I move:
That Seanad Éireann notes the report of the Task Force on Small Business.
Report of the Task Force on Small Business: Motion.
I welcome the Minister to the House.
I welcome the debate on this historic document in Seanad Éireann today and I thank you, a Chathaoirligh, for providing the opportunity to have this debate and I thank also the proposers of the motion.
This is the first ever in-depth report on small businesses in Ireland. It is also a benchmark report, bringing together many new and previously unpublished facts about small businesses. For instance, there are not 100,000 businesses in Ireland, as many have previously stated, but 160,000 businesses, 145,000 of which have fewer than ten people employed. They are predominantly service companies, approximately 80 per cent, and they account for 50 per cent of the private sector employment in Ireland. It will be noted from this that we are truly a nation of small businesses.
The report also destroys many myths about small business which had gained currency in recent years. No, we do not have half the start up rate of developed economies, as has often been said. We can match them and we can also match the more advanced EU economies in our total number of businesses per capita. Again, the opposite was often assumed.
However, that is where the similarities end. We tend to fall between two stools. We neither achieve the extraordinary number of small businesses per capita that southern European countries achieve, nor do we get the number of fast growth companies that northern European countries achieve. We also tend to experience high failure rates, with up to 40 per cent of businesses failing within the first five years, a staggering figure revealed in the task force report.
One of the most striking features in the analysis in the first two chapters of the report is what the more developed economies in the world — the US, Japan and Germany — do to help small business. All of them have a powerful large firm sector. Between them they account for the great majority of the world's largest companies. Despite this, all three countries have attached a high priority to small business and have consistently supported them with substantial resources. There is a long term commitment which is evident now for several decades.
The question we must ask ourselves is that if the world's largest economies have seen the advantage of supporting small companies, how much more compelling is the case for a small, less developed economy like ours to do likewise. As we state clearly in the report:
They had the option only to think big, but the foresight also to think small. We have the option of thinking big only to a very limited extent and must place an even greater emphasis on thinking small.
This is where we are today. We have never had formal consistent policies specifically for small businesses in this country. We never properly differentiated between small and large, we merely differentiated between manufacturing and services. This has now changed. The Government has accepted one of the key recommendations in the report, the setting up of the small business division, and extra staff have been approved.
This division, which I announced publicly yesterday afternoon, commenced a few day ago and will oversee the implementation of the task force recommendations, will champion the cause of small business across Departments and will report annually on the state of small business in Ireland. When I say small businesses, I include services, which have been left out in the cold for too long.
The report runs to over 180 pages. It consists of seven chapters, the first two of which defines small business as having 50 employees and a turnover of £3 million, and measure for the first time the numbers of small businesses in Ireland, which I have already outlined. It also states the case for supporting small business, which is primarily a jobs case, since 70 per cent of all new jobs being created in the EU at present come from this sector.
The chapters also review what other countries do for small businesses and how imaginative programmes are now in place and have been for the past 30 to 40 years. The next five chapters look at what we should do to support our small businesses and there are almost 100 concrete proposals outlined. A number of them have already been accepted by the Minister for Finance in the budget and will be put in place by the Finance Act.
We disagreed somewhat with the Culliton report when it pointed out that there was a substantial equity gap in small business. Based on the view of the 14 small business owners/managers who sat on the task force and confirmed by the views of the representative organisations, we saw the need as primarily a financing gap rather than an equity gap. No, there is no shortage of finance, as such, in this country. But yes, there is a shortage of affordable finance at realistic rates of interest with long term facilities. For example, there is now a 4 per cent margin between the prime rate and the AA rate which applies to small business, so large businesses can obtain money, generally speaking, at 4 per cent below what small business can obtain. The State can also get its money at 3 to 4 per cent below what small firms will obtain.
We therefore decided to begin to fill this gap in the array of financial options available. We negotiated the £100 million loan fund with the ICC which provides funds at 3.75 per cent fixed and over a ten year period. We persuaded the Minister for Finance to approve this package and he provided for it in the budget.
I see this as only the first step in a definite direction. I believe we need more and more financial institutions to follow this trend. I welcome the Bank of Ireland's £25 million fund, provided without Government subsidy. But we need more low cost funds being made available and in this regard I would welcome any proposals from the commercial banks to our new small business division.
The £100 million ICC loan fund has already received some 1,100 applications for funding of £195 million. In other words, the fund at £100 million established applications for funding now running at almost £200 million. This means the fund is oversought to an amount doubling the original fund, which indicated the extent of demand for that form of financing and to an extent confirms our view in the report that it was this type of financing that was sought by small business rather than perhaps the traditional equity type of funding.
Despite the widespread perceptions, the services sector does qualify for these subsidised loans, but only services that have the potential for export revenue. Imitation services or locally delivered services do not qualify for this fund. Recently, for example, we brought to the attention of the ICC the fact that hauliers who trade internationally qualify under the conditions agreed.
The processing of each application is a matter for the ICC and normal commercial criteria apply, that is, the ICC is carrying the risk element. In this respect a strong message emanating from small business entrepreneurs is their preference for lower taxation rather than increased grant assistance. In addition, we have argued strongly in the report that the services sector must be treated more seriously and that the 40 per cent corporation profits tax rate should be reduced over a period. The Minister for Finance has moved swiftly to lower capital gains tax and the revised 27 per cent rate he announced in the budget is very welcome to small businesses.
Of the 12 EU countries only Ireland and the UK do not pay interest on late payment on public contracts. Even in the US late payment legislation has been in force for the public sector since 1982. The State here in general is not good at paying its bills on time. The £100 million allocated by the Minister for Finance in the budget to bring the health boards' accounts into order is a welcome development. It is simply not good enough that small business should bear the brunt of the State's cash flow problems. It is self-defeating for the State, through its development agencies, to assist firms on the one hand while at the same time the payment practices are actually hindering them. It is inconsistent for the State to insist that business remit taxes on time while at the same time we are not prepared to pay for the goods and services provided. The introduction of maximum payment time would involve a once-off cash flow Exchequer adjustment. At the end of the day a strong and thriving small business sector is the best guarantee of a strong and solvent Exchequer.
There is a great deal of work involved in improving the lot of small business in Ireland. However, an excellent start has been achieved through the task force report. The opportunities for increased economic activity and employment are immense. For instance, we have lost 14 percentage points to imports in our own market since 1980. It is estimated that up to £2 billion of imports could be replaced by Irish companies. Of the £3.3 billion spent by the Government on public procurement — this figure relates to 1991 — over 50 per cent is sourced outside the State. This is another area of potential business, particularly for small companies. These are just two instances of opportunities that are available for small business if we deliver the right structures, financing and advice.
I assure Senators that, as the Minister with responsibility for small business, I will continue to drive the agenda in this area and will not rest until the recommendations of the task force are implemented. By doing this we will have radically improved the lot of Irish small businesses.
I welcome the Minister and the opportunity to speak about the report of the Task Force on Small Business. The introduction to the report states that "The moment has come to give small business a central place in the making of public policy in Ireland so that the sector can realise its full potential for contributing to economic development and job creation". It is an indictment of all of us in this House who have advocated job creation and of all the efforts made over the years that nothing was done until mid-1993 to protect and improve the position of small businesses. Ireland is a nation of small businesses. Our definition of a small business is one with fewer than 15 employees and a turnover of less than £3 million. This definition applies to 160,000, or 98 per cent, of non-farming businesses. Around 90 per cent of them employ fewer than ten people. Our achievements have not been as good as they should have been. If we spent less time trying to attract the big multinationals who spent a short time in Ireland and invested some of our funds in small business, we would have a great deal more to show for it at the end of the day.
There is emphasis in the report on raising money for small businesses. The Minister mentioned the moneys which have been made available by financial institutions such as the ICC and the Bank of Ireland. What criteria must small businesses satisfy to qualify for loans? I can give the Minister a list of four or five people who in the last eight weeks went to banks with decent proposals, investment in which would have resulted in extra people being employed. However they were refused funding. Without doubt the reason for this is that the banks believe these individuals and companies are able to pay higher rates of interest. Is there any way of redressing this problem? Applicants who are refused funding by banks have no redress.
The Government did not decide on the composition of the country enterprise partnership boards until the end of 1993. Many people waited with bated breath for these boards to be established. They had ideas and because of commitments to produce products they could not wait until the boards were set up and had to borrow money at rates higher than those available under the new schemes. Only £9 million of the £21 million provided in the 1993 budget for the boards was used because of the delay in establishing them. I welcome the strategy whereby small companies, which heretofore were not in a position to receive any kind of help, can now be helped by the boards.
Is it the policy of the Minister's Department that the boards do not supply information on the number of applications they receive and approve each year? If there is to be accountability, we should be given this information and the number of jobs which it is intended will be created on the basis of approvals. If this information is not made available to the House and the public, how can we assess whether these boards are successful?
Rewarding risk has not been satisfactory over the years. Owning a small business requires major personal commitment. The task force report points out that research shows that owners work more than 55 hours a week. They put at risk their personal resources, often including their family home. A few evenings ago somebody rang me to say he lost his family home as a result of his business not doing well. The real problem is that financial institutions to date required too many signatures and a commitment that family homes would have to go if businesses failed. I hope the new approach of the banks and the county enterprise partnership boards will result in such commitments and personal guarantees not being required for people with good ideas who want to start up a business. This practice has proved to be disastrous in real terms for many people and as a result, the State ends up carrying the can by having to provide those people with homes, etc., after their businesses collapsed.
The tax system has played a major part in the problems which many small businesses encounter. There is a need for radical change in that regard. With regard to the PAYE allowance, I find it incredible that if a husband and wife own a business, if their son or daughter is unemployed and registered with FÁS and if they are taken into the family business, there is no PAYE allowance for that son or daughter, there is no subsidy in real terms from FÁS or anywhere else for them. That proposal must be widened because there are many companies and individuals who find themselves with that problem.
I ask the Minister why a dividend income to full time directors of companies has not been allowed in the Finance Bill. If a reasonable amount of £7,000 was allowed it would be an incentive to people who are prepared to put their head on the block. The Minister informed us that capital gains tax for small businesses has been reduced to 27 per cent. Is there not a real case for reducing that further to 20 per cent for assets held for over five years to give people an opportunity to get up and running? The first year in business is tough, the second perhaps evens out but in the third, fourth and fifth years firms are only getting off the ground, establishing markets and depend totally on help.
Families should not have to pay capital acquisitions tax on inherited family businesses. Here we are penalising the normal transfer of property. Much more should be done in the Finance Bill and I hope the Minister will accept some amendments to the Bill in connection with this. There should be an exemption for family members as long as the operation is an ongoing concern. If we went down that road, many younger people might take charge earlier with new ideas which could, in the long term, prove beneficial to the State.
With regard to corporation tax, people are liable to pay 40 per cent on profits of up to £80,000. This should, at least, be reduced to a standard rate of 27 per cent. I ask the Minister to take note of this and to have discussions with the Minister for Finance in this connection.
We spend a great deal of time talking about small businesses and I have no doubt there is a greater future in small businesses in this country than in the multinationals. Unfortunately, when there is an announcement of 400 jobs being created, the following week a major multinational announces it is reducing its number of jobs; this happened in the last two weeks.
With regard to mushroom growers, they are all small industries created to supplement income from other farming activities. The Government decision to increase CPT from 10 per cent to 40 per cent for the mushroom industry is nothing less than outrageous, and to these people it is a draconian measure. It is wrong and the decision should be reversed.
Our mushroom growers mainly export their products. It is only a year since the currency crisis nearly put a substantial number of them out of business, especially those who export to the UK. Yet, one year later, the Government is proposing to wipe them out altogether — the full time and part time jobs, the people who get up at 3 a.m. and 4 a.m. to pick mushrooms. According to my information, many of them will not be in a position to make the repayments on the new investments they have made. The new tunnels cost about £30,000 each.
I wonder what this Coalition Government has against the mushroom growers. We are looking at devastation. I can name 25 people who, in the last six months have invested substantial amounts of funds adding two tunnels to their businesses. This would mean extra pickers and part-time workers, money that is used to help to send children to school and make necessary purchases. I ask, at this late stage, for a decision to be made by the Government to reduce this proposal, even to bring it in line with the European average; this 40 per cent rate is 13 per cent higher than the average in the UK. The Minister is looking at devastation in real terms.
With regard to withholding tax, it has, in particular, a negative impact on personal practices with employees in activities such as engineering consultancy. The amount of tax being withheld across the board is far more than the amount individuals would have to pay. For example, doctors invest in their surgeries; they have to employ secretaries, etc., and provide a service to people who would otherwise have to go to hospitals where they would clog up outpatient departments. We have a situation developing where doctors in rural areas are financing the State. The task force has recommended that changes be made in this area.
I also agree with the task force's proposal on special commercial rates for a two year period until the companies are up and running. The Minister mentioned the cost of complying with the State's regulations and administrative requirements. This is higher for small businesses than large ones. In the case of PAYE, for example, compliance costs firms with under 25 employees around 4 per cent of their total PAYE liabilities; the cost to major firms with 100 employees is only 1 per cent. Extra administration costs are a problem. Administration costs decrease as the number of employees increase.
I am sorry the Minister did not use his visit here today to announce the establishment of the new small business division. This is the Upper House of the Oireachtas and the Minister should have made his announcement here. I am sure no Senator would have objected to that.
The Minister referred to late payments. Our 100,000 farmers should be classified as small business people. Farms should not be treated differently from the 160,000 small businesses. The Minister mentioned the late payment to small companies by health boards. That was a serious problem because the health boards were under-funded by the Government during the last five or six years. The problem of under-funding grew and small companies carried the can for the State which the Minister correctly said they should not be doing.
Where late payments are concerned the Minister should take not only the 160,000 small businesses into consideration but also the farming community. Only one and a half hours ago I was on the telephone seeking a payment which was due to a farmer in December 1992. That section of the community, no more than small businesses, should not be expected to carry the can for inefficiency or for the Government's lack in ensuring that this work is carried out promptly, efficiently and effectively on behalf of all the people involved in small businesses.
Not one public representative, whether a Member of the Oireachtas or councillor, would disagree that somebody who is running their own business has daily costs which must be paid. If money due is not paid the small business cannot pay its bills; everybody is left short of money as a result of late payment. The same is true of the farming community and suppliers of farm goods. Ten days ago a farmer told me he owed substantial amounts to co-operatives and other institutions on the basis of promised subsidies and other State payments. The money due to farmers is in the Department and a blanket payment of all such subsidies should be made.
I welcome the opportunity to speak on this report. I look forward to the Minister's response to making available information from the county enterprise partnership boards because they cannot be properly assessed if we do not know the exact number of applications, approvals and the job potential on the basis of such approvals.
To alleviate Senator Farrelly's anger at the Minister for not making his announcement in the Seanad, perhaps the Minister might invite us for champagne later.
This is a welcome debate. It is particularly appropriate after the publication of the ESRI report and its expectations of how the economy will perform in the foreseeable future. Every small business owner or manager would agree that the 100 recommendations proposed by the task force are necessary if we are to expand and encourage the development of small business, job creation, exports and the competitiveness of our economy. I compliment the Minister and welcome him to the Seanad. It was important that, on publication of the report, the Minister sought and received funding for the establishment of the new division in his Department to oversee and implement the recommendations of the task force both through legislation and the establishment of agencies.
The report acknowledges that small businesses are the only hope for this economy if it is to reduce unemployment and increase competitiveness. The task force has acknowledged this in its proposals. The Minister has also acknowledged it in setting up the new division to implement the report. Through small business we can stimulate growth and take advantage of the current exceptional prevailing circumstances of low inflation, low interest rates and a competitive economy. For too long too much emphasis was placed by Governments and job creation agencies on large multinational companies which were over-grant aided. As we have acknowledged that small business is the way forward we must not hesitate in removing the shackles on small businesses.
It was a commonly held perception that this country did not have a high start-up rate in small business. The Minister has pointed out that we are on a par with the European average. Unfortunately we have a very high failure rate. While the report proves that there is an entrepreneurial spirit in this country, it also proves that we do not have the support, necessary funding and proper taxation system that will allow such enterprises to develop and grow to the extent that they may leave the small business sector. The task force's taxation proposals are very important and should be implemented immediately. This year's budget was a first step. I compliment the Minister and his Department for pursuing as many realistic proposals as possible and the Minister for Finance for accepting the proposals.
The major complaint of small businesses has been the fact that they cannot secure adequate finance at cheap competitive rates to start up or to alleviate cashflow problems. The £100 million funding scheme, through which money is available at a fixed rate of 6.75 per cent, is very good. Unfortunately, the funding is mainly available to the manufacturing sector. We must get away from the philosophy that manufacturing is the only sector in which employment is created. The services sector must expand. Our economy needs services; it is expanding and developing and service industries must be encouraged. The task force report and its recommendations accept that there is great potential for growth in the services sector. Some banks have admitted that their criteria for sanctioning loans to small businesses are too stringent. An individual may be asked to offer his home as collateral on a loan.
The kernel of the problem is that our taxation system does not encourage saving. If personal taxation was reduced people would have the opportunity to save money which could be invested. We must acknowledge that taxation is crippling the economy. I raised this issue when discussing the Social Welfare Bill and I will continue to raise it. As the economy improves we must revert to low taxation. The report and recommendations of the task force acknowledge this. Since the late 1970s every country with a successful economy has acknowledged that fact and implemented measures immediately. That is true of the Japanese, British, German and American economies. The recently successful economies, such as those of Canada and Australia, have acknowledged that fact and have implemented that policy. Even if we do not take advantage of the proposed upturn in the economy, this report should also be put on the shelf because this is our last opportunity.
Senator Farrelly welcomed the broad thrust of this report. However, the budget acknowledged it by extending the PAYE allowance to children working full time in a small business. There was also a fund set up to alleviate the financial burden experienced by such businesses during the currency crisis last year. One must be realistic about the currency crisis. It was an international crisis very much outside the control of any individual state. I congratulate the Government on its speedy implementation of that fund, which saved many small businesses from a serious financial situation.
I have already referred to limited financial resources. The £100 million scheme has been successful, but it is only a drop in the ocean when one looks at the overall borrowing content of our small businesses. The Minister must ensure that more funding will be made available. The fact that companies are seeking a total of £195 million from this new scheme indicates that there is great interest in it. Unfortunately, many of them will have to be turned down. I referred to the services sector during another debate last year. This sector does not need as much investment as other sectors to create more jobs. Indeed, I know both the Minister and the task force have acknowledged this fact.
I do not want to detain the House too long on debating this report because the thrust of it is acceptable to everybody concerned. It was welcomed by the Small Firms Association and the Irish Small and Medium Enterprise Association. When one has the support of such bodies, this indicates that the report must be acceptable. However, the ISME pointed out that funding is also required to ensure the momentum is not lost. I ask the Minister to ensure that this new division will have adequate funding and will be correctly overseen so it can pursue the implementation of all realistic proposals at minimum cost to the Exchequer.
I compliment all those involved with the Task Force on Small Business. As the Minister said, this is an historic document. It is the first time that small business has been examined in a serious and practical way. I hope both the Department and the Minister will pursue this matter and ensure that every proposal will be implemented as soon as possible. If they are implemented, our economy may create a lot of employment and sustainable jobs. The one major advantage a small business has is that it does not cost much money to set up. Therefore, if it does not succeed, less money would have been lost. By comparison, if large multinationals fail, they end up leaving a large number of unemployed. Losses from a small business can be absorbed easier into the economy. Many small businesses are currently failing, but we could have a successful next century if these small steps are taken.
Senator Lee, I understand you want to share your time with Senator Quinn.
Yes.
I welcome the report of the Task Force on Small Business. It is an uncommonly good report and is one of the most impressive I have read on any issue of economic policy over the past two decades. This is partly because it is clearly written, which counts, but has also been well researched. The recommendations seem to be based, to a disproportionate degree when compared to many other reports, on evidence. It is not simply a series of opinions being presented, resulting in conclusions which, however emphatically expressed, are not based on fact. Indeed, these opinions may be right but one has no way of knowing this.
A particularly impressive factor of this report is that the sources are cited repeatedly. That is not an academic observation, but means that the authors of the report have sufficient self-confidence in what they are doing. If anyone wants to disagree with their conclusions, they can simply check and assess the quality of the evidence from which they are basing their recommendations. It is important for public confidence in Government that there should be confidence in the calibre of public servants. One way to achieve that is if public servants were more prepared to present their evidence for public scrutiny. Sadly, that has been lacking in many recent reports on economic affairs. That factor alone enhances confidence in the likely commonsense and validity of the recommendations and I compliment the authors for that.
As the Minister correctly points out, the report has exploded a number of mistaken assumptions. Even the Programme for Competitiveness and Work said there were approximately 100,000 small busi-take nesses in the country. It is currently around the 160,000 mark, although I would warn against that becoming a new definitive figure. The report presents that figure as being a broad approximation between 145,000 and 175,000. That should serve to warn us about the amount of continuing work that needs to be done to reinforce or, where necessary, to modify these conclusions.
It is encouraging to see the task force has calculated figures which give reasonably reliable estimates of the total number of firms in the country. Therefore, they have largely destroyed the widespread assumption, which was becoming the basis of policy both in industry and in my own area of education, that we were somehow a people lacking in enterprise and that our number of start-ups was only half that of European or OECD economies. There was also an assumption that there was something peculiarly wrong with the Irish psyche and the educational system which required immediate and drastic correction. Exploding that myth of itself has been an important contribution.
It behoves us to ponder how such misunderstanding about the size and the scope of the small business sector and of the alleged lack of enterprise came to be official gospel for many years. IBEC, for example, in its response to the Green Paper on education and university presidents, when discussing the promotion of enterprise, could cite the assumption that we were so lacking in enterprise as a demonstrated fact. Important policy conclusions were proposed to be based on extremely fragile evidence, plucked out of a report that was not subjected to the type of scrutiny that one would expect. The fact that these types of conclusions could be drawn so easily in a debate on small business should act as a warning to us. I hope there are not many analogies in other areas of public policy making.
It is important to get the diagnosis right before one proceeds to give the prescription. I know there is a reluctance to indulge in diagnosis in this country. We are told to delegate it to a report, which simply keeps repeating matters. If only we were action oriented, these problems could then be solved. Had we proposed measures on small business a couple of years ago based on the assumptions that have now been proved incorrect, we could well have embarked on a great deal of public expenditure based on nothing but the most vacuous and factious of opinion. I hope this will act as an example of how to improve the quality of thinking on policy making in a major area.
One would have to agree with most of the specific proposals in the report. More weight should be placed on the proposals concerning tax credits for job creation. If it is agreed that the tax system is an impediment to small business formation and job creation, which is the end objective — and many examples suggest it is — then the more specific the tax policies are and the greater the focus on job creation, the more effective they will be. There are problems with devising specific tax credit policies, but it is worth thinking about the potential in this area and about asking the Minister for Finance to appoint a small group of experts, including business representatives, to devise and cost a workable scheme of the type they are suggesting. Perhaps there is no such workable scheme, but it would be a worthwhile effort, rather than relying on the broad incentive of improving the tax system by abolishing a number of hindrances. We should not go as far as Signor Berlusconi in suggesting that every small firm could instantly produce an extra body, even to do some simple things. However, the potential which is there could be activated more effectively if there is a workable tax credit policy.
We should not treat small and large businesses as mutually exclusive because there is great interdependence between them. One of the main problems for small businesses in Ireland is that we have few large businesses in this country by international standards. Internationally, large firms — and I do not mean the firms which employ 500 or more people and which we call large — provide the main markets for small firms. The greatest problem with developing the small firms sector in Ireland is that it does not have the cadre of large firms which other advanced industrial countries have. Often we do not compare like with like when we ask about their capacity to sell. In this context State procurement policy becomes doubly important, because the State is the largest firm we have for small companies in the absence of a cadre of large firms.
I am delighted the report emphasised the possibility of revising, at least in part, State procurement policy, or perhaps even devising State procurement policy for the first time in a number of areas with a view to assisting the growth of small firms and providing the type of market incentive they require. As the report states, small firms in Ireland must think about export markets at an earlier stage in their product cycle development than is the case with many countries with which we compare, usually unfavourably, our small firms development. They are facing more difficult circumstances. Given the continuing absence of large firms, the State is the main potential large buyer. Some of the import penetration, to which the report brought attention, involves selling to the State in a variety of guises. No one is suggesting the State should only buy from itself. If this was suggested it would be prohibited by EU rules. The potential can be exploited further in existing EU legislation and it should be considered.
I am hesitant about endorsing the proposals on the relaxation of standard labour legislation in relation to small firms. That legislation could create difficulties for small firms, but I would be slow to assume a priori that a major contribution to the development of the small firms sector could be achieved along that path, apart from what the other potentially undesirable consequences might be. Too often that is a cop out for the failure to effectively manage in other respects. It may be a problem in certain circumstances, but it smacks too much of the British route of creating a cheap labour offshore island off the coast of Europe which, at best, would only be briefly competitive in most sectors most of the time. I question this area of the report in terms of proceeding too rapidly without careful investigation of the consequences and without relying on opinion in that area.
The references to education for the small firms sector and other proposals in the report are not necessarily well judged, although there are good ideas about what FÁS could do. It refers to the Green Paper on Education, which the Minister is familiar with, and to its uncritical endorsement of the enterprise culture ethos in chapter five. I strongly support the idea of enterprise culture. However, what is enterprise culture and how does one define and operate it? It is too narrowly defined in the Green Paper on Education, but I will not enter into a philosophical disquisition about it.
The programme for enterprise culture in the Green Paper on Education was based on the assumption that we lacked enterprise and that we only had half the number of start ups which our rival economies could produce. The basic assumption underlying it is invalidated by the research in this document. I do not doubt we need enterprise, but because our main problem is not start-ups but growing firms and precluding firm failure, the emphasis must be placed on managerial skills, which are not identical to enterprise skills. There is an overlap, but our problem is not trying to start firms but keeping them going and allowing them to grow. This requires a different thrust in terms of education from fostering self starters.
There is no point having a large number of self-starters if they fail after a couple of years because they did not have the capacity or the techniques to harness their enterprise potential through effective management in order to overcome obstacles and to grow. One of the main objectives of having a vibrant and viable small firms sector is that a sufficient number of small firms grow out of it to become larger firms. We should not romanticise the potential for job creation in this sector. If we rely solely on the small firms sector for job creation, then we are in real trouble in terms of job creation over the next ten years. There must be a blend of job creation in the small, medium and large firms sectors if we are to grow each sector into the next one.
I am delighted the report emphasised the services sector. Services are not a panacea, but they are a crucial component of an overall economic growth plan. Services also require types of labour and management which are not necessarily provided by an enterprise culture as defined in the Green Paper on Education. The Green Paper on Education was orientated towards manufacturing industry and the type of labour which manufacturing industry required. The services sector requires a different orientated type of enterprise and personality.
I must reluctantly dissent from the overall commendation because in many ways it is an alpha report. The references in it to the Green Paper on Education are a little hasty, facile and simplistic compared with the depth of research and thought which has gone into the rest of the report.
I welcome the Minister to the House and I congratulate him and the backup team who compiled this report.
My first point relates to the clear recognition of the willingness to accept failure. I remember a type of cycle race, which may still be popular, called "devil take the hindmost". Twenty cyclists would begin the race. At the end of the first lap 19 cyclists would stay in the race and the 20th would drop out, at the end of the second lap the 19th cyclist would drop out and the eventual winner was the last cyclist left in the race. Business is like that in that it is highly competitive. It is likely to remain competitive; and this report recognises that if some businesses are successful, others will fail. It would be worthwhile for the nation to recognise there will be failures and we should not be ashamed of failure. That message came from the report and I was delighted to see it.
Senator Lee touched on the issue of family firms. It appears from the report that such firms last longer than non-family firms. They are much more likely to have roots in the nation and in their respective businesses. They are also more likely to continue to exist when problems arise; non-family companies tend to move somewhere else and give up more easily. There is a need to encourage family firms, not by grants or support but to avoid any handicaps such firms may face. Perhaps we should not address this issue today because the Finance Bill deals with this matter. I was delighted to see how much attention was given to this report in this year's Finance Bill.
One of the central findings of the report is that this country is bad at helping businesses to grow. This point was also made by Senator Lee. The problem is not getting businesses set up, rather that companies grow bigger at a below average rate. This is a vital failure in our economy. The number of businesses established is satisfactory in that it is equal to the average, but we are not good at getting such business to grow. If the report did nothing other than highlight that crucial fact, the effort will have been worthwhile. It is important to get companies to grow because there is no virtue in being small as such. There is a danger in all the attention now being focused on this sector because it may put small businesses on a pedestal. That is dangerous because we would be focusing on the wrong aspect of the issue.
For that reason I will say what the report has not said and what none of the commentators on the report has yet said: there is no special virtue in being small. If a small business continues to be small it does not grow to the limits of its potential, which is not good. If after all the years of neglecting small businesses we now go to the other extreme, we serve neither the small business sector nor the wider economy. If we decide to lionise small businesses just because they are small, we will be making a mistake.
Our emphasis should be not on small companies but on growing companies. There is a world of difference between those two words. If a company is small but growing, it is making an important contribution to the economy and it is deserving of State encouragement and, where appropriate, of State support. If a company is small but not growing, that is a private matter for the people who own it. If that is what they wish, it is their own business. We should not object to that but we should not encourage it.
The growing companies are the ones we must encourage and we should focus our attention on them. We must encourage them to grow and remove any barriers preventing their growth. Occasionally we must assist them with know-how and other resources. I would not be in favour of the Department of Enterprise and Employment devoting a special division to small businesses; however, I would support a division for growing businesses. The distinction should not be between big and small companies, but between growing companies and companies which are not growing. If we make such a distinction we will have our priorities right. The virtue is not in being small but in growing and we should at all times send a message to that effect.
My last point concerns a specific proposal in this report which is worth pursuing and may be lost among the other worthy suggestions and proposals. That is the proposal to target a job creation incentive specifically at the owners of small businesses. This idea is quite revolutionary — I had certainly not heard it before. It is suggested that the owners of businesses should get personal tax relief for each extra job they create.
This is so different from job creation incentives in the past that it is like a breath of fresh air. Previous schemes have been targeted at larger companies, which was the wrong place. Large companies carefully control their staff numbers and in recent years many of them have been ensuring success by reducing their employee numbers. However, small business people often say they could take on one to three extra people but do not want to do so because of the trouble and difficulties involved. This is where the accumulation of disincentives, so well documented in the report, comes into play.
The key here is numbers. It was interesting to hear Senator Lee refer to Signor Berlusconi, because he may have a solution. We could ask a small number of large companies to take on a large number of employees each. We saw an example of that in Ballymena yesterday, when a Korean company took on 250 people. That is marvellous and should be encouraged. However, if 160,000 small businesses took on one person each, or if even half those companies employed an extra person, that would have a great impact on our economy. We have not focused on this idea before and I congratulate those who produced the report for including it.
The potential is so exciting we should look at possible incentives. There would be no special motivation for owners of small businesses by offering them free PRSI for a period. However, one could motivate them by reducing their own income tax. That could be funded from the savings to the State which result from taking a person off the live register. Presumably the mandarins in Merrion Street threw their arms up in horror at that suggestion but I believe it is one of the best ideas in the report. When one thinks of the vast potential for job creation involved, most people would say we should do whatever necessary to make that happen.
I welcome the Minister and the task force report and I also welcome his announcement yesterday that a small business division has been set up in the Department of Enterprise and Employment. As Senator Lee said, one of the reasons why this is such a well researched and well constructed document is because of the composition of the task force. Other than representatives from the Department, it was made up from people running and working in small businesses who know the problems and the issues. That also explains why it is a practical report. The suggestions made are sensible and based on reality, there is little hot air or idealising. It is concerned with the practical problems of businesses, therefore it is useful and should be taken seriously.
The points made by Senator Quinn at the end of his contribution are important. Simply setting up a business is not enough. One has to maintain it and if possible make it grow. Unless we do that we will not make inroads into the unemployment figures. It is essential that we concentrate on all those areas, not only the setting up but also the maintenance and growth of small businesses.
In that context it is interesting to see figures from the past. Indigenous Irish industry has performed badly in job creation terms. There has been a decrease in employment in that area. One set of figures show that half of the grant aided indigenous industries set up in 1983 have gone out business. We must ensure that firms which have been set up survive and grow.
Duplication, an issue we discussed in the House in regard to the services industry, etc., must be avoided. There is no point producing something in one area and duplicating it ten miles away because the first person will be put out of business. We must not take that approach. Given the Department of Enterprise and Employment's commitment to those involved in business and its efforts in trying to identify and solve their problems, it is clear that the Department is taking its role in relation to job creation and this report seriously.
Funding is one of the main issues which has been identified, particularly in relation setting up businesses. Members referred to the £100 million loan fund which is available through the ICC at a rate of 6.75 per cent. The Minister indicated that the fund is now oversubscribed and the 1,100 applicants are seeking more money than is available. I support other speakers who said more money should be made available but there must also be an onus on the commercial banks.
Immediately after the Government announced the £100 million fund, the Bank of Ireland advertised in the media that it was providing a fund at similar rates. However, its fund only amounts to £25 million. No other commercial bank has indicated that it will supply money to small businesses at this rate. Commercial banks make substantial profits, they operate in the world of business and, to a large extent, they may pick and choose their customers. There is an onus on them to match the Government's commitment in regard to small businesses.
Commercial banks should devise workable schemes which would provide finance at an affordable rate. The Minister pointed out that money is available, but those running small businesses cannot always afford it. Small businesses do not have large amounts of disposable cash. I support what Senator Farrelly said — this was also mentioned in the report — that people should not have to put up the family home as collateral thereby putting it at risk. Most Members have probably been approached by desperate individuals who have brought their ideas to a certain stage and have received support from the county enterprise partnership boards but want to go further. These people are not in a position to raise more funds and they are worried about their home and family. They must be supported. I pay tribute to the county enterprise partnership boards, Forbairt and other bodies involved in this area. However, as I said, commercial banks must play a greater role in this regard.
The mentor system referred to in the report is useful. It helps to maintain enterprise and it helps firms to grow. Someone who has already gone through the system will help others. Clustering is also useful. A number of firms are clustered for the purposes of advice, education, training and marketing and they are helped by Eolas or another body. It is economically viable to bring a number of firms together for this purpose but it would not be viable for a small firm alone. It offers tremendous support in terms of saving money in areas such as marketing and in the exchange of information and advice where firms may learn from each other's mistakes. The report also recommends ongoing discussions between the Government, the banks and a forum for small businesses. That supports the point I have been making.
A number of proposals in relation to tax, for example, tax credits for job creation which Senator Quinn mentioned, a reduction in corporation tax and the extension of relief for reinvestment have been made. Although these practical proposals will cost the State money, the Department of Enterprise and Employment in conjunction with the Department of Finance should investigate them. I welcome the changes in the budget which eased the burden on businesses, including VAT on cash receipts as opposed to invoices which has helped cashflow, the increase in the VAT threshold, the simplification of tax clearance and tax registration forms, the inclusion of sons or daughters of owners in the PAYE net and the reduction in employees PRSI for incomes up to £9,000. These changes, which were brought about by recommendations made by the task force are helpful. There has been an immediate and substantial response to the task force in many areas. Given that a small business division has been set up in the Department, we may be confident that this will continue.
The report also recommends the setting up of a type of data base which would gather information. It would be a one stop shop and those setting up a business or trying to maintain or increase their business would not have to go from one place to another seeking information. As regards marketing, I was disappointed that little emphasis was placed on foreign markets. I appreciate the importance of the home market cannot be over-emphasised, but our population comprises 1 per cent of the EU. More emphasis should be placed on helping small firms get into European marketing networks. Marketing at home and abroad, State procurement, which was discussed earlier, and the fact that public bodies and the State try to buy local products is a complicated area. Recently my local authority spent a substantial amount of money on a product which it was unable to get in Ireland because the Irish product did not reach the technical EU standard. I believe hundreds of the technical standards must be complied with in many areas of the manufacturing industry. A number of subcommittees in the EU set these standards and we have not always been represented on them. I ask the Minister to seek information on that. If Irish firms are prevented from supplying components, for example, to large firms, the matter should be seriously investigated.
Obviously there is potential for growth in employment if we increase our share of the world market and, in particular, the EU market. Because we have such a small population, even a small percentage increase in the market of other European countries would make a huge difference in terms of the growth of small businesses and job creation. We must overcome any obstacles in relation to standards and getting into networks.
As regards service industries and food producers, it is essential that we get into the existing distribution network. There is much work being done in that area already but I ask that we do whatever we can to expand our markets. We have the capacity to make things and to provide services and there are plenty of people with skills who are unemployed. However, there is no point making something or providing a service unless there are customers. There are not many customers in Ireland because we have such a small population and we need to look to customers in other parts of the world. I support the progress that has already been made, according to the report, in relation to standards, for example, the ISO 9000. It is now a little easier for small firms to afford the steps that need to be taken to get an ISO 9000 qualification and there has also been progress in relation to the cost of electricity, telephones, etc.
I support Senator Lee's concerns about labour law and the Unfair Dismissals Act which is referred to in the report. The suggestion is that the onus of proof, for example, in the Unfair Dismissals Act should be taken from the employer. This should be examined because it would be almost impossible for an employee to produce the records needed to prove his or her case if the onus of proof was put on the employee. I realise the report is suggesting a balance, but I would be concerned about any attempt to modify that legislation.
I welcome the report overall. It shows a real commitment to job creation in the Department of Enterprise and Employment and I congratulate all involved, including those who compiled the report, the Minister of State here today and the Minister for Enterprise and Employment. There has been a small reduction in the unemployment figures in the recent past and this offers hope for greater improvement in the future.
Plenty of FÁS schemes.
I welcome the Minister of State to the House and I welcome the opportunity to debate the report of the Task Force on Small Business. The report contains many practical and constructive suggestions and I hope there will be speedy action in its implementation. I warn against sitting on the report because we need action.
I welcome the setting up of the small business division in the Department of Enterprise and Employment. I also welcome the statement of the Minister of State that extra staff has been approved. This division will oversee the implementation of the task force's recommendations and will champion the cause of small business. It will report annually on the state of small business which is important because we need to monitor what is happening and to see what other changes should be made.
I welcome the Minister of State's assurance that services, which have been left out in the cold for too long, will be looked after by this division. We had a debate here last November, at which the Minister was present, which concentrated on the service sector. For far too long we laid too much emphasis on jobs in manufacturing. The ESRI medium-term review predicted that the overall major increase in employment is expected in the market and non-market service areas, so this is obviously an area on which we must concentrate.
I was interested to hear the Minister state that raising money tends not to be as big a problem as we had originally anticipated and that the financing gap and affordable finance was people's main area of concern. There is a difficulty in financing especially for people who move from the PAYE sector into business. They find it difficult to save money from their after tax income. The only occasion on which many people receive a lump sum is if they are made redundant. This tends to be a difficult time for them and not the easiest set of circumstances in which to plan a business.
Providing equity is vital and I welcome what the Minister said about arranging lower interest rate finance for small industry; this is vital. One of the ideas brought forward by the Government for seed capital was tax refunds for new enterprise. This scheme was introduced in the 1993 Finance Act. It was a means of refunding tax immediately to the promoters of new enterprises. It was a brilliant idea but tended to have many restrictions. The report stated that very few people had taken up this option.
The Government will have to take risks with some of their schemes and not be so defensive when they are put in place. One of the restrictions in the aforementioned scheme was that the person could not have had a previous equity involvement. In Ireland people do not seem to be allowed to fail; Senator Quinn spoke about this earlier. We have to develop a culture like that in the United States where people are allowed to fail again and again and eventually they are successful. This scheme was very restrictive for people who had previously been involved in enterprise. I understand why the Government is so defensive because many tax incentives have been abused in the past. They have been used by high earners looking for tax avoidance schemes rather than the entrepreneurial small business people for whom they were intended. We have to examine this area again.
The county enterprise boards are a welcome development because, for the first time, they are giving grants to service industries. I agree with many of the recommendations made by the task force in relation to the county enterprise boards. As a member of the Laois County Enterprise Board I have some experience in this area. The boards fill a long standing gap in the provision of seed capital to small businesses. It is regrettable however, that the amount allocated has been reduced this year.
One of the recommendations of the task force — and it is one that Laois County Enterprise Board supported — is the allocation of mentors to all firms receiving financial support from the county enterprise boards. Mentors were provided by Forbairt who had a similar scheme. The Minister for Enterprise and Employment should provide resources for the county enterprise boards to extend this scheme to new companies, start ups, expanding companies and any company receiving financial assistance from the county enterprise board.
The task force referred to equity capital for companies. One of the recommendations in relation to county enterprise boards was the significant scope for the use of informal equity capital provided by individuals who would take an equity stake in a small business. The problem with this is that it is difficult to sell off a minority interest in a small private company because there is no market mechanism for it in this State. One of the problems that came to my attention in relation to this tax refund scheme is that one of the conditions is that one receives a certificate from Forbairt saying one is eligible for grant aid from Forbairt. Many of the companies that would have previously obtained funding from Forbairt will now be getting it from the county enterprise boards.
I urge the Minister to make change to allow these people avail of this scheme. We have experienced this in Laois. I have spoken about this to the Minister, Deputy Quinn, and officials in the Department of Finance. The Department of Finance officials do not seem willing to change it but if we are setting up schemes and want people to set up their own businesses, we should be doing everything we can to encourage them. We must get away from this defensive attitude. People may have exploited and abused these schemes in the past but there must be some way this could be sorted out between the Department of Enterprise and Employment and the Department of Finance and the Revenue Commissioners. Another difficulty experienced by the promoters coming to the county enterprise boards is that if their plans are rejected, they do not have any contact with the members of the board making this decision. This could be examined.
One of the recommendations with which I thoroughly agree and which was referred to by Senator Quinn, is the rewarding of job creation and the use of a system of tax credits. The task force spoke about giving a tax credit of £1,000 per extra employee taken on. They also looked at the area of surcharging undistributed income and asked that it be abolished. The tax incentive could be given to the company itself which would allow the company to build up a capital reserve. At present it is difficult for companies to build up a capital reserve because of this surcharge on their undistributed income. Linking this to the creation of employment would be a welcome development. A fund that is retained in the company's capital reserve rather than passed to the individual who owns the company means that the company is in a much stronger position and is more likely to survive, expand and employ more people.
The task force also examined withholding tax. This is deducted at the standard rate from all payments for professional services by public sector bodies. The task force stated that it has a particularly negative impact on professional practices with employees and activities such as engineering consultancy. The amounts withheld are sometimes out of all proportion to the eventual tax liability. I have some experience of this as my husband is a general practitioner in the GMS and he is subject to withholding tax. I constantly listen to general practitioners and other professionals, such as engineers and architects, whinging about the amount of money that is withheld in this way. The task force recommended that, as everybody is on a current year basis, perhaps this system of withholding tax could be changed.
I would consider it in terms of linking it to job creation. For instance, general practitioners in this country could employ many more people. Their counterparts in Britain employ perhaps two or three people but there is nothing like that here. Perhaps the withholding tax could be used to grant concessions, provided more people were employed. Senators Quinn and Lee spoke about the number of small firms in this country and that if all, or even half, employed an extra person, it would have a major impact on our employment problem. Perhaps areas affected by withholding tax could be examined to see how jobs could be created by giving incentives through that system.
We are all concerned with the national priority of job creation. Our actions must reflect this priority and we should do what we can to reduce unemployment. We should look to small business because, as Senator Quinn said, it is much easier for small business to take on one person rather than seeking some firm to employ a huge number of people in towns. General practitioners, engineers and architects are spread all over the country. Every area of the country would benefit from the additional employment that they could give.
I heard Lorraine Sweeney on the radio this morning. She welcomed the establishment of the division within the Minister's Department. She felt that the success of the task force and its report was due to the number of people involved in small business who were on the task force. She felt if the Minister used the same formula in his division that it would be very successful. I agree. They should discuss the situation with people who are working on the ground regarding the changes they want. As Senator Lee recommended, perhaps the Minister for Finance and the Minister for Enterprise and Employment should appoint a small group of experts, including the business community, to devise and cost a workable scheme of tax credits such as in relation to withholding tax, as I mentioned, rewarding job creation and the surcharge on undistributed income.
The Progressive Democrats welcomed the task force report. We felt it emphasised specific, practical recommendations. There are other matters that are not included in the report which, if linked to it, would help to create employment. One is the development of a more neutral corporate tax regime so that the combined corporate and personal tax on company dividends does not exceed the equivalent tax on income. Any conflict between the operation of the county enterprise partnership boards and Forbairt regional offices in promoting indigenous employment growth must be resolved. Many small firms required assistance in kind rather than cash. Premises, expertise in marketing, business planning, etc, are most important to small business starting off. This is why I support the recommendation of the mentor programme. More enterprise units must be developed, particularly in disadvantaged areas. The organisations which operate these enterprise units should get the same taxation benefits given to initiatives such as enterprise trust and first step.
Senators O'Sullivan and Lee mentioned labour law. I heard an item on the radio this morning about the number of new companies setting up which do not allow or do not have unions. I recall discussing labour law earlier this year in the House with Minister of State, Deputy O'Rourke. Many employers are ignorant in this area and they should be given training and information. Sometimes it is simply an impression they have that labour law can be a disincentive to employers. It is an area that must be examined.
Apprenticeship schemes should be widened to cover the training of production technicians and operators required by high tech manufacturing and service industries. We also discussed this area with Minister of State, Deputy O'Rourke, when she was here dealing with the extension of the apprenticeship scheme. If these proposals were acted on, along with the many sensible recommendations in the task force report, we could see an upsurge in enterprise and job creation in this country. This would be welcomed by all.
I wish to share my time with Senator Farrell.
Is that agreed? Agreed. However, I do not think there will be a need to share time as there is 25 minutes remaining. You can share 20 minutes. Will ten minutes suffice?
I will do my best. I will speak quickly or much faster than usual.
It would not be possible.
As the Minister of State said in his speech, the role of small business is recognised in even the most developed countries. The contribution small business has made to developed economies, such as Germany, Japan and the United States, is well documented. Small business is the driving force behind developing economies and the small joins such as on the Pacific Rim and particularly Taiwan. Yet, as Senator Lee and others pointed out, Ireland has largely overlooked or grossly underestimated the role of small business. This report is most welcome because it lays this issue open for debate. If Minister of State, Deputy S. Brennan, achieves nothing else in his term of office, he will have achieved a huge amount by elevating the debate on small business to its current point. We now have truths as opposed to myths and reality as opposed to clouded generalities. This cannot but help.
The report is well written and well presented. It is evidently written and produced by people who understand both the problems and potential of small business. The task force has laid out its report admirably under the five pillars that support small business: raising money, rewarding risk, reducing the burdens, providing help and establishing a new deal for small business — or ultimately reducing bureaucracy.
The issue of raising money has been a perennial problem for business, small, medium and large, since the foundation of the State. The earliest Governments had to establish State venture capital agencies, the ACC and the ICC, because of conservatism and the simple obduracy of the commercial banking sector. The commercial banking sector has come a long way since then. In recent times I have been full of admiration for the major banking groups because they have made a real effort in this area. However, it must be admitted that they are coming from behind.
The task force recommendations in this area cover a broad range of issues. One of its first recommendations is reform of the scheme on tax refunds for new enterprises and removing the scheme from the Revenue Commissioners. This is a good recommendation because regardless of the quality of the Revenue Commissioners in the raising of tax revenue, I do not think anybody would regard it as a development agency.
More representation for small business on the county enterprise partnership boards is suggested. I have made this proposal on a number of occasions in my own county. More support from the State sector for companies, such as First Start, is an admirable recommendation. So are those advocating common codes of practice for commercial banks as a number of speakers mentioned, and a code that would take the family home out of the collateral area. All of the recommendations under this heading are well focused and well intentioned. If they were followed they would have a major impact in what has been a particularly difficult area.
I suggest that the Minister take a serious look at the composition of county enterprise boards. I agree with the comments of the task force in this regard. County enterprise boards are dominated by local officials or by officials of various State agencies and some councillors, the councillors being included almost as an afterthought. This is a mismatch of the needs on those boards. I suggest that the board membership should be exclusively limited to councillors, who would provide a democratic input, and to people who have business experience which would provide the relevant amount of business perspective. I do not believe that with the best will in the world people who have served all of their careers on county councils, corporations or various State agencies have the requisite skills to service those boards either in terms of dealing with the public or dealing with business realities. We need to look at that.
The pillar which deals with rewarding risk is an area which I fully support. The extension of PAYE allowance to people who are self-employed and to their families is clearly just and equitable. The other proposals in this section of the report concern VAT or proposals which we have all heard and which we have all probably echoed from time to time.
The report under the third pillar speaks of reducing the burdens. The Government and the State can help to promote development, but can equally crush it. The problem today is that we are faced with a bewildering array of State agencies. Let me give an example. In one case a number of years ago a friend of mine came up with the bright idea of processing a certain type of seafood. He had to go to a whole range of Departments and agencies. He went to the Department of Transport and Power for a foreshore licence. He went to the harbour commissioners for a licence to dredge a particular harbour. He had to go to the county council to get a licence to develop and he had to get county council planning permission for an on-shore structure. Across the river he had to get planning permission from an urban district council. From the health board he had to get permission relating to food processing and specific permission relating to shellfish processing.
He had to approach the IDA for support for the plant. He went to An Coras Tráchtála for support for the European market development programme. He went to BIM, first of all for assistance for funding his on-sea activities and secondly for support for product development and brand development. He went to the county development board for general assistance, to the Revenue Commissioners for his tax clearance. He had problems with his telephone lines and went to the local TD as well as going to Telecom Éireann. He went to FÁS for help with training programmes. At the end of this exhausting odyssey, the extraordinary thing is that the man actually established a very successful business. We need a programme of debureaucratisation in this whole area. We need to look at our overall bureaucratic structures, their needs, their number and their imposition on the citizen.
There is a good deal in this report which deals with an area close to my heart — the area of forms. A few years ago, before I went into politics, I wrote a report for the OECD and in it I pointed out that perhaps there are few official communications which cause more angst than the official form. Throughout a number of OECD states in the 1980s form audit agencies were established to ensure that the forms did not create problems for the general public, for the business public, or indeed for the bureaucracy itself. The French example was one which we could emulate. In France it is now illegal to use a non-audited form. All forms are regularly subject to audit scrutiny, for their language, their scope, their scale, the level of contact they have and for their size. We could do that too. This task force provides us with yet another good reason for doing that.
Pillar five deals with providing help. The task force recommends a whole series of things which are eminently suitable. We have to accept that we have too many major players in this whole field of development. An increasingly frequent query in my clinics, and I am sure in the Minister's, is which agency does what in the development area. Not only does the multiplicity of State aid institutions confuse us, but it swallows up a huge amount of money in administration. There is also a very real possibility that the overlap will bring about territorial hostility in the end result, with nothing positive to show for that hostility. Some attention is clearly needed in this regard. The report makes the point that we should have one stop shops. I know the Minister himself is of that view. We need a one stop shop for development in every county in the country. We should not tolerate a situation where people have to travel from one end of the county to the other before they find out who does what, where, and when.
A number of other specific proposals are made which are very welcome. The Minister has made reference to mandatory payment periods. That is long overdue. It is a major scandal that State agencies lean on the trade to the extent they do. This happens right across the board, from small suppliers right across to nursing home owners. It is time that scandal was brought to an end. We need a small business division and I recommend very strongly that we put in place an Oireachtas Joint Committee on Small Business in order to give small business a continuous focus in this and in the other House.
I welcome the Minister and congratulate him on this very good report. It is an historic report simply because it is the first time we have a report before us written by ordinary people who are in the business. Every report I ever read in my time in this House was written by professors from universities or consultants and experts, the kind of people whom I have often referred to as being able to write 40 pages of foolscap about the shape of a new penny and never say it was round.
This report is solid, but it lacked one thing. I have been in the small industry sector for the last 20 years. I built the first small factories out of my own pocket because I believed there was a need for small industries in rural Ireland. We lack a marketing arm for small industries. We have many great craftsmen who produce very good pottery, glassware etc., but they are not good salespeople. They do not have the time to go out and sell. We should commission a survey of the different types of industries in each county and then market all these different products together. If that were done we would be more successful, but we are not doing that and unfortunately An Coras Tráchtála is not doing it either.
The second thing we must do is concentrate on our youth. Many people are unemployed, but many of those do not want jobs because they are getting good social welfare benefits. I will not go into detail here but we know that is a problem. We must concentrate on encouraging the work ethic among the youth, the people who are now leaving schools and colleges, so as to get them out of the social welfare system. Their problem when they go looking for a job is lack of experience. How can they have experience when they have never had a job to work in?
I recommend that more of our FÁS money be spent on work experience. In years gone by an apprentice went in to serve his time. He got experience while he was serving his time and when he went to do a job the employer knew he could do it. Now a student comes out with a bale of certificates, but that is no guarantee that he or she can do the job because he or she has no practical experience. Some of this money should be given to industries to give young people work experience of six or 12 months. Then when they apply for a job they can say they have work experience. We must work hard to create an atmosphere where our young people get work experience so that when they apply for a job, they are not refused work on these grounds.
I am delighted that the hauliers are being brought into this group, because they create a lot of work. They bring our products to the continent and elsewhere and deliver them on time. For a long time they were not recognised. Now they are recognised and are getting assistance. Hauliers are very important because if we do not get our goods to the point of sale we are lost.
The report says that small businesses should get two years' rates remission. Every young entrepreneur starting up should also get two years' tax remission. When I started in business in 1964 all I wanted was a considerate bank manager, which I had. While many people would blame banks down the years, I must say I can speak highly of them. I never put all my eggs in one basket and if I did not get good value from one I got it from another; I played one against another. I cannot say anything against the banks. But for them many people would not be in business today — I certainly would not. In 1964 I found the banks easy to deal with. If one honours one's word with them, they honour their word; and if one cannot meet commitments to them it is best to go and tell them rather than ignore their letters.
I have created many small industries in rural Ireland. However, small industry cannot work without big industry, so we must also have the multinationals. In my village there are eight industries. It is probably the only small village in Ireland that has a small rural industrial estate — they are usually found in the larger towns. Those rural industries, by and large, provide services to larger companies. Therefore, it is important to remember that we need the big companies so that the small ones can service them and thereby create jobs.
I am glad the report also deals with work conditions. If an employer employs somebody they have to get rid of the person in six months or keep them for life, or face redundancy payments or unfair dismissal actions. This militates against employment. Environmentalists will have to be more realistic. Many of the small industries in north Sligo could not be built today because at that time one applied for planning permission, which cost nothing, built a shed and put people to work there. Today one has to apply for planning permission, carry out an EIS report, which can cost up to £20,000, and one can face environmentalists' objections. While I know that they are high-minded people who want to keep the country looking well, they are, by and large, in good jobs. They are not worried about the young people who are trying to get jobs. We have to marry the economy, industry and the environment.
I welcome this report and I congratulate the Minister and his staff. There is a wealth of opportunities with the rising tide in the economy, as evidenced by favourable reports for the next few years. If the Minister gives an incentive to the employers he will get a response, particularly from the small business sector. What Senator Farrell said is true. The biggest problem is taking on staff and then having to pay more and more taxation and other liabilities. Employers will create jobs in the small industries if they are given the tax incentives, and there are thousands of jobs waiting to be created.
I have but a few minutes so I will not be able to deal in detail with the questions put to me. I will perhaps do so at another time.
I thank the Senators who gave the report a strong welcome and for their constructive criticisms of aspects of it. It provides us with an agenda for action. There are about 100 proposals in the report. Seven or eight of those have been put in place since the budget and another put in place yesterday. It is my ambition to systematically drive the section in the Department of Enterprise and Employment on a day to day basis to ensure that we get as many of these proposals implemented as we can. All of them are possible and we will report to the Oireachtas on our progress.
The ICC criteria were mentioned by Senator Farrelly, Senator Kelleher and Senator O'Sullivan. We will keep that matter under day to day review. About £25 million of the £100 million is already committed, so we are a quarter of the way there with the scheme. I take the points made about the criteria and the need to include some services and to take some risks with the scheme, and I will bring that to the attention of the ICC.
This is costing the State £3 million in a year, but it is excellent use of State funding and support for industry. The ICC figures indicate that there have been over 1,000 applications, although the number of jobs which will come from that is not quantified. However, if for £3 million one can get such a fund in place to make money available to small industry, it is good value compared to a £3 million one-off grant, for example, given to one industry. We have over 1,000 applications from different firms who will benefit from it. It is a novel and effective way of helping small industries.
Senator Farrelly asked me about the county enterprise boards' data. My understanding is that it is intended to provide the kind of statistical data one would get from the IDA or Forbairt relating to the number of grants, the average amounts, the number of firms, the geographical locations, the sectors etc.. Without consulting the Minister for Enterprise and Employment I cannot say whether it is intended to include the names of the firms involved.
I do not want them.
The IDA publish them.
Some of the boards are not prepared to give the information.
I checked the figures recently and I was told that there is about £6 million already committed by the 35 county enterprise boards to about 800 projects. The initial figures indicate that it is good value for money. If one can get £6 million spread over 800 different projects that makes an average of about £7,000 per project, and my information is that there is at least one job per project — which is not over ambitious — and that works out at £7,000 per job. That is a dramatic improvement on what we normally pay for employment. It is early days for the county enterprise boards and I stress that I got these figures from the Department at short notice and I will have to recheck them.
Senator Kelleher talked about the need for low tax and we all agree with that. There was a welcome for the £800 allowance. With regard to the question of mushrooms raised by Senator Farrelly, I will take note of what he has said and I will bring it to the attention of the Minister for Finance. Senator Farrelly and Senator Honan commented on withholding tax. The task force more or less agreed with them and I understand the points made, particularly regarding the potential in GPs offices or surgeries for additional service employment. That issue is addressed by the task force and I thank Senators for their support on it.
Senator Roche and others raised the question of late payments. It is not good enough for the State not to pay its Bills and we plan to take some action in that regard.
And pay the subsidies.
Yes. Senator Farrelly mentioned the farmers in particular and I will bring that to the attention of the Minister for Agriculture.
I would give a special word of thanks to Senator Lee, who made a thoughtful contribution, particularly in his demand that we get the diagnosis right before we start prescribing. It came as a shock to me when I chaired the task force and we gave the matter a lot of consideration over many weeks. The statistics emerged that we have as many start-ups as elsewhere but they do not last. One figure that emerged is that of all the companies grant-aided in 1983, 56 per cent were no longer there after ten years. That is not unusual but seems to be the general pattern. In the first five years 40 per cent of firms fail. If we learn nothing but that, it will change public policy to help start ups, but especially to help those firms to keep going. I also thank Senator O'Sullivan, Senator Farrelly and Senator Quinn for their thoughtful contributions.
Question put and agreed to.
When is it proposed to sit again?
At 2.30 p.m. on Wednesday, 27 April 1994.