the ultimate cost.

The indicative figure on which we have been working is something in excess of €400 million in loan guarantees in the first tranche. It is not huge but we believe it would be a tailored approach that would provide us with the opportunity to pilot the system. We have the support of Enterprise Ireland, Forfás and other agencies that have engaged in a close examination of the enterprise sector and we are of the view that there is a market failing which needs to be remedied. The scheme will be complementary to the bank restructuring taking place under the remit of the Department of Finance.

Senator Kathryn Reilly

I welcome the Minister. I am conscious that a number of members wish to contribute so I will be brief.

In the context of the priorities relating to SMEs and gaining access to export markets, the Minister referred to the BRIC countries and the diplomatic initiative being undertaken by the Tánaiste and Minister for Foreign Affairs and Trade, Deputy Gilmore. We do not have strong connections in the BRIC countries and there is no traditional diaspora presence within them. As a result, it is much more difficult to break into their markets. How will the diplomatic initiative - in the context of the forging links and trying to break into these markets - work in practical terms? Reference has been made to trade promotion, using our embassies, etc., but I want to know how the initiative will operate.

The Minister referred to clusters and using areas where a typical competitive advantage exists. He referred to the commercialisation of research, specifically that relating to the area of science and technology. I note that a network of technology research centres is to be established. When will these centres be set up and where will they be located? What work is going to be done to assist indigenous sectors, such as the agrifood sector, which could benefit from the establishment of the centres to which I refer? While there is a push towards research and development in the area of science and technology, in domestic terms there is a need to promote the carrying out of research in and that can be practically applied to the agrifood and other indigenous sectors. I am aware of the Fuchsia Brands cluster of businesses in Cork. Will any work be done to develop similar clusters in other indigenous sectors?

Will the Minister indicate the work that is being undertaken in respect of the retail sector? As he stated earlier, measures to deal with unfair trading practices are to be introduced and perhaps he could expand a little on that.

In the context of prompt payments, what monitoring is being carried out and what enforcement measures are in place to ensure that the 15-day rule which applies to public sector companies is being adhered to? It is important, now more than ever, that money should flow through the economy. We must ensure, therefore, that the companies to which I refer are making payments within the timeframe set down. Do any sanctions apply in respect of late payment?

Will the Minister comment, in the context of innovation, on the impending reduction in the rate of corporation tax in the North? Does this mean Cavan will compete with Fermanagh or that we will work together on some kind of all-Ireland strategy? Will the innovation agenda delivered by the Department recognise that this is but a small island and that we have very limited resources? Can we harness institutions and staff for an innovation agenda on an all-Ireland basis?

Deputy Richard Bruton

I will ask the Minister of State Deputy Sean Sherlock to deal with some of the science and technology issues and the Minister of State Deputy John Perry to deal with prompt payment.

The Senator is correct that targeting countries such as Brazil, India and China will be more difficult than it was heretofore. It will require more ministerial attention. For this purpose, the Minister for Foreign Affairs and Trade is re-establishing the Export Trade Council. It will have broader membership, from the private and public sectors, and Ministers of State and I will participate on it. It will be designed with a view to exploring how we can develop opportunities. There are already joint economic commission agreements signed with the relevant countries. These are co-operation agreements and comprise one of the vehicles we pursue. The agreements will not be a substitute for Irish companies meeting people in the countries in question. I was in India recently with third level colleges and institutes of technology that are seeking to develop opportunities in that country's market. One needs to build long-term relationships in the countries in question. They, especially India, have not received much attention from Ireland of late. There are markets to be built but it is a long game rather than a short game. One must be willing to lay down the seed bed. The strategy will be worked out by a combination of Departments, including mine and the Department of Foreign Affairs and Trade, with a view to determining how best to deploy resources to avail of the opportunities that arise.

The Senator asked about the retail sector. As she probably knows, Mr. John Travers was asked by the previous Government to determine whether a voluntary agreement could be reached that would result in the policing of unfair practices, including seeking "hello" money and sudden changes to the terms of special offers. I refer to many practices that are plainly regarded as unfair. The fear is that small producers get squeezed by big retailers. There is an equal fear that some of the suppliers are putting smaller retail outlets under pressure. Mr. Travers, who sees no prospect of a voluntary agreement, has published a draft code of conduct, which would be a statutory code for consultation. The period of consultation is ongoing.

I propose, in the competition Bill that will shortly be before the Houses, to introduce by way of statutory instrument the necessary powers to put in place a statutory code of practice. The draft code is available for people to read and comment on. This is clearly an area in which there are diametrically opposed views. There was no scope for a voluntary agreement. In an ideal world, heavy compliance regulation would not be required but, as of now, there seems to be no willingness to come up with a voluntary agreement.

With regard to competition and collaboration, the Minister of State, Deputy Seán Sherlock, will deal with innovation. The truth is that there are elements of competition and areas of very fruitful collaboration. We must develop both fronts.

Corporate tax has been a very important competitive element for us. We have developed that and Northern Ireland rightly believes it could be on a more level playing pitch in this regard. The IDA and Invest Northern Ireland often compete for the same projects - that is the reality - and they compete with regions in the United Kingdom and elsewhere. On the other side of the equation is InterTradeIreland, a jointly funded body operating within the island and doing very useful work building collaborative relationships across a range of areas, including research and development and marketing. One must recognise there are areas of fruitful collaboration and areas that will remain competitive.

The agrifood sector is very much recognised in the research clusters and ambitious plans. Responsibility for this will lie with the Minister for Agriculture, Marine and Food. Much of the marketing will be done through his Department and by Bord Bia. There is a very ambitious programme built around Horizon 2020 and on the growth of output in agriculture. The market is growing. My father would turn in his grave if he knew I was in Berlin recently selling Aberdeen Angus meat to Germans. He spent a lifetime trying to persuade Irish farmers to give up the black "polly" and bring in nice European breeds that are leaner and more suited to the European market. The world has changed, however, in that many restaurateurs say the best flavour comes from an Aberdeen Angus. Therefore, we are returning to the black "polly". Such are the things one must do in politics.

Minister of State at the Department of Jobs, Enterprise and Innovation (Deputy Sean Sherlock)

With regard to the indigenous base, there are many centres of excellence within the higher education institutes. UCC, for example, is doing considerable work through Food for Health Ireland, an initiative that involves collaboration between the dairy industry and Teagasc in Moorepark in Fermoy, for instance. The objective is to build on extracting value from milk. Much research is being done in this regard. There is collaboration between Teagasc, UCC, UCD and UL to determine how to build functional foods and add nutritional value to foods. This work is taking place in the indigenous base. NUIG has the Competence Centre for Biorefining and Bioenergy, which is researching second-generation bio-fuels.

The key components are the Programme for Research in Third-Level Institutions, PRTLI, and Science Foundation Ireland, which provides funding. There is very strong engagement between these bodies and industry. In real economic terms, investment in research allows this country to compete with other centres of excellence, including global ones such as Singapore, and become a world leader. It is not often publicised that research and collaboration between industry and the institutes allow us to support exports from our economy valued at approximately €73 billion.

Since 2005, foreign direct investment in research, development and innovation increased from approximately 10% to approximately 50%. There is a highly evolved realisation globally that the companies operating in Ireland through collaboration realise they are able to mine much more value out of the arrangement, and that this is adding to our export base. However, we must continue to invest because, if investment slips, we could signal to the rest of the world that Ireland is taking its foot off the pedal in terms of investment in very high-level research. There is a logical component that ensures we can support between 72,000 and 78,000 jobs. We need to continue on that trajectory. In other words, a large component of FDI is predicated on ensuring that basic and applied research is there and that we have the requisite competent centres. We have 28 competent centres of excellence in various scientific fields. We have the Irish Centre for Manufacturing Research and the Tyndall Centre in UCC, which is a competent centre for micro-electronics. In addition, there is a competence centre at NUI Maynooth for IT and innovation, which is well supported by companies such as Intel Labs. There is a strong collaboration in evidence there and, in that sense, we are continuing to push out the boundaries.

I profess to having been ignorant of this field when I was in opposition. Now that I am in government, once one delves into this, one realises that it is undersold as a concept. The deep collaboration between research and industry is a good news story because of the number of jobs it supports and the exports it generates. We would not generate so many exports, with a net value of €73 billion, if we did not have these competence centres and the world-class researchers we are able to attract to this country. I hope that answers the question.

Minister of State at the Department of Jobs, Enterprise and Innovation (Deputy John Perry)

The 250,000 companies employing 700,000 people are clearly important for the creation and maintenance of jobs in the domestic economy. Access to credit is very important, as are credit limits. Prompt payment is needed to improve cash flow which is the life-blood of any business trading domestically. The Government now requires the HSE, local authorities and all other public sector bodies, excluding commercial semi-State companies, to pay their invoices within 15 days of receipt. This came into effect from 1 July. This initiative is an extension of the arrangement that currently applies to payments made to suppliers by central government Departments.

It is important that it should be monitored effectively. Stage agencies are now required to publish quarterly reports on their websites outlining their performance. To date, Departments appear to be co-operating effectively on this. In addition, from 15 October, all Ministers will be responsible for publishing reports on the performances of all bodies for which they have responsibility.

My experience, since being appointed, is that the lack of funds from pillar banks affects the role of small companies. We hope there will be a code of conduct for non-commercial companies requiring them to pay invoices within 30 days. However, many credit limits are being extended beyond 60 days which is regrettable and has a major impact on the viability of companies that cannot get paid on time. The State is now leading by example and I am happy with what I have seen to date with regard to paying invoices within 15 days of receipt. The obligation is on suppliers to ensure that their invoices are signed off correctly and that there are no anomalies. In addition credit and debit notes should be corrected.

Lack of credit is a big issue for the survival of jobs. It is important, also, for the State to be seen to be doing its part with regard to the prompt payment of invoices. I am satisfied on that point.

Deputy Willie O’Dea

Can the Minister of State clarify if the extension of the 15-day rule has come in since 1 July?

Deputy John Perry

That is correct, yes.

Deputy Sean Sherlock

I want to address one aspect of Senator Kathryn Reilly's question on commercialisation. Each institute or university competence centre has a technology transfer office which seeks to facilitate commercialisation of research. Coupled with that, the State is seeking to prioritise those areas of research for which we can create the necessary jobs, thus focusing on the required research areas. That prioritisation exercise is currently ongoing.

Chairman

As Deputy Halligan is not here, I propose to split the Technical Group's time between Deputy Joan Collins and Deputy Tom Fleming, who will have two minutes each. Is that acceptable? Do they want to share the slot?

Deputy Joan Collins

One cannot say too much in two minutes, so Deputy Fleming can take four minutes.

Chairman

I am sorry about that. There is a five-minute slot but the main spokesperson is not here.

Deputy Joan Collins

I just want to ask one question after Deputy Fleming has spoken.

Chairman

That is grand.

Deputy Tom Fleming

I welcome the three Ministers to the committee. I also welcome the document with its aspirations. I hope we can work on this in the coming months. On Deputy O'Dea's comments on the joint labour committees concerning more than 200,000 workers, in light of the recent High Court determination we need to legislate immediately to ensure the position of JLCs continues. There is great concern among individuals affected. Their rights should be restored. The benefits of all under the JLCs should be preserved as heretofore.

We must engage in prompt job creation initiatives. I have tabled a priority question for the Minister for next week on targeted initiatives on job creation. I propose that the Department of Jobs, Enterprise and Innovation should sponsor a voluntary programme across the private and public sectors whereby employees - within five years of their normal retirement date - could, with the approval of their employer, job share with a person on a fixed-term contract. The scheme would be attractive to someone agreeing to job share for a specific number of years within the five-year period. Therefore, the person opting to work would have each job-sharing year counted as a full year for pension purposes. Meanwhile, the person on the fixed term contract, although not having pension contributions made for him or her by the employer, will have the benefit of getting off the unemployment register and entering the workforce where they can develop their skills, as well as acquiring new ones. This would have the benefit of giving those approaching retirement a better opportunity to plan their long-term retirement activities and recreational pursuits, rather than having to move abruptly from working full-time to having no work. As we are well aware, there are 450,000 people who cannot get on the jobs ladder. The scheme I have outlined would give many such people an opportunity to develop their skills. It would work both ways and could be a good initiative if it is taken on board.

A review of the county enterprise boards is currently under way. In Kerry, for instance, the board has been successful in the micro-jobs sector. There is probably a big variation between various county enterprise boards, but the successful ones should be re-examined to see how they have been so productive. In that way, we could work from their model.

Deputy Joan Collins

The Minister said that he cannot do anything about the JLCs until robust legislation is introduced. In the meantime, more than 200,000 workers fear the future. Can the Minister not be more definite on this and state that, in the meantime, any employer who tries to break contracts would be fined? There should be some financial sanction so that no employers will try to break JLC clauses or contracts. It is too open at the moment for employers to abuse the situation, so I would like to hear the Minister's view. Instead of saying "Thanks very much. We know you're not going to do that", the Government should be clearer and impose a massive fine on any employer who thinks they can get away with it.

Deputy Richard Bruton

We gave careful consideration to whether it would be possible to draft legislation that would immediately create a system for enforcing the existing JLC rates, which are now just protected by the terms of people's contracts. However, there was not a sound legal basis for doing so in light of the judgment that was handed down. In order to impose a fine, there must be a legal base. The judge who heard the case found that the system is unconstitutional. To try to prop up something that has been found to be unconstitutional would be extremely complex, particularly if it were to have any chance of being robust when put to the test in the courts. The legal view is that it would be extremely vulnerable. Effectively, it would be unlikely to be enforceable and, if efforts to create such a system were successful, it would only protect existing workers. Legal opinion indicates that this would not be a successful route to take. It would also have been extremely difficult to circumvent the many flaws that exist. It just did not provide to be a viable route, much though I would have preferred to pursue it. We pulled it apart and tried to reconstruct it but it was not possible to achieve the latter in a way which, from a legal point of view, would have allowed us to stand over it. That continues to be the case.

Deputy Tom Fleming referred to a job-sharing type of initiative. I would certainly be interested in seeing the details in that regard. In other countries such initiatives have enjoyed some success. Obviously, the aspect to which careful consideration would have to be given would be that relating to asking those in the private sector to make certain pension commitments. The latter might be problematic in the context of such a scheme. The key issue for the public sector would be that this matter would fall within the remit of the Minister for Public Expenditure and Reform, Deputy Howlin, and as the Deputy is aware, there is a very strict employment-control framework in place. The attitude of the Government must be to consider every idea in order to evaluate whether it might make a contribution in the context of what we are seeking to achieve. There are wrinkles in the Deputy's proposal but I would be happy to consider the detail relating to it in order to assess whether there might be scope for developing it further and what might be the cost implications for the State versus the potential benefits to be gained. When Deputy Tom Fleming develops his idea, we can examine it more carefully. As already stated, however, it would probably fall under the remit of the Minister for Public Expenditure and Reform in view of the public sector participation involved.

I will ask the Minister of State, Deputy Perry, to deal with the issue relating to county and city enterprise boards.

Deputy John Perry

The issue of restructuring the county and city enterprise boards has been in the public domain since the publication of the McCarthy report in 2009, during the term of office of the previous Administration. It is essential that elements of the county and city enterprise board model, which has served micro-enterprises very effectively in the past, be restructured. There have been many changes in the social, economic and technological landscapes since 1993. The boards were extremely effective in developing the enterprise sector. Any restructuring of the county and city enterprise boards will be based on the principle that they should provide a more streamlined, integrated and focused support service that will allow micro-enterprises to access all relevant supports and to facilitate their profitability, sustainability, expansion and growth in order to enhance the employment opportunities relating to the micro-enterprise sector.

A number of submissions relating to the role of county and city enterprise boards in the delivery of State support to the micro-enterprise sector have been received from the county and city enterprise board network. Since the publication of the McCarthy report some 35 boards are represented on this network, generally at CEO level. In addition, officials from the Department meet representatives from the network, which has been extremely effective, on a regular basis. There have been numerous exchanges of view on the way forward. This is a major decision, particularly as the boards have been in place since 1993. We want to ensure they retain their critical and autonomous role in working with small companies

On foot of a specific invitation from the central co-ordination office in the wake of the publication of the McCarthy report, submissions have also been received from the chairpersons of the county and city enterprise boards - on a collective and individual basis - and from board members. Other interested parties, including the County and City Managers Association, have also made submissions on the matter. This is being done in addition to the recommendation of the local government efficiency group. Although individual micro-enterprises were not specifically selected for consultation, representations from members of the public have also been received.

All options regarding the restructuring of the county and city enterprise boards have been examined thoroughly in conjunction with the Minister, Deputy Bruton, and his officials. We are currently seeking to determine the extent to which the boards should be restructured - having regard to the programme for Government and to recommendations relating to such restructuring - in the context of achieving a national, focused and effective model for entrepreneurs. We must also ensure there will be targeted local delivery of enterprise supports which will be driven by a national enterprise policy in a manner which will eliminate overlap and duplication. It is hoped that one-stop-shops which will co-ordinate all the facilities available to businesses within a county's boundaries will be put in place. People will be able to visit these one-stop-shops to obtain mentoring and advice on accessing credit, become involved in working with third level colleges, etc. It will be a business-led, friendly initiative that will encourage enterprise. Support from the Department will be made available through Enterprise Ireland to the emerging sectors of the economy, including those relating to science. Enterprise Ireland will also provide encouragement to start-up companies.

When what is envisioned is finally signed off, there will be a very focused facility in place for people with ideas. If even 80,000 companies created one additional job each - this could easily be done at little or no cost to the State - that would be a good development. We must encourage enterprise by giving small companies ten reasons to create jobs rather ten reasons to shed them. I am of the view that a well-focused, streamlined facility can provide the catalyst to kick-start the domestic economy. When the final announcement is made in respect of that facility, it will be very well received.

Chairman

Before I call Senator Quinn I wish to seek members' agreement on extending the period of our deliberations at this meeting. We can make up the time lost at our second meeting. The Minister and Minister of State will still be able to leave on schedule. Is that agreed? Agreed.

Senator Feargal Quinn

The Minister referred to the statutory regulations relating to purchasing practices in the grocery trade. Does he accept the criticism that these will only apply to companies whose headquarters are located in Ireland? A large proportion of trade in the grocery business is now done by companies with headquarters outside Ireland. If one introduces regulations which cannot be imposed on companies with headquarters in Dusseldorf, London or elsewhere, one is almost encouraging other companies to purchase outside Ireland.

Before it was amalgamated with the Competition Authority, the National Consumer Agency was hoping to encourage more foreign companies to enter the grocery business here. Asda, Walmart and Carrefour do not operate in Ireland because, in view of the size restrictions that have been laid down, they cannot open hypermarkets. What is the Minister's view on removing those restrictions in order to encourage the arrival here of more competition from abroad? I have travelled around the country a great deal in recent years in order to look at various shops. As the Minister of State, Deputy Perry, will confirm, there are empty premises in many town centres because we have allowed hypermarkets and other shopping centres to be built on the outskirts of those towns. Would the Minister encourage more or less development of this kind? I accept that this matter may not strictly relate to his portfolio but the introduction of a statutory regulation on purchasing practices in the grocery business certainly comes within his remit. As already stated, the latter can only be imposed on companies which operate in Ireland.

Deputy Anthony Lawlor

I welcome the comments by the Minister of State, Deputy Perry, on the enterprise boards. In the context of developing Ireland has a European hub for the BRIC countries, it is good that Jim O'Hara will be involved in some way. Mr. O'Hara actually discussed that idea with me in the past. The Department is doing a great deal on RDI and developing new technologies but we must take a lead from countries such as Germany because we do not sell our technologies. The BRIC countries, in particular, would be interested in purchasing them. We should use these technologies to generate jobs in Ireland and to encourage the BRIC countries to invest here. We might use the tax system to discourage the sale of technologies overseas.

The committee also covers education issues. Is there much of a link between the Department and the Department of Education and Skills on a plan for students entering second level now who will enter the workforce in five to ten years? During the boom, most students entering third level education took up construction or legal courses because that is where they believed they would make money. We need to plan for the future and, therefore, maths and science subjects will be crucial in five or seven years. High end jobs are being created currently but, in many cases, companies have to recruit overseas because graduates with the necessary qualifications are not available. I spoke to someone working in the agrifood sector in the midlands recently who had to go to London to recruit people suitably qualified to take up jobs in his business.

Deputy Richard Bruton

Senator Quinn illustrated the difference of opinion regarding trading rules. If the terms of supply are regulated, one runs the risk that companies will source overseas as an alternative to compliance with whatever requirements are imposed on their purchases within Ireland. I will have to check and get back to the Senator whether merely headquartering outside Ireland would bypass the regulations but there is certainly a risk. It is one of the risks articulated by those who oppose such rules and, instead of going through the requirements of maintaining records and having them open to inspection and so on in a business based in Ireland, they can simply transfer their purchasing overseas. Products will arrive on their shelves and there will not be the same capacity to police.

This illustrates that there is a genuine problem with the pressure being put on suppliers and there are also implementation difficulties in this area, not least getting evidence to successfully prosecute. Many of the suppliers, if they are dependent on a particular outlet to sell, will not be in a position to come forward with evidence and that is why the statutory code proposed by Mr. John Travers would rely on record keeping and compliance officers within companies to show that they were policing it internally and ensuring they would be open to inspection. I do not pretend this is an easy area but it would be better for everyone if there was a voluntary agreement on this in order that we would not have to come in with the artillery of regulation and enforcement and so on. As of now, it appears that is the only way we can deliver fair trading rules and the Government is committed to ensure fair trading practices.

Senator Feargal Quinn

They will only apply to Irish companies, which is most unfair, since a substantial number of companies trading in this sector in Ireland are based outside Ireland and this code would only encourage more purchases from outside Ireland.

Deputy Richard Bruton

That is a down side risk of a statutory code and that has been highlighted. Mr. Travers catalogues in great deal the opposing views and arguments in his report. For example, farmers will point to the difference between the price on the shelf and what they are paid for a gallon of milk. This is a highly contentious area and we want to have fair trading rules applied with minimum regulatory drag and distortions like those referred to by the Senator. Even Solomon would have difficulty resolving this.

The Senator is correct that the market needs new entrants. There is a difficulty with the dominance of a particular player in the marketplace but having unlimited hypermarkets as the solution to new entry is a different matter entirely. Work is on going in this area and a balance will need to be struck between the need for more flexibility in the planning system and protecting town centres. The data suggest Irish food prices are 20% dearer than the European average and, therefore, there is something wrong with the competitive model here but we will not resolve that in one leap by facilitating hypermarkets at the edge of every town and demolishing town centres as trading environments. The issue is finding changes that would be useful to facilitate a more competitive environment without damaging the viability of town centres, which people recognise have become wastelands in some cases.

Deputy Sherlock will response to some of the questions. Mr. Jim O'Hara is doing work on research and development. He is not working on the export council but there will be private sector involvement. Those appointees have not been selected. I will pass on the name suggested to the Minister for Foreign Affairs and Trade. That is another day's work but there will be private sector involvement, including people who have an insight into the operation of these new markets, to help the work of the export council.

Deputy Sherlock will deal with our connection with the Department of Education and Skills. Our Department is involved with the expert group on future skills needs. There is a Cabinet sub-committee on jobs, which helps us to work jointly on issues such as this. Last week, the Minister for Education and Skill and I met the ICT sector regarding the issue of the availability of jobs for which we do not have the skills match. He outlined what he is doing through the Springboard scheme and beefing up entry into higher education courses relating to these skills. Deputy Sherlock will also deal with intellectual property, IP. The UK with its new patent box is using tax measures to keep the development of IP within the country.

Deputy Sean Sherlock

Enterprise Ireland has a presence in all the BRIC countries and the technological component of that would be as integral as any another sector within the economy.

Very often, intellectual property, which is valuable and might form part of a larger innovation, is created and the key for us is how to commercialise that research and add value to those who created it. Sometimes that gives rise to the creation of a spin out company. A total of 31 such companies were created through the higher education institutes in 2010 but some of the IP created adds value to the Intels or HPs of the world, which have a presence in the country and which are collaborating with the researchers through their involvement in the higher education institutes. It is a multifaceted approach. Our challenges are to get more spin outs from Irish universities and institutes of technology and to create the right framework to ensure any research or intellectual property created will add value to Ireland Incorporated. Technology transfer offices have a key role in this. Most importantly, the very fact that these blue-chip companies interface with Irish universities and institutes of technology through research collaboration to create intellectual property ensures we can continue to retain that investment in the country. We can also grow it because these companies return to their parent companies with the good news story of the research component, as the intellectual property adds value to the parent company's stock or portfolio. We will maintain this route and trajectory but we must also meet the challenge of trying to get more indigenous spin-outs. The research prioritisation exercise and the work of Jim O'Hara on the innovation task force is part of this and it continues apace.

Deputy Anthony Lawlor

I am concerned about companies that do not have an indigenous base here but buy technology we have developed to take back to their home country. The Chinese do this on a regular basis in countries throughout the world; they purchase technology and bring it back to China to develop it further. In Germany, a key part of policy is that technology remains in the country, even though it might involve only a small component of a huge picture.

Deputy Sean Sherlock

I am not sure one can one put a stricture that intellectual property remain in the country where it has been created by a researcher in a centre of excellence in collaboration with an international company operating in Ireland. The market is involved in this in terms of how intellectual property is sold. We try to retain it here in a way that ensures spin-out companies can be created but it does not always happen this way. The only way a small open economy dependent on foreign direct investment can ensure that investment is to sell technology, innovation or intellectual property because it realises a commercial value for the company in Ireland and retains jobs in Ireland. I hope this explains it.

Deputy Ray Butler

I have 22 years experience in the retail business selling footwear and sportswear, where sportswear made up 70% of my business in the latter years. I found retail giants took over the market, particularly with regard to branded sports goods, making it very difficult to get supplies. If one overcame that problem one may have faced the problem of a clothes retailer in the town stocking the same brand.

I wish to raise the issue of enterprise boards being subsumed into local authorities. I was a director of an enterprise board and I am very sceptical about this. The budgets of enterprise boards will have to be examined because many of them have no money after five or six months of the year. One cannot decide to put off dealing with someone until the end of the year; if someone has a good idea an enterprise board must go with it and invest. If an enterprise board does not spend its allocation it is returned and another enterprise board may be able to apply for the surplus, but this is not right.

I agree with Senator Feargal Quinn on retail giants on the outskirts of towns decimating town centres. This happened 20 years ago in England. After the centres of Manchester and London were decimated in this way, it was difficult for retail giants to obtain planning permission on the outskirts of towns or cities. There were enticements to base in town centres. We went the opposite way and have allowed retail giants to build on the outskirts of towns, which has decimated town centres.

Deputy Aodhán Ó Ríordáin

I thank the Minister and Ministers of State for their attendance. Will the Minister comment on attempts to combat the black economy and the effect of the black economy on compliant small-time builders and tradespeople? With regard to last week's judgment on JLCs, will the Minister comment on his contact with the social partners? Has contact intensified as a result of the judgment? The impact of large multiples on the outskirts of towns has been raised. Will the Minister also comment on the groceries order and the impact of below-cost selling of alcohol on small-scale off-licences?

Deputy John Lyons

Approximately 2,000 vacancies in high-spec jobs exist throughout country. I know the response to this falls between several Departments but it suggests an academic or qualification deficit in the output of the graduates we pump through our universities. I acknowledge that in areas of science, technology, engineering and maths we want to ensure a steady pipeline but in this day and age people in the world of work seek more than qualifications; they seek skills. I know of one university, with which the Minister, Deputy Bruton, is familiar, which has revised hundreds of its modules and introduced a portfolio which lists attributes and qualifications which employers such as Google seek but cannot obtain from those graduating from most universities. If we are to succeed with companies such as Google we must ensure that other universities follow suit and have a system whereby they do not just stamp a qualification but ensure graduates can adapt to the working world and fulfil the qualities companies need.

Deputy Richard Bruton

To answer Deputy Butler, the Competition Authority derives from Articles 85 and 86 of the original EC treaty, whereby abuse of a dominant position is a major offence as are cartels and collusion. Whether the Competition Authority can act on what Deputy Butler describes as unfair practices by retail giants hinges on what exactly is being done and whether they are dominant players abusing their position or colluding in some way to keep people out. For example, are the retail giants dominant, are they abusing their positions or are they colluding to keep people out? The Competition Authority can examine the terms being offered to different players. Although it may be a problem, being big is not in itself a breach of competition law.

We addressed the question of multiples versus town centres and I accept the Deputy's comments. A balance must be struck between consumers' need to get the keen prices they demand and the need to have vibrant town centres. Excesses have occurred.

The Deputy asked whether county enterprise boards, CEBs, could become demand led. They have not been that way to date, as they are told what budgets they have for the year and must work to them. Towards the end of last year, some money was found and released, as the Deputy rightly pointed out. Since our budget is under the same pressure as every other budget to meet IMF and EU rules, agencies must comply with their financial provisions and plan their work accordingly. It is a dilemma that there can be a surge of demand in one area.

Deputy Ó Ríordáin raised the issue of the black economy. Registered employment agreements, REAs, can continue to police construction rates and so on, as it is only the joint labour committees, JLCs, that have been struck down. While it is obligatory that rules be applied in public procurement processes, I have received complaints to the effect that these rules are not always being applied. I am sure the Deputy has received similar complaints. The policing of this matter falls to the Department of Social Protection and the Revenue Commissioners, not my Department. Protections are provided, but it comes down to effective policing.

Since the judgment, I have consulted both sides of the social partnership on the dilemma. It was my desire to produce protection in the short term, but that has proven impossible on legal grounds. It was not down to a disagreement between the social partners that I must now take a different course.

The question of the below cost selling of alcohol relates to my response to Deputy Butler. The Competition Authority can police the abuse of dominance, not below cost selling. It is only an abuse to sell below cost if one is doing so to drive someone else out of business. As such, this is more of a public order issue if it causes problems for the police and so on. When the competition Bill is introduced, we will debate powers and so on. Primarily, the abuse of alcohol is not a market issue and neither the Competition Authority nor I have powers to regard-----

Deputy Aodhán Ó Ríordáin

My point is that the abolition of the groceries order is being used to drive come people out of business. Has the Minister considered investigating this issue? I used the sale of alcohol as an example. It is not the issue itself.

Deputy Richard Bruton

To act on that, one would first need to establish that the person cutting the price of alcohol is dominant, but proof of abuse of dominance is difficult to find in any market because one would then need to prove that the person was cutting the price to drive out competition. Only then would one have a statable case. While some outlets are selling alcohol at low prices, it is not always large players. Some of them are small. It is difficult to see how a piece of competition law will address what is primarily a public policy issue about order on the streets and the availability of alcohol. As the Deputy has raised the matter, we will consider it but my initial reaction is that competition law is not particularly well designed to address it. Under existing law, one would need to prove a great deal before reaching the main question. Under competition law, one cannot go after a player because it is undesirable that cheap drink is out on the streets.

The point about graduate mismatch was well made. Recently, I met a number of companies that complained about the adequacy of graduates. We need to consider this matter. The Minister for Education and Skills, Deputy Quinn, is examining it. Equally, companies have a certain obligation. The placement of students during their pre-graduation periods needs to be better developed. This year, some students experienced difficulty getting their placements. A placement helps to prepare a student for a further placement. The internship programme is a useful way to complement graduate delivery. The Minister of State, Deputy Sherlock, is in the unique position of having a foot in both camps. Perhaps he would like to comment.

Deputy Sean Sherlock

Regarding Deputy Lyons's point, having a presence in the Department of Education and Skills allows one an overview. Consider the teaching of mathematics, in which leaving certificate pupils who are well capable of doing higher level maths are instead choosing to do lower level. It is a calculated decision on points and the allocation of time and resources. We must move away from that scenario and Project Maths is moving in the right direction. The Government is seeking to give political impetus to greater involvement by industry stakeholders in shaping policy so that people might be encouraged towards industry and provided with the necessary preparation and skills. This will take time and I would like this committee or a sub-committee thereof to have a central role in that regard. If we have experts within, we should find them a role to try to work out the nuts and bolts.

From a basic pedagogical point of view, the idea of a steady pipeline and a more rounded graduate means more applied learning and problem solving as opposed to by rote learning. The latter seems to have evolved to such a point that young people who are going into universities or institutes of technology still structure their learning in this way. The applied learning skill set needs to be buttressed so that, when companies employ graduates, this will be one way to ensure applied learning has been well built in psychologically.

Chairman

The final batch of questions will be asked by Deputies Ryan, O'Dea and Kyne and Senator Kelly.

Deputy Brendan Ryan

I have two brief questions. The Minister stated that he had explored all options to protect workers exposed as a result of the High Court judgment on JLCs. What is that exposure and has he conducted a risk assessment on it?

While I welcome the initiative on prompt payments, I am disappointed by the reporting requirement in quarterly publications. Most organisations, including the HSE and local authorities, will manage this area of their business closely. Therefore, their management information systems will contain detailed data on debtors and creditors. A requirement to have them report this information to you on every month places no burden on them because they have the information. What will be the sanctions if they do not comply with the 15 day requirement?

Chairman

Before I call on Deputy O'Dea, I confirm that we will have a break for 15 minutes between the two meetings. The second meeting will start at 11 a.m.

Deputy Willie O’Dea

I have a number of brief questions. Responding to the issue of joint labour committees, JLCs, the Minister said he received legal advice to the effect that an appeal would not be successful. I read the judgment carefully and took legal advice on the judgment. I agree that the prospects of success in an appeal would be low. However, the Minister did not address the question I asked. Despite the fact that the chances are low, the Minister could have lodged an appeal as a tactical measure to ask for a stay on the order at minimal cost. If he had done so and did not pursue the matter assiduously before the Supreme Court, it would have given the Minister the time and space to prepare legislation while the existing protection remained. The previous speaker asked what protections exist at present and the short answer is that none exists. New employees can be offered the minimum wage, those who change jobs will lose their protection and people in the existing system are protected by contract.

Each and every employee must vindicate the contract individually. Before the decision of the High Court, employees were entitled to a certain wage under the JLC system and to a certain premium for Sunday work. If the employer deprived the employee, it was a simple matter of reporting the case to NERA for enforcement. Now each of these employees, who are mostly low paid and vulnerable, must vindicate the right themselves. In some cases this will involve a breach of contract case before the Circuit Court, which is all right for someone who is wealthy but somewhat daunting for those on €300 per week. They must wait two years to bring a case to the Circuit Court and have €20,000 on stand-by in case it all goes pear-shaped. That is not protection.

The legal advice I received is that if the Minister had lodged an appeal, it would have enabled him to ask for a stay of execution and there is every possibility he would have received it. The Minister says a request for a stay would be legally vulnerable. What does that mean? Does it mean the Minister will not ask for a stay because there is a danger he will be turned down? All the judge can say is "no" and my advice is that he is more likely to say "yes".

On a broadcast on local radio, Limerick's Live 95FM, a number of employers in the mid-west spoke by phone on the airwaves. I have sent for the tape. All but one admitted they were not passing on the recent VAT reduction. We said at the time that trying to create employment by reducing VAT was a gamble. I cannot imagine that employers in the mid-west are untypical of the rest of the country. They are publicly admitting they are not passing on the reduction. We raided pension funds to provide up to €800 million for a reduction in VAT for the next two or three years. What is this for if it is not being passed on? I respectfully suggest the Minister listens to a copy of the tape, which I can get for him. He should take some action to ensure this is being passed on. I am alarmed by what I heard.

Chairman

We are here to discuss the work programme and the priorities for the next couple of years. It is not an interrogation of the Minister on various issues.

Deputy Seán Kyne

I welcome the Minister and the two Ministers of State. I welcome the fact that the Minister was out selling Irish beef, which is very positive and important irrespective of the type of beef. Ireland is the largest exporter of beef in Europe and the fourth largest in the world. The IFA will be delighted with the Minister.

All Ministers will be rated in different ways and, unfortunately, this Minister will be rated on figures from the live register. The Minister touched on a few issues that will have an impact on those live register figures, such as JLCs and reducing red tape. Regarding the latter, how will the Minister proceed and what red tape is he targeting? Previous figures referred to a 25% reduction in Government red tape.

The Minister does not have direct responsibility for commercial rates, which is the responsibility of the Minister for the Environment, Community and Local Government, but they have a major impact on job creation. I was a member of a local authority until some months ago. Some 20% of companies pay over 70% of the income in commercial rates to local authorities and therefore 70% of companies pay only 20%. Small businesses are always contacting the council for rate reductions. The largest companies also benefit from rate reductions even if they are not asking for it and do not need it. They will take a reduction if it is offered to them. We cut rates by 1%, which is meaningless to small companies but gives a large rebate to larger companies. That topic is vital for job creation.

I agree with Deputy Lyons's comments on job vacancies, particularly in the high-tech and ICT sectors. During the dotcom boom, there was a major intake of ICT graduates from colleges, but that fizzled out and was followed by a major intake of engineering graduates in the building boom. They are emerging into a deflated jobs market in that sector. Along with Deputy Walsh, I met the president of NUIG to discuss these issues. At times, companies sponsor postgraduate positions. Does this concern only companies and universities or is there a role for undergraduates to be directed to the courses that will provide jobs for them? There can be no guarantees but I seek clarification.

Senator John Kelly

I welcome the Minister and the Ministers of State to the committee. Our greatest challenge is job creation and we can take measures to create work in this country. We must also work to sustain businesses. Deputy Kyne touched on commercial rates and we must examine this topic in respect of small businesses and retail outlets on the basis of turnover and profit rather than the size of the premises. Last week, I gave an example of how we do business in a ridiculous fashion. A hotel in my county had a rates bill of €40,000 a year and a water bill of €30,000 per year. Business could not be sustained and it went out of business over a rates bill of €70,000 per year, putting 40 people on the dole at a cost to the taxpayer of €840,000. The Minister should knock heads together and ensure such an incident does not happen again. If help was given to these businesses, they would not go out of business. The net cost to the taxpayer is €770,000 per year.

We must consider our social welfare budget. The Minister of State, Deputy Perry, referred to 80,000 small companies and the fact that employing one person would amount to 80,000 jobs. It costs €21,000 to keep someone on the dole. If we wanted to create 100,000 jobs, why not offer €10,000 to an employer to hire someone? This will save €11,000 per person or €1.1 billion by creating jobs in small businesses.

I mentioned hotel prices in the Seanad. On any night of the week, one can get a hotel for €59 in Dublin city. As soon as there is an event such as a Take That concert, the same hotel increases its prices to €299 or €399. Apartments that cost €70 per night increased to €499. We should put a cap on hotel prices based on the number of stars.

There should be a cap for one, two, three and four star.

I welcome the fact we will benefit from a reduction in red tape, and health and safety was mentioned. In regard to the running of county councils, health and safety legislation has cost them a lot of money. Perhaps we could pass on to small businesses whatever we save by way of a reduction in red tape for county councils so their rates bills can be addressed and they can remain in business.

Deputy Richard Bruton

In response to Deputy Brendan Ryan, people who have existing contracts and are JLC workers continue to have the protection of those contracts but they are not enforceable by NERA, rather by the normal industrial relations machinery. People who are recruited have the protection of existing law which applies in more than 75% of the economy. They have the protection of the suite of employment rights and the employment legislation. The fact the Government is intent on moving rapidly to restore the JLC system is clearly a signal of its intent, even though it is not an enforceable right. There are real protections but there are also exposures compared with the position before last Thursday. I will ask the Minister of State, Deputy Perry, to deal with the issue of prompt payments.

The position in regard to an appeal, which was raised by Deputy Willie O'Dea, is that the legal advice has been that such an appeal would be unsound and could be immediately rejected. It would obviously be very cynical to seek an appeal with no grounds for the State but I suppose that is a matter for lawyers. More important, any attempt to prosecute under a spurious stay would be unsound. In terms of the hoped for gain in NERA being able to prosecute, such a prosecution would be unsound. The legal advice - I do not pretend to be a lawyer - on every front is that this is not a route that would yield an outcome.

The VAT reduction will not be sustained unless the Government is happy it is being effective. The National Consumer Agency will follow this on behalf of my Department. This is clearly a temporary provision. It is designed to be part of a package to boost tourism, between the travel tax, the VAT reduction, the reduction in PRSI and so on. The Government will look very carefully at it. We believe there is an opportunity here and we will track it to ensure it is effective as a policy instrument but, of course, at a later date, it may not continue.

The issue of red tape and what we are doing was raised by Deputy Kyne. We have made significant changes in a number of areas. The HSA has a simplified system for compliance. The Companies Registration Office has gone online and has simplified its system. There have been a number of reforms.

The next big saving we hope to deliver is through the reorganisation of the employment rights bodies which would significantly simplify the procedure and we would not have multiple claims. We recently published, in electronic form, the reorganisation of company law to make it a much more streamlined and an easy system to operate.

In terms of spurring other Departments to act, we hope to get all Departments - I am taking the initiative in this area - to measure exactly their compliance burden and what progress they have made to date. Revenue online has certainly been a very significant simplification but it has not been costed and we have not been shown the savings. We reckon our Department is 90% there already in terms of our commitments for 2012. Other Departments have made progress but we need to collate that and set it against accurate measurements and get Departments to identify the next initiatives. Seven Departments are particularly in play across a range of approximately 200 items which create compliance costs. The focus will be on them.

On the issue of rates, the Minister for the Environment, Community and Local Government, Deputy Hogan, is looking at whether some sort of graduated or targeted intervention could be made. Obviously, that would be one for him to develop.

I share the concern that people at CAO stage are making choices which are not the correct ones. Certainly, in recent years, there was a huge drift to property based courses and we must rebalance that. The Minister for Education and Skills, Deputy Quinn, is working with industry to try to do that, most recently with the ICT sector.

I agree with Senator John Kelly that rates is a very significant area. It is approximately 4% of companies' costs across all businesses. In terms of a targeted measure, obviously, it is very tied up with the delivery of the local government cost saving agenda. Businesses closing is a perennial problem for any Government. Should one subsidise a company at risk of closing because the consequence will be that people will go on the dole? In all cases, the viability of the business must be the issue. There is no future in supporting a company that is not viable. The efforts of Enterprise Ireland to support a company have always been in the context of a viable business.

I continue to be amazed by what companies do not take up - for example, the Revenue job assist scheme whereby somebody takes someone, who has been unemployed for a year, off the dole. There are 176,000 such people. The number of people availing of the Revenue job assist scheme, which is an extremely generous concession to an employer, was 300. One can work out the percentage of take up. It would allow a sole trader something like €48,000 over three years in tax relief for taking on somebody who has been a year out of work. There are schemes which are already designed to help companies to take people on. I urge companies to avail of them, in particular sole traders because a tax based relief is particularly generous to sole traders. There are instruments which companies can use.

I agree it is abhorrent to push up prices. We should insist on price display and actions like that. Obviously, Government does not regulate prices and we are not going to get back into the business of regulating prices. However, insisting on prices being displayed and naming and shaming those engaging in these practices is the way to go rather than trying to bring in some legally questionable machinery.

The Health and Safety Authority is developing online services and BeSMART was raised by Deputy Seán Kyne.

Deputy John Perry

In response to Deputy Brendan Ryan who raised the issue of prompt payments, we will certainly consider monthly reports but there will be quarterly reports for the moment. That will not take from the obligation to pay within 15 days. We are way ahead of the EU in terms of this initiative. State agencies should still report through their line Minister. There is no official sanction at present; it is an administrative agreement, not a statutory agreement. The sanction would be to name and shame. Since I was appointed I have seen this being done effectively and the next report will be published October and will show the compliance by Departments. From 1 July the report has incorporated State bodies as well and I will be closely watching the situation.

The Minister mentioned Senator Kelly's point about the jobs assist promotion. We might promote the concept more because it is a good initiative that would allow sole traders to avail of it to support people on welfare to get into the workplace.

Deputy Nicky McFadden

I thank the Minister and Ministers of State for their presentations. The roll-out of high speed broadband, however, is still an issue. I assume with his responsibility for connectivity for education, the Minister for Communications, Energy and Natural Resources is involved. In the midlands, Grass Lodge Recording Studios is unable to attract the high calibre of artists that had been the case in the past. That organisation employs 14 people. It is vital to keep jobs but the studios were unable to attract the calibre of artists like U2, Black Eyed Peas and Fo Fighters,

Deputy Sean Sherlock

I think it is the Foo Fighters.

Deputy Nicky McFadden

That is why Deputy Sherlock is Minister of State.

Deputy Sean Sherlock

I like the Foo Fighters.

Chairman

Does the Minister of State want to sing us a tune?

Deputy Nicky McFadden

I know nothing about them but in the past the studios attracted people like Michael Jackson, God rest him, Shirley Bassey and Sharon Shannon. It leads to a massive spin-off for the local economy. The Ministers spoke of developing and delivering a broadly-based innovation agenda. To me the absolute fundamental need is for high-speed broadband.

Deputy Richard Bruton

All I can do is talk to the Minister for Communications, Energy and Natural Resources about the problem raised. It is acknowledged that we do not have the speeds and the prices are too high. We are competitively weak in this area, acutely so in some parts of the country. The problem has been acknowledged and the Minister is working hard to come up with solutions. I am not in a position to elaborate on what might be done for this company so I will speak to the Minister and pass on his response.

Chairman

On behalf of the joint committee, I thank the Minister and the Ministers of State. This was a lengthy meeting but it was useful and will feed into our work programme.

The joint committee went into private session at 11.35 a.m. and adjourned at 11.40 a.m. sine die.