I welcome back to the House the Minister of State, Deputy John Perry. The list is rotating. In view of the fact that the Government side has more speakers, we will begin with the Leader, Senator Maurice Cummins.
Report of Advisory Group on Small Business: Statements (Resumed)
I thank the Minister of State, Deputy John Perry, for agreeing to return to the House to resume the debate on this very important report to which many Senators contributed last week. A number of other speakers wish to contribute. Overall, the report provides a very good and detailed analysis of the climate for small businesses and there is more of a focus on domestic companies than those involved in the exports sector.
I wish to focus on finance, the county enterprise boards and Government procurement procedures. There should be clear identification of the financial requirements of a small firm. Many face cash-flow problems which are short term and should be dealt with separately from requests for finance required to ensure growth and expansion. Banks are already training staff to understand the provision of finance based on performance rather than on the asset base which was the norm previously. The recommendations on managing cash flow should be initiated immediately as training and the prompt payment rule could easily be provided for.
On investment finance requirements, there should be a mechanism whereby other sources of finance could easily be identified by small firms. The emergence of angel syndicates throughout the country shows the potential to tap into private finance sources. Matching this with Government and bank funds would be an innovative way to bring private investors into small business markets.
Clarification is required on the position of county and city enterprise boards which play a critical role in new start-ups and are the only source of support for non-exports based enterprises which should also be supported. There is great merit in getting companies to participate in courses on how to start one's own business, but such courses should be audited, with agreed delivery standards throughout the country. In addition, the experience of successful businesses should be drawn upon locally to ensure the start your own business courses are practical, relevant and tailored to the specific industry or sector.
There is also an opportunity within the framework of enterprise boards to incentivise business owners to consider their options for expansion. A proposal under consideration in Waterford is to invite business owners with a proven track record but limited export or growth focus to examine their businesses with a view to development opportunities. Those interested would have mentoring and support to develop their growth opportunities and if only a small percentage are encouraged to take the chance to develop their sales that would still be an increase in jobs and investment locally. Those with potential could then proceed to more advanced management development and training.
Regarding clarity for enterprise boards, the Government needs to decide whether that will be under the local government umbrella or Enterprise Ireland. We need clarity soon in that regard.
With regard to Government procurement, there is a very good initiative to get smaller companies to co-operate in tendering for Government or large procurement bodies. However, it should be developed further to create a structure which could be expanded to facilitate small businesses co-operate in tendering for private sector business and into other jurisdictions, overcoming the economies of scale achieved by larger companies.
An initiative in the south east, through the FUSE initiative, has seen the appointment, with the help of Enterprise Ireland, of an experienced procurement manager who is developing a process through which local companies can tender for business to the multinationals in the region. Already there is co-operation with multinationals and the system, when complete, will facilitate joint tenderers through a secure and confidential portal. That could then be expanded on a national basis.
All the points in the report are necessary and should be carried out promptly. It is essential that whoever is charged with monitoring and delivery should report to the Minister and to the House on a regular basis.
We will have a debate on ideas for job creation today and it is our intention to send the ideas we come up with to the Minister and the Minister for Jobs, Enterprise and Innovation, Deputy Bruton. The Minister might put those ideas to his Cabinet colleagues and the advisory group on job creation and come back to us on them at a later stage. It would be beneficial for the House to see that something is happening as a result of our ideas.
I welcome the Minister to the House for this important debate. I commend him for the amount of time he has spent in this Chamber on the small business area. The report of the advisory group indicates that we have more than 200,000 businesses employing approximately 665,000 people. We all know people in areas in our constituencies who are running businesses.
I will focus on several points. I commend the advisory group on its report, which is easy to read and contains some actionable points. Section 3 contains the big ticket items and the biggest ticket item is credit. The banking survey undertaken by the county and city enterprise boards last September showed that 48% of small business owners felt their businesses were being curtailed by banking restrictions. That figure is up from 44% in the previous year. All the initiatives the Government can bring forward are important but the elephant in the room for the past three years has been that the banks are not lending as they should to business. I do not want them to lend to businesses that are not viable. None of us proposes that.
We had a case in my constituency in north Dublin. I will not mention the company's name but it is well known. As a result of the Bank of Ireland arbitrarily withdrawing the company's overdraft facility, 48 people were made redundant before Christmas. I have written to the Minister, Deputy Bruton, about the issue. The Minister, Deputy Joan Burton, is trying to assist in terms of the redundancy payments and, if the Minister present does not mind, I will pass the details to him also. This is a clear case involving a profitable company with 48 staff which is 25 years in the recyclables business. It was a market leader and broke new ground in this area 25 years ago but Bank of Ireland pulled the plug. Mr. John Trethowan will say, as he rightly states in the report, that there are two sides to every story. That is understood. I know this company inside out. I have a background in finance and therefore I have an interest in that. Our biggest single issue is credit.
I ask the Minister about costs and commercial rates. In my local authority of Fingal County Council — I commend the county manager — the councillors and those who supported the last four budgets in Fingal have seen significant reductions in rates. We have had reductions of between 6% and 10% year on year. That has been done because of the late Minister, Mr. Brian Lenihan. On the basis of a local authority making savings and showing that savings are made, there was a repatriation of the amount of savings from the Department of Finance to the local authority. If we set a target for Fingal of savings of €10 million and it reached 40% of those savings, they were repatriated to the council. In recent years the county manager, Mr. David O'Connor, proposed to the members that those savings would go directly to reduce business rates. That approach incentivises county councils to reduce their costs on the basis that they will get a rebate, and that rebate goes off against commercial rates. I ask the Minister to examine the Fingal model on that because it is working.
The county enterprise boards are crucial. They were not given enough support by many Governments, including the previous Government. For small start-up businesses and existing businesses that are finding it difficult to trade the county enterprise boards provide an excellent resource. The county enterprise board in my area, headed by Mr. Oisin Geoghegan, does a superb job and more businesses should be aware of what the enterprise boards do. We must do some work on letting people know about mentoring, grants and various other services.
On the cost to businesses, and this goes against my party's stance on the issue, I support the initiatives the Minister, Deputy Bruton, is taking with regard to premium hours and Sunday rates. Having been in government I am aware of the pressures small businesses are under. In the retail and hospitality sectors the premium rates and Sunday hours must be tackled. If an individual is working from a Wednesday to a Sunday, that is part of their working week. Obviously, bank holidays and exceptional circumstances should be included. I welcome the initiative on the ability to pay principle for a business. It should not be abused but I support the Minister, Deputy Bruton, in what he is trying to do, and the Minister. We must become more cost effective and Government has to support our businesses to do that.
I refer to the back to work allowance for people who wish to set up their own businesses. They may have lost their jobs and want to become self-employed but the process in terms of the Department of Social Protection, FÁS or SOLAS does not work as well as it should. I ask the Minister to examine that because people who have lost their jobs are coming up with good business plans and good business ideas and they can apply for the back to work allowance. That means they get at least a portion of a salary for the first year which is reduced into the second year but it takes an inordinate length of time to get that approved. It is a confusing system for people also. I ask that something be done between the Minister's Department and the Department of Social Protection to ensure that process is more seamless and that we support people who want to get back into the workforce under their own steam. We should support that entrepreneurial spirit.
Credit is the issue. My colleague, Senator Sheahan, raises that issue regularly. The €3 billion targets per pillar bank, Bank of Ireland and AIB, are not being met. I refer to roll-over commercial loans. In the past two months some of our covered institutions have imposed increases of up to 2% in the variable commercial rate. I ask the Minister to specifically examine that.
When loans come up for review and are rolled over, the institutions in question deem them to be new business and use them to meet their lending targets. When a bank removes an overdraft from a small business and provides for a term loan in its place, that is also deemed to be new business. Irish business people are not fools; nor are we. I am not asking the banks to lend to businesses which are going to fail, rather I am asking them to support those which will survive. They were supported by the same businesses, by us as taxpayers and by the country as a whole to ensure they survived. It is good to see the capitalised banks coming through that system, as they would have gone under. The principle that applied to them should also apply to viable businesses. We need to grapple with that issue which is a difficult one. The Minister of State should not believe the figures he is being given by the banks. We need to drill down into them, as it is not new business. The banks are not supporting businesses.
I again welcome the Minister of State, Deputy John Perry, whose business background means he is well placed to understand the needs and difficulties of small business at this time. The problems in large and small towns reflect what is happening worldwide. However, the statistics show that exports are booming. If one confined one's analysis to exports, one would think Ireland was doing very well. However, I know from experience that the problem is that the domestic economy is flat. We have to get it going and cash moving.
I have been in business for over 25 years. The difficulty when things get tight is that cash stops flowing. It is like oil in an engine and it is happening everywhere. At Christmas, the strength of sterling gave a small boost to businesses in the Border area. Although it was welcome, it also gave a false sense of optimism. If sterling had been weak, many more retailers in Border areas would have gone under. There is a fear that any currency fluctuations next year will have a detrimental effect on the establishment of businesses.
I agree with Senator Darragh O'Brien in what he said about credit. If a person from a Border area goes to a bank to look for money for his or her business — he or she might have a good idea and some finance in place — the first question the bank will ask is how he or she will cope if the value of sterling increases or decreases. That might be the difference in the business surviving, but that is a bigger issue for the longer term.
One section of the report relates to the management of the crisis. I do not think a single business in the domestic economy can state its future is secure. It is important to bear in mind that every business established in the past 15 years has seen the good times, but not many of them allowed for the difficulties being experienced. They thought the Celtic tiger would continue. In addition to helping people to set up businesses, we need to help them to manage their businesses in order that they will survive the difficulties they are experiencing. The stark reality that businesses are suffering was set out during yesterday morning's briefing by the CSO when it was made clear that if cash and credit did not start to flow, more companies would fail and more people would emigrate.
The lack of confidence in the domestic economy is stark. I encourage the Minister of State to develop facilities that will help people to manage their way through the crisis. Many of the small business people to whom I speak say they do not know where to turn. They are sometimes in denial until things reach the stage where it is too late to do anything. They should know that help is available.
There is no lack of help for companies when they are being set up. If one contacts the relevant agencies, one will receive very good help and support. However, if one has a viable company which is struggling, one might not be able to receive the extra help one needs to get through the difficult times. Senator Darragh O'Brien spoke about a company in his local area which had waited until the last minute, when the bank called in its overdraft. It would be useful if a mentoring service or advice was provided for such companies at an earlier stage.
When I set up my own business, I did not have much experience. I had to manage each month until I reached a position of viability. I suggest help should be provided in the middle and at the end, rather than just at the start. Therefore, I welcome the establishment of an advisory group comprising people with experience in small business. I hope the group will examine these matters more closely. The availability of mentoring services needs to be advertised. Accountants often fail to see beyond the bottom line and are happy to sign off by saying things need to change. However, the company in question might not know where to go. I ask the Minister of State to ensure greater emphasis is placed on this service.
I remind the House that those who have spoken in the debate cannot do so again. I have to be careful because if someone speaks twice during a debate, it is a major breach of protocol.
I give a warm welcome to the Minister of State, Deputy John Perry. I thank him for his commitment to the House which he has attended on a number of occasions and his contributions on each occasion have been worthwhile. It is clear from the comprehensive statement he made earlier in the debate that the Government is aware of the importance of the small business sector to the economy and its potential to generate employment. I agree with Senators Darragh O'Brien and Maurice Cummins that the Minister of State faces difficulties as he tries to eliminate red tape, bureaucratic madness and bungling.
I was struck by what Senator Darragh O'Brien had to say about the hospitality sector when he agreed with the stance being taken by the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton. As someone with a background in the tourism and hospitality sector, I understand well the importance of flexibility in this context. Saturday and Sunday are part of the normal working week in the sector. Every day is the same for those trying to fill hotels and guesthouses. That is an important aspect of the debate.
I welcome the package of initiatives outlined by the Minister of State, the aim of which is to directly assist the enterprise sector. A combined total departmental budget of €980 million, comprising €366 million in current spending and €514 million in capital spending, has been allocated to the sector in 2012.
All Members agree with the Minister of State that access to credit and finance is the key issue facing the small business sector. This point was ably reinforced by the two previous speakers. Lending targets totalling €21 billion have been imposed on the two domestic pillar banks in the period 2011 to 2013. The introduction of a targeted temporary partial credit guarantee scheme and a microfinance loan fund should assist in the flow of credit to small and medium-sized enterprises which, in turn, should sustain employment and create new jobs. As Senator Darragh O'Brien said, we know that what has been set out in this regard is not what is being followed.
True.
There are mistakes and errors in the system. Although Mr. John Trethowan and his staff are doing a very good job, many are not aware of the existence of the Credit Review Office. They do not know they can submit an appeal when they are refused credit. Perhaps more use might be made of this facility. Mr. Trethowan, a former banker, is a good and practical man.
Everything is so centralised in the two pillar banks that there is no longer a reliance on the local bank manager. One of the inherent flaws in the system is that the authorities in Dublin are calling the shots. I accept that in the case of AIB everything goes through the county business centres. I have nothing against the people who work in them, but they often come from other areas. They do not know the credit rating or the history of some of the businesses with which they are dealing. There is not a need for what they bring to the process, as they are too concerned with red tape. The banks need to return to the system under which they used to be able to receive a quick report and a recommendation from the local bank manager. He or she is usually a person of experience who has come up the ranks and spent several years in banking. I know this subject is close to the Minister of State's heart, but I suggest it needs monitoring. I am aware that some other Ministers have an interest in this area and perhaps the Minister of State could liaise with them or with the Department of Finance on this. He needs to ride shotgun on the lenders and should have a system of monitoring.
With regard to the move to assist the cash flow and working capital of small businesses, I welcome the initiative to extend the 15-day prompt payment initiative beyond the 15 central Departments to the wider public sector for invoices received after 1 July 2011. I note that the advisory group's report recommends the development of a voluntary code of conduct and payments within the private sector aimed at reducing payment terms. This is vital. I also agree with the two previous speakers, Senators Cummins and Ann O'Brien, with regard to what they said about the county enterprise boards. We must find ways to increase links in that regard because businesses and start-ups are not availing of or relying on the boards. This may be due to a lack of communication and perhaps this is something the Minister of State can aim to improve.
I welcome the Minister of State to the House. We are all aware of the excellent export figures we have had recently. However, this good news belies the real issue that in order to recover, the economy must look to the domestic market. I will highlight three issues that are important in this regard. The report of the advisory group mentions the laws relating to insolvency and debt and the importance of changing those laws. However, it does not deal with one aspect of the situation we had in the 1980s. Then, certain businesses folded up one day and reinvented themselves the following day. I do not suggest there was anything untoward or illegal about that.
Let me give an example. The former Business and Finance publication restructured itself in 2002 and recently, Murano Publishing, the publishers of Business and Finance, folded owing €500,000 to Revenue and other preferred creditors and significant other sums to unsecured creditors. It is these unsecured creditors about whom I am concerned. There is an issue with regard to the current situation because the suggestion seems to be that as long as Revenue and the principal banks are taken care of, we are happy with what is happening. The position of small businesses is not well catered for in this regard. We need to look at the rules relating to restructuring and insolvency to discover what can be done to protect the non-preferential creditors, in particular those who comprise the sector this report tries to highlight. These are small businesses such as those secured against Business and Finance, owed amounts of, for example, €34,680 for one creditor, €11,380 for another and €41,979 for another. These are sums that are very significant to any small business trying to run from day to day and month to month on very narrow margins. I have concerns about that.
The second issue I raise is the importance of expertise. We could go further in this area. It is well recognised that one of the major constraints to the growth of small businesses is management expertise. Part of the difficulty is that many of the courses offered to business are offered in very structured formats and are time constrained, rather than in the format of what I call "just in time" learning, which allows expertise to be given to companies and businesses when they need it. We need to place more emphasis on support and mentoring groups such as Plato. Our third level institutions, our institutes of technology sectors in particular, are also a huge resource that could be made available to businesses through, for example, creating relationships between Plato organisations and local institutes of technology. The Letterkenny Institute of Technology in my colleague Senator Harte's area, for example, is an excellent institution that could be brought in to play to offer that type of "just in time" learning and support to businesses at the point when they need it, for example, in terms of strategic plans, marketing and so on. I envisage a situation where qualifications could be earned by entrepreneurs and business persons on the basis of the business plans they prepare. In that way we would not just provide people with help, but would give them expertise that would be of value to them in the future.
The third issue has been touched on by a number of other speakers and relates to funding and money. We are all aware that our banks are not lending. The State is pouring money in at the top level, but it is not filtering down to the bottom. This concerns not only small businesses but the mortgage market. One of the groups not mentioned in the report of the advisory group is the construction sector. It is now down to forming just 3% of our GNP, but as any statistics show, a vibrant economy needs a construction sector at or around 10%. There is significant difficulty in that regard. We will never grow back to those levels if we do not have finance coming into small businesses. Many of the small businesses here were construction companies, based in small communities and employing two, three or four low-skilled workers. I am not being critical, but we will not solve this problem through the micro-finance fund or the partial credit guarantee. We need to look again at the resources available to us. The State now owns the branch network of the INBS, the old Irish Nationwide Building Society, which I understand is on the market. I suggest we do not sell that branch network, but reopen it as a bank aimed at small business and at the ordinary man on the street. As we know the main banks are not lending and that no amount of carrot and stick will make that proposal work, rather than putting money into them, why do we not get around that problem by using the facilities that are available to us and putting the money directly through those facilities to the people who need it?
I welcome this debate and welcome the Minister of State to the House. My main bone of contention is the lack of credit from the banks. I will tell a brief story. In 1977, my father had just died and I, armed with an honours law degree, approached three banks with my mother, God be good to her, seeking to borrow £100 to send me to Dublin to the law school there at the time. We were refused the loan of £100 by all the banks, which we found difficult and embarrassing because they had the money to lend. I came out ashamed from the last bank. Eventually, one of the banks rang up and said that if my mother signed as guarantor we could have the £100.
Now the banks may not have the money to lend, but we are back in this sort of situation. Now, because of lack of credit, restaurants, drapery stores and small corner shops in our streets and towns will close. When the problem with regard to offshore accounts was uncovered, what did the banks do but go off and do a sweetheart deal with Revenue and hand over the names of everybody involved. I did not condone offshore accounts, but many people were advised by the banks to put their savings into them. As a solicitor, I was asked by bank managers if I knew of anybody getting a few bob from a claim or selling an acre or a site, and asked to send them down to the banks to be sorted out with an English bank account or whatever. That was rife at the time, but when the muck hit the fan, the banks did their deal. I knew one man who committed suicide over a small little bit of money. He had €4,000 or €5,000. I do not know what the banks told him, but he, an elderly man, could not handle the shame for his family and he got the rope. That happened, but the banks did not give a damn.
The previous Government bent backwards to help the banks in their hour of need. It probably went too far with bank guarantees and all of that. Anglo Irish Bank should have been put into the bottom of Bantry Bay, with 20 tonnes of stone on top of it to keep it down. That is my view. All the banks seem to be interested in now is profit and they are closing little shops and not so small businesses. I know of a restaurant that closed in west Cork last year because of an overdraft of €20,000 being reduced to €10,000 unilaterally without any prior consent or consultation by the bank and a Revenue debt of €12,000. The restaurant employed a total of 21 full-time and part-time employees. This is short-sightedness. It was a successful restaurant which was very popular.
I also know of a drapery store and a sports shop in west Cork which are surviving from day to day. It is almost like begging as each day they wonder whether the bank will allow them to continue in business. The banks state that they are lending but I also know of a man in Dublin who is not very well paid but in a profession and whose wife is a midwife. They have saved approximately €40,000 and are trying to get a loan to buy a house. They have been trying for three years and still have not received a loan and this is a good time to buy property.
The Government should no longer pay lip-service to the banks. We own the AIB, whether it is a good or bad thing, and have a share in the Bank of Ireland. We also own several other banks. I do not mean this in a derogatory fashion but the Minister, Deputy Noonan, the Taoiseach and the Tánaiste should bring in the banks and kick their backsides a bit because they are not lending. We see and hear advertisements in the media stating that if people deal with particular banks, those banks will look after them. However, they are not giving credit to businesses. Let us be fair and honest about this. If I do one thing today I want to nail thislie.
Another issue crippling small businesses, and I am not sure how we can tackle it, is that of rates. Much re-rating of property took place in the late 1980s and 1990s. I know of one property struggling to pay now which was re-rated for €26,000 or €27,000 from €9,000. The business people accepted it at the time because it was a boom and money was being made, although they challenged it as much as they could. The Valuation Office decides the rates but we blame the local authorities which collect them. They were decided in the boom and no thought was given to a downturn. It is like building a boat for calm weather, but sometimes one must go out on a day which is not that calm. Rates are crippling many businesses, as are the abnormal rents some people charge their clients.
This morning I advised a friend of mine who has a little shop and who is in difficulties. Rather than closing the shop he plans to lease or rent it for three or four years until the economy recovers. It has been in his family for five generations. My advice was to set the rent at an amount which will not give him much profit but which will ensure the tenant will survive. He accepted it as good advice. He does not have a mortgage on the building but the business is going down the Swannee. H proposes to lease it for three or four years after which he might be able to sell it and make a few bob or when things come around — as they will although it might take three, five or seven years — another family member might be able to meet the challenge again.
My main point is that I ask the Minister of State to go back to the Minister and the Cabinet and ask them to tackle the banks and get them to face reality. If the Government does not do so the closure of small businesses in the next 12 to 18 months will be frightening.
I agree wholeheartedly with what my colleague, Senator O'Donovan, stated with regard to the banks. From my experience I have no respect for banks and have not had for a long time. In 2000 I bought a business and I wanted an overdraft facility of £15,000 but the banks would not give it to me. Three days prior to opening the business, 30 miles away from where I was born and bred, I did not have an overdraft facility. However, when push came to shove we opened and worked away. Several years later, when business was going very well, I purchased a site where I wanted to build something like the Minister of State has, namely, a bigger supermarket than I had. When I asked the bank for €500,000 a manager and two members of staff came out to me with two laptop computers and before they left they were offering me €3 million that I did not ask for. I then lost much more respect for bankers. Recently, they took an overdraft facility and rolled it into a personal loan. One can imagine my esteem and respect for banks. I will have to be restrained in what I state about them.
I concur with what Senator O'Donovan stated about rates. Businesses had no problems paying rates when things were going well. On an annual basis we had an approximately 3% top-up on the rateable valuation. However, businesses paid this because they had the footfall and turnover and things were going well. Now, we have the reverse situation. In fairness, the majority of local authorities are retaining rates at current levels. However, they were good enough to increase them by 3% per annum while providing no extra service and they should now roll them back when the footfall, turnover and margin is not there for businesses.
An issue that gets lost in the debate about self-employed people and small businesses is that nobody takes into consideration the self-employed person who works 100 hours a week. Nobody in small businesses works 39 or 40 hours a week; the minimum any of them work is 80 hours a week but now they work up to 100 hours a week. In many cases, they do not take a wage or salary from the business. They are living from it but they do not take a wage or salary, and this is lost in the debate.
One of my constituents established three businesses in 2011 and employs 300 part-time and full-time workers. When he established those businesses he did not receive even €5 of an overdraft or stocking loan from his bank. He received no assistance. The problem is very acute in certain industries. My family is involved in butchering where the price of stock has increased by 100% over the past two years. Sheep now cost €150 per head and animals cost up to €1,200 per head, but people cannot get an increase in their stocking loans and banks have withdrawn overdrafts. How can a businesses continue when the cost of the stock in which it trades has increased by between 50% and 100% but it has no stocking loan or overdraft facility to carry it? It cannot do so.
With regard to receivership and insolvency which was mentioned, Revenue must be paid, banks must be paid and the last people to be paid are the creditors. What happens then? The creditors' businesses close because they cannot pay Revenue, the banks or their creditors. It has a domino effect down the line. There should be a more equitable manner of dealing with insolvency and receivership whereby creditors receive something. In the vast majority of cases they do not receive anything but there should be a pro rata payment system to Revenue, the banks and creditors.
Former trading records and business records mean nothing to banks any more. It means nothing to banks that a family business has been trading for 100, 120, 50 or 60 years.
We must also be very careful about the following issue. I know of companies that let go staff prior to Christmas to avail of the 60% redundancy rebate rather than the 15% redundancy rebate. It was a bad move and we must be careful——
The Senator has gone way over time.
——in terms of the sick leave for which companies are expected to pay.
I welcome the Minister of State to the House. Our topic of discussion is the No. 1 issue in the country and I will speak on the solution to the problem.
Several people from Valentia and I published the Valentia Island Red Tape Report, which examined how bureaucracy was preventing job creation on the island. Expanding on this microcosm highlights the number of private sector jobs that the Government is preventing from being created. On Valentia Island, 72 full-time jobs, 42 short-term construction jobs and 25 seasonal jobs were being prevented by the Government. If the Government could cut the red tape, private enterprise could create jobs for those who need them badly.
I will give examples of the Government preventing job creation. A marina was proposed for the island. The breakwaters are in place, but the foreshore licensing process is too bureaucratic. The Foreshore (Amendment) Act 2011 does not outline the timelines necessary to allow people to go through a process and get results quickly. In one case in County Donegal, people have been trying to get a foreshore licence for four years. Galway County Council went ahead and installed a pipe because it could wait no longer for the Department to make up its mind.
Some 35 jobs are being held up because the foreshore licence in respect of the Valentia marina is not being sorted out. In one boatyard, a boat builder wanted to expand his operation but was prevented from creating 20 jobs by bureaucracy because a man who had a holiday home in the locality objected. While this was the objector's right, in England and other jurisdictions one is only allowed to object if one is a full-time resident living within a certain distance of the site to which the planning application pertains. A man who lived in the area for a few months per year objected and prevented 20 people from being employed. The boatyard lost out on its tender for constructing rigid inflatable boats, RIBs, for the Irish Coast Guard. It could have built RIBs more cheaply than the Irish Coast Guard, but the manufacturing job went to England. We were borrowing money from the IMF to build RIBs in England when we could have created five jobs at home. A hotel next to the marina wanted to expand but was told that it would not get planning permission because the infrastructure was not in place, that is, the sewage treatment system needed to be upgraded.
I will turn to more comical job creation issues. Someone wanted to install seaweed baths in an existing building, given that tourism is a major concern in County Kerry, but the person was refused permission. One of the grounds for refusal was that the building could be seen from Sleigh Head. I do not know whether the Minister of State has ever been to Sleigh Head near Dingle, but one would want very powerful binoculars to see Valentia Island, never mind the proposed seaweed baths. The objection was made by An Taisce and did the State no service. These were not reasonable grounds for objecting, but the Government believed it was a good idea to refuse permission to someone who would have created jobs.
Bureaucracy, red tape, licensing issues and delay after delay prevented from proceeding, an art gallery, a retail unit and a scallop fishing endeavour that would have created 15 jobs. In such situations, people eventually give up. They cannot deal with this level of bureaucracy. In a country that is starving for jobs and in the case of Valentia Island in particular, bureaucracy seems to be one of the greatest obstacles. Although we need systems, they must work and be transparent. As we all know from our constituents, they submit applications, provide the documents requested of them and, after the deadline has passed, are asked for even more, delaying the application process for months.
We have discussed Seanad reform. In light of our public consultation system, I suggest that organisations such as IBEC, the unions and those with an interest in creating jobs propose detailed, analysed legislation on how the Government can cut the red tape that is preventing job creation and ensure that people return to work.
I welcome the Minister of State to the House. We are in the second half of the debate and many of my points have already been made. Several Senators referred to the role of enterprise boards and development companies in helping small businesses to start up and survive. These two groups should be taken under the remit of local authorities. In some cases, the people who need their services are not aware of their work, as they are not making themselves known in communities in the way they should. The established position of local authorities in their communities would provide greater exposure to enterprise boards and development companies. Greater democratic accountability would also be afforded to the dispersal of the moneys they provide to local businesses and entrepreneurs.
In recent years, the level of grant assistance provided for enterprise boards has decreased, resulting in most boards running out of money by the end of the first quarter. For the rest of the year, they have no money to provide for the applicants they accept.
During the debate, a number of Senators referred to the ordinary, small town businesses, for example, butchers and bakers, that are closing down because of multiples entering their areas. The five large multiples are Tesco, Dunne Stores and Superquinn. The names of the fourth and fifth elude me.
Aldi.
Aldi and Lidl. Up to 80% of retail trade is handled by these multiples, leaving 20% for small businesses. One might ask how this has happened in Ireland but not elsewhere in Europe. Planning regulations in mainland Europe protect artisan businesses such as butchers, bakers, fishmongers, and so on. In Ireland, we have allowed the Tescos of this world to sell everything from fish to meat to bread in store and unregulated. Therefore, we have wiped out our towns' artisan main street shops.
It is not too late to do something about this. Many towns have survived because the large multiples have not come to their doors yet, but they are on the way. Something can be done for certain areas.
Many Senators have discussed my next point, namely, commercial rates. Some 13 staff work in the rates valuation office. If a business or local authority applies for a general rates valuation for a town, it will likely need to wait years for it to be done. The most recent valuations took place in Donegal. In most cases, its property rates were decreased.
The calculation of rates is a blunt instrument and no account is taken of a company's trading figures. There must be a link between how a company is trading and the rates it pays. If this was the case, we would have a fairer system. I ask the Minister of State to take a serious look at this proposal.
Many speakers, including Senators Sheahan and O'Donovan, mentioned that smallbusinesses cannot get finance to sustain their businesses. I have been contacted by manysmall businesses, which are limited companies, who have put vast amounts of money intotheir pension funds and who, because of current legislation, are unable to access thesepension funds which they wish to invest in sustaining or growing their businesses at full risk to themselves. However, legislation to allow this would be required. When legislation in this regard is introduced in the House in the coming weeks, the Minister of State should supportit.
I am delighted to be here again. I note there is to be a three-hour debate this afternoon on jobs ideas, which will be an important debate. I discussed earlier with the Leader the importance of ensuring the advisory group, which is the group that advises Government on actions for business, receives a copy of the transcripts of that debate and is given an opportunity to respond. Some great ideas were put forward during last week's debate, as I am sure will be the case today.
I thank all Senators who contributed to the debate today and last week on the report of the advisory group for small business, The Voice of Small Business — A Plan for Action. I appreciate the quality of the interventions and acknowledge that many Members spoke from personal experience of running successful businesses and the challenges in that regard in the current economic climate. I thank Senators Mary White, Mary Ann O'Brien, Fergal Quinn, Tony Mulcahy and Jimmy Harte for their business insights. Many useful points were made by all Senators. The Government must listen to and take on board the many good ideas put forward by Members of this House.
All Senators who contributed welcomed the setting up of the advisory group and the dialogue structures that have been put in place. It is important that there is dialogue with people who have first-hand knowledge of operating a business. The Government cannot create jobs but it can create the environment within which employers can retain and create new jobs. I welcome publication of the group's first report, in respect of which I thank Senators for their respective contributions, which have been noted by the Department and will be brought to the attention of the advisory group who will listen in to this afternoon's debate on jobs ideas. I thank Senators for their support of the work of the advisory group. Small business is the backbone of this economy. Access to credit is the lifeblood of business. People who run their own companies know only too well the difficulties currently being experienced in this regard.
Many Senators spoke about the no problem-no business concept. Business is about problems and dealing with them. The taxpayer has invested heavily in the banking sector and the banking sector is now duty bound to invest in companies that can create jobs. This does not appear to be happening. Senators also acknowledged the importance of the small business sector to the future well-being of the economy and local communities throughout the country. Some Senators outlined examples of where small businesses can make a real difference to local employment, thereby helping to build local confidence and self-belief. Management of local enterprise and artisan companies was mentioned. It is important, in the context of regeneration of town centres, that the advantages of the stand-alone shop versus the multiple is taken into account. It would be a real tragedy if, as is the case in the UK, all our town centres were closed down. Planners must ensure this does not happen. The message of building confidence and self-belief must be highlighted and encouraged at every opportunity.
Practically all Senators who contributed to the debate over the two sessions referred specifically to access to credit as thekey issue facing small businesses at the current time. I referred last week in my remarks to the Seanad, to the various initiatives taken by my colleague, the Minister for Finance, Deputy Noonan, to restructure and recapitalise the banking system, which is the Government's principal response to making the banks once again fit for purpose and in a position to make credit available to viable businesses. The loan guarantee scheme and micro-finance funds are additional Government responses to supplement normal bank lending and to provide additional lending where specific measures are warranted. However, this will not substitute for banks doing their job. The banks have been well capitalised. My colleague, the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, is working to implement these two initiatives. The pillar banks operate in an arms length capacity in relation to their operational issues. It is a matter for the respective individual boards and management to determine and implement operational policy in their organisations. Given AIB is in State ownership and the Government's stake in Bank of Ireland, it is important that these banks meet their obligations.
Senator Clune highlighted the fact that when businesses are applying for credit they must have credible business plans. As a businessman, I fully agree with this as I know the importance of being able to show the reasons for requiring credit and one's capacity to repay any loans from ongoing cash flow. This is all about confidence in the economy. A series of meetings are to be held with Mr. John Moran, head of banking, to discuss the issues pertaining to companies experiencing huge difficulties in terms of accessing funding. Mr. John Trethowan, of the Credit Review Office, has commented on this issue in his quarterly reports. Some €3.5 billion has been invested in the two pillars and they must meet their obligations.
Allied Irish Banks and Bank of Ireland, working with Mr. John Trethowan, have developed standard credit application forms in order that customers can clearly see what information is required in support of an application. This will ensure customers who wish to shop around between banks are not faced with different sets of information requests. The application form has been standardised and simplified. Where appropriate, small businesses can seek assistance from Government agencies, including Enterprise Ireland and the county enterprise boards to ensure that their business plans are as developed as possible. It is important that viable small businesses refused credit are not afraid to use the banks' internal appeals systems and that if this route proves unsuccessful, they consider seeking the assistance of the credit review office. There is no question of the banks taking a negative view of customers who follow these procedures. The more people who use these procedures, the better picture we will have in terms of the banks' performance in meeting the needs of viable businesses.
Small businesses also have statutory rights under the code of practice on SME lending, which is overseen by the Financial Regulator. I highlighted last week that both pillar banks have given commitments to sanction lending over the period 2011 to 2013 as follows: at least €3 billion in 2011; €3.5 billion in 2012 and €4 billion in 2013. It is important the banks deliver on this and do not, as suggested by some Senators, engage in reinventing or recapitalising existing loans. The banks must engage in new lending rather than in reconfiguration of existing loans. Senators Mulcahy, Comiskey, Ó Murchú, van Turnhout and Keane raised the issue of access to credit from banks. That is very important. The Government will monitor lending patterns to ensure banks honour commitments. Furthermore, the Taoiseach, the Minister for Finance, Deputy Noonan, and the Minister for Public Expenditure and Reform, Deputy Howlin, will meet representatives of the banks to ensure the €3.5 billion from both banks — or €7 billion in total — will be lent to small companies. We must see this benchmarked independently with Mr. Trethowan. The Government will monitor the issue and I will return to the House to provide an update on the matter.
This House will consider recommendations for business this afternoon and the Government is in listening mode. The small business advice group will take on board recommendations from the Seanad. I spoke to the Minister, Deputy Bruton, this morning, and we are anxious to respond to that debate as all the contributions from today and last week are very important. People do not want lip service and there should be a meaningful benefit for small companies. The backbone of this economy is made up of 200,000 small companies employing 655,000 people. We should never lose site of an employer and the wonderful initiatives such people take, in partnership with good staff, despite risk.
As part of this monitoring process, we are also holding a series of regional meetings around the country in the coming weeks, with the banking section of the Department of Finance, to discuss access to bank credit with key local stakeholders. I will be on that roadshow with Mr. John Moran from the Department. It is important that when these meetings are advertised we get people to clearly debate the issues. We will get small firms associations and representative bodies to attend as well. These meetings will explore the findings of the latest Mazars survey on credit demand published by the Department of Finance late last year and look at the actions being taken by the Government to improve access to credit for SMEs.
Yesterday's report from Enterprise Ireland indicated the highest export level ever in this country and that can lift the mood of the domestic economy. There is much pessimism out there, even within some media outlets, and some of the companies and small businesses I have seen would lift the confidence of employers and the domestic economy. It is amazing how jobs can be created, and people must be optimistic for the future. Considering the successes of some extraordinary companies in Ireland, which I have seen at first hand, I am encouraged about the capability and competence of business people. They know how to deal with recessions and can manage the crisis.
The meetings will allow both our Departments to hear at first hand the views and experiences of local business representative groups, local bank representatives and State agencies on access to bank lending. I very much look forward to fruitful and constructive exchanges at these meetings. It is important that these meetings compliment the information provided by the Mazars survey and ensure that ongoing and future Government policies on credit to SMEs are based on as much information as possible and be implemented as soon as possible.
The Mazars survey has shown that 36% of SMEs surveyed requested bank credit in the period April to September 2011, and when applications pending were excluded, 70% of those requests were approved. With the 64% of SMEs which did not request bank credit in this period,80% did not need credit or had sufficient internal reserves and 7% believed the banks were not lending. Access to the Mazars report is available through the Department of Finance website. It is important to study it as it runs contrary to what one may hear from those in business. We intend to have those meetings around the regions to discuss the findings of the report.
Senators John Kelly, Quinn, Mullen, Reilly and Harte highlighted the issue of red tape and administrative burdens being placed on small business. We want to keep processes simple and issues such as the numbers of licences required to sell food, burdens placed on employers in the area of employment law and wage rates, rents and local authority rates costs have been raised. These are important, and we must consider the number of inspectors that come to a company, and regulation. Senator Darragh O'Brien mentioned Fingal, where rates have been reduced, and some local authority regions have tried their best not to increase them. The cost of doing business by Government agencies must be reduced. Initiatives are being taken by the Minister, Deputy Bruton, with regard to wage setting arrangements under EROs and REAs, which are addressing labour market costs and flexibilities. I welcome the support for this. The job was difficult because the arrangements have been in place since 1946, and Sunday is very much part of the working week now. Any employer must take those changes into account when managing staff.
Local authority structures and reforms have been highlighted and are also being advanced by my colleague, the Minister for the Environment, Community and Local Government, Deputy Hogan, in consultation with his ministerial colleague, Deputy Bruton. We will work on management within local authorities, volumetric water charges, refuse charges and other costs from local government on small companies. These can be prohibitive and there may not be a return from local government. We must encourage enterprise and small companies to retain staff. It is far simpler to encourage employers to create a job than make somebody redundant.
In my capacity as chairman of the high level group on business regulation, I am working across Departments with a view to reducing burdens on business. Progress has already been made in a number of areas, including in my own Department, where we already have cut the administrative burden it places on business by 22%. My Department has measured administrative burdens arising in three key areas of regulation, namely, company law, employment law and health and safety law, which amounted to some €831 million per annum in costs for business, which is outrageous. The Government's target is to reduce these burdens by 25%, and this dictates that €208 million must be cut from these costs for business. At this stage, €187 million of this €208 million target has already been reached. We are also working across seven Departments and the Revenue Commissioners in reducing administrative burdens for business, and this work is to be completed by mid-2012.
I am personally taking an initiative to convene "simplification workshops" in all the major areas of regulation affecting business. These workshops will be arranged shortly around the country, and I would encourage business people to attend them and help us to identify the most practical ideas for reducing measured red tape costs. The advisory group's report also makes recommendations in this area and they will be progressed in consultation with the high level group on business regulation. This is about cutting regulatory and administrative burden on companies. We are anxious to get the report from Senators on today's debate and how they feel the regulatory burden can be eased.
I also referred last week to the initiative to extend the 15-day prompt payments initiative beyond central Governments to the wider public sector in respect of all valid invoices received from 1 July 2011. This is further assisting the cash flow of many small businesses. Business can follow the lead of Government and do more in paying suppliers on time. I will be discussing with relevant stakeholders the introduction of a voluntary code of practice for businesses to improve payment performance. There is an opportunity for businesses, especially bigger businesses, to respond favourably to such an initiative and contribute to the stability of smaller businesses.
Senator Cummins mentioned the management of cash flow and it is important to consider other methods of funding, such as crowd financing. The issue of enterprise boards was raised and there will be an announcement shortly regarding a single point of contact in every county for anybody establishing a company. There will be a reconfiguration of enterprise boards and a new initiative with local government. There will be a one-stop shop for doing business, involving a reconfiguration of services to eliminate duplication.
The matter of procurement was raised, particularly with regard to the €15 billion of State contracts. We had a meeting yesterday with the Minister of State, Deputy Hayes, on procurement contracts for Irish companies. We are considering a procedure that will allow small companies to access this critical area. Senator Darragh O'Brien raised the matter of credit and I advised him to send me details of the company to which he referred. He also referred to the fact that the Fingal County manager had reduced rates by 60% and this is a model we will look at. He emphasised the role of enterprise boards, mentoring and support for small companies, which are important issues. Senator Darragh O'Brien was also in agreement on wage rates and the back to work scheme, which is very important. He made a point about the roll-over of commercial loans. Regarding banking and giving facilities to businesses, the message is very clear that this is about jobs and supporting viable companies. The banks have a critical role to play.
Senator Harte made a point about the CSO figures released yesterday, which I have seen. Managing our way out of the crisis is very important and mentoring ideas are important. Senator Coghlan referred to monitoring banking and enterprise boards. We are dealing with this. Senator Hayden referred to unsecured creditors, which is an important point in respect of non-preferential creditors and the importance of just-in-time learning. Mentoring companies, Plato Ireland and the ICT sector have great potential. Dealing with the construction sector is also critically important.
Senator O'Donovan referred to the loan guarantee scheme, which we must examine from the viewpoint of rents and rates. Senator Sheahan referred to county enterprise boards, artisan products and trade. It is important that we deal with that and rates and valuations are equally important. Rates have a major effect on companies. Senator Sheahan's point concerned banking. Senator Daly used the example of the difficulties Government imposes on the development of companies, the potential of Valentia Island and the disincentive to create jobs.
Getting enterprise boards working with local authorities and the recognition of small enterprise companies is very important. I have tried to give due recognition to the points made over the two sessions. If I failed to mention any Senator by name, I ask Members to accept my apologies. I listened carefully to what has been said and I will give due consideration to the points made. Small businesses are not just a vital part of the economy, they play a vital role in our society and in our local communities. I refer to community regeneration and community enterprise, which we must tap into, and community economic development, which was very successful in past recessions. It is amazing how one can get the regeneration of the community through community economic development companies. We must look at this effective model once again. It is about bringing the lifeblood into the empowerment of communities and the empowerment of business people who can give of their time in mentoring, which is very successful.
The BIC Network is having what will be a very successful event in Cork in the coming weeks where 21 successful business people mentor start-up companies. Many successful people have retired from companies and they can give of their time. As Minister of State with responsibility for small business, I intend to continue to ensure that the business environment supports them. Our future economic prospects depend on sustaining a strong entrepreneurial spirit, even in the face of unprecedented economic challenges. The Government is focused on ensuring small businesses are supported in every way to develop their businesses, increase exports, create jobs and rebuild the economy.
I thank every Senator for participating in this debate. It is important to buy-in to this document. Many reports were published in the past and it is very important that we empathise with business people. We must recognise them, understand them, display concern and respect and the Government will give service to smaller companies that are the backbone of the economy. They are run by the people who create up to five jobs. If 25% of the 200,000 small companies created just one job, we would have 50,000 jobs at little or no cost to the State. It is important to lift the mood of the economy and encourage people who have entrepreneurial ideas. They should be encouraged and supported and the micro-finance fund will strongly support the commercialisation of knowledge through third level colleges. This represents a major business opportunity.
I thank the Cathaoirleach for setting aside time over two days in this very important discussion. I look forward to coming back to this Chamber to discuss further reports.
I thank the Minister of State. I acknowledge the presence of the French ambassador, Her Excellency Emmanuelle d'Achon. The House extends a welcome to her.
One of the Senators believes that some questions were left unanswered from the last day of debate. Has the Minister of State replied to all points raised?
Yes. It was a fantastic speech.
Issues raised last week will be taken on board. My officials intend to reply to every Senator on the issues of concern. The report has an impact on the job strategy, which the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, will launch in the coming weeks. Many issues that were raised last week will emerge once again in the important three-hour debate here this afternoon. This is a work in progress and I welcome the Leader coming to the special advisory group with ideas from Senators. I can arrange for Senator Cummins to speak to the advisory group on issues debated this afternoon and on some of the points made today and last week. We do not have all the answers and the report is the benchmark of where we are starting from. The five actions in the report have been acted upon. The theme of the debate last week was access to credit, procurement and the regulatory burden on companies. This is a question of recognition, understanding, concern and respect for that critical part of the economy. All Members of the Oireachtas must be conscious of the importance of small business. I value the input from Senators last week. The views of Senators will go to the advisory group and the ideas that emerge this afternoon will be acted upon, hopefully in a way that will benefit all of us. If I did not refer to an area specifically, it is because it would take too long and go beyond the time allowed.
Sitting suspended at 1.10 p.m. and resumed at 2 p.m.