On behalf of the committee, I welcome the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, and his officials. We are meeting to consider the Supplementary Estimate - Vote 34 - for the Department of Jobs, Enterprise and Innovation. A proposed timetable has been circulated which allows for an opening statement by the Minister, followed by a discussion on the Supplementary Estimate by way of questions on each of the two subheads. Is that agreed? Agreed.
Vote 34 - Department of Jobs, Enterprise and Innovation (Supplementary)
I am accompanied by Mr. Paraig Hennessy, Mr. Ronnie Breen and Mr. Stephen Walsh.
I seek approval to make provision in the Supplementary Estimate for additional capital funding of €10 million for the IDA under the industrial property subhead and €2 million for Shannon Development under the grants to industry subhead. These allocations are being provided from savings of €21.5 million in the Enterprise Ireland grants to industry section of the Vote. This figure comprises savings of €15 million owing to timing issues with the innovation fund and an underspend of €6.5 million owing to lower than expected grant claims from Enterprise Ireland client companies. This reflects the impact of the slowdown on companies in which projects have been delayed or postponed.
Approval to reallocate funding is being sought on the understanding these amounts will be expended by the agencies concerned prior to year end to meet matured liabilities in line with public financial procedures. With the exception of a small Exchequer allocation of €1 million under subhead 3 on IDA grants for industrial property, IDA Ireland's property function is self-financing. However, owing to the collapse of the property market, IDA Ireland is finding it increasingly difficult to generate income to meet obligations arising from its property programme. Moneys generated from property sales in recent years have decreased substantially. In fact, the funds IDA Ireland has on hand to meet its obligations under its property programme have fallen from €63 million at the beginning of 2009 and are expected to be less than €10 million as we enter the new year. To ease the financial pressures on IDA Ireland, I propose to provide a further €10 million for it in respect of a grant for industrial property in 2011. Payments of mature liabilities prior to the end of the year will ease financial pressures on the agency and enable it to focus on delivering its strategic agenda in the coming year.
The 2011 allocation for Shannon Development under the grants to industry subhead is €3.6 million. Shannon Development's capital grant payments to its clients are demand-led and for some time the agency has been indicating to me and the Department that owing to increased demand in the region, further funding would be required in 2011 under this subhead. I propose to provide an additional €2 million to enable Shannon Development to meet commitments that will arise under subhead E2 in December. When this proposal is approved, the total Exchequer allocation for grants to industry will be €5.6 million in 2011. This will enable Shannon Development to support 28 projects which will sustain more than 730 jobs in the Shannon region and yield a further 660 jobs when fully matured.
I have no doubt the Chairman and his colleagues will agree that we must take whatever steps we can to maximise job creation and sustainability. To this end, this proposal is timely and I am happy to make this reallocation to assist Shannon Development in sustaining existing jobs and creating new ones in the Shannon free zone. I am happy to respond to questions.
Cuirim fáilte roimh an Aire. It is hard for anybody to understand how an enterprise organisation can have an underspend, considering that there is such a demand on enterprise agencies for the development of businesses. Last night I spoke to two individuals seeking to develop a new wind turbine prototype. They are selling one of their prototypes to one of the universities as an example of what can be done. However, they were told by Enterprise Ireland that it had no money to give them. People are being told funds are not available, yet there has been an underspend.
The detail of how the savings were made is important. The Minister has given a brief outline which we appreciate, but will he give us more detail on how exactly the savings were made? I would also like to know where the money will be spent by IDA Ireland. The Minister mentioned property, a matter on which I hope he will allay my concerns. I am concerned that the money will go to finance or service the property portfolio of IDA Ireland. Is that the case? The Minister mentioned a clear number of jobs to be created as a result of the investment in Shannon Development. How many jobs will be created with the €10 million allocated to IDA Ireland?
I notice the county enterprise boards and Údarás na Gaeltachta were not considered for this transfer of funds. Will the Minister comment on this?
The largest element of the underspend in Enterprise Ireland involves the innovation fund. There was a closing date of 26 November 2010 for receipt of expressions of interest. A total of 32 expressions of interest were received and three funds are being signed off on. The original expectation was that the first drawdown would happen in 2011, but it was not completed and the legal agreements will not mature until the new year. As a result, the first annual payment to the fund from Enterprise Ireland will fall to be paid in 2012 rather than 2011.
There were lower than expected drawdowns in some of the existing venture capital funds which Enterprise Ireland has partnered. These funds are managed privately and demand-led; therefore, the extent to which they are drawn on depends on projects presented. There were also some lower than expected equity investments by Enterprise Ireland owing to a small than expected number of expansion projects. Each element of the Enterprise Ireland programme has different criteria and investments are managed within these resources as effectively as possible. However, they must meet the requirements laid down. Enterprise Ireland needs to consider it is warranted for it to invest equity in the projects presented.
IDA Ireland maintains a property portfolio extending to 1,200 ha and this budget is used to manage them. Increasingly, the money is used at strategic locations in gateways or at sites of strategic importance to the pharma and bio sectors. It is part of IDA Ireland's advance planning to maintain readiness throughout the country to pursue suitable projects. Until projects mature, there is no jobs number connected to them. As I stated, the turnover of such projects, whether by sale or lease, used to generate a considerable income. However, this income is no longer available. IDA Ireland has much tighter funds, but it must still manage the portfolio resource to be ready for projects of significance. It is examining all of its costs. It is looking at leases and the costs associated with the management of its parks. It is also looking at the sale of land which is not commercially of interest to it. It must manage its resources as effectively as it can to meet upcoming needs. Naturally, anyone managing a property portfolio is under severe constraints, but it is still important for IDA Ireland to bí ullamh for suitable projects. I did make an allocation to county enterprise boards. An additional capital of €3.3 million was given to those boards in 2012, and that was permitted without the necessity of a Supplementary Estimate.
Is that Údarás na Gaeltachta?
That is not under my remit.
I asked the Minister for Arts, Heritage and the Gaeltacht but he was not aware that there was a transfer of money from Enterprise Ireland to any of the other agencies' areas. I thank the Minister for that information, however. I have a couple of brief follow-up questions. The Minister made an interesting point that much of the drawdown of funds from Enterprise Ireland is demand led. It is a point I have made a couple of times here at this committee. I wonder if we could alter the culture a little so that Enterprise Ireland markets, educates or gives information out more strongly to local areas. Such an effort could ensure that there is a better understanding of what is available from them. There is less investment by Enterprise Ireland in my own county, Meath, than any other county in Leinster. In some of those years, County Kildare had 12 times more investment.
In order to help the committee, can we obtain details from Enterprise Ireland on the number of applications received for assistance in innovation and equity, as well as the number of such applications that are successful? In that way we can get an understanding of the demand involved and whether or not the majority of applications were successful.
The Minister touched on the spatial element of the IDA. There is increasing disquiet among political representatives in certain counties. In County Meath, for example, Navan is the fifth most populous town in the State yet it holds 29th position in the spatial plan. Therefore, 28 other urban areas are in front of us every time a decision on jobs or development occurs. Will it be in the Government's interest to review or change that spatial plan in the coming years?
The Deputy has posed a lot of questions. I agree wholeheartedly that we need a better understanding from SMEs as to what is available. We are anxious that a broader range of business would examine its own potential for development. To that end, a new export division has been established within Enterprise Ireland which is looking not just at the traditional ten employees plus, but also smaller companies that would have the potential to become exporters. Enterprise Ireland is actively looking beyond its traditional portfolio to try to encourage people to look at their businesses to see how they can break into markets. We will certainly seek to promote that more effectively. If the Deputy has suggestions about how that could be done he should make them known. In addition, chambers of commerce have a role that we would be keen to exploit.
Some programmes like the high potential start-up one are competitive, so Enterprise Ireland supports a target number each year. That does not mean the ones who do not make the cut get nothing, but they are competitive. Similarly, there is a €50,000 start-up fund for ICT and digital gaming companies which require a much smaller start-up figure. Generally speaking, there might be 100 competing for 30 places. They are aimed at encouraging people to think of new projects and then picking the best of them to run with. They are designed to have others applying who may have to come back the following year or refine their project. They are mentored to that end. The high potential start-up company is the elite club of Enterprise Ireland's stable. They are required to be companies capable of creating ten jobs within three years and getting their turnover in excess of €1 million. There is an element of selection as well as being demand-led. I am sure we can get information of the sort the Deputy is seeking.
Obviously the key for any project is that the business plan is sound and warrants the support of Enterprise Ireland. Just as people are turned down for bank credit, so there will be people whose business plan will not make the cut. I do not want the Deputy to say: "Aha, a whole lot are missing". Maybe the project was not well enough developed. This is taxpayers' money so we must rely on Enterprise Ireland in this respect.
The spatial plan is due for review. We are only one element in the bigger picture. The Department of the Environment, Community and Local Government is the sponsor of any such review. In the IDA context, companies come in with fairly clear specs as to what they are seeking, including the depth of the labour market they need. The IDA does not sit and direct projects all over the country at its whim. The IDA offers a portfolio of locations it believes has a fit and then the company starts to work with the IDA on that. If the project is in a BMW region it will obviously have access to a different suite of supports. The first thing for the IDA is to ensure that we win the project for Ireland and then refine it. We do not sit in our offices directing projects all over the country; it is much more a case of companies looking at the fit.
This morning I met with representatives of the Louth Enterprise Initiative which is examining its assets and trying to see how it can have a better pitch, which is always a great help.
I welcome the Minister, Deputy Bruton, and his staff. He mentioned exports and on Friday The Irish Times had an article in the business section about a successful farmyard manufacturing business in the midlands, perhaps in Meath, which is exporting to France. In the course of the lengthy article it talked about the uneven spread of penetration on the Continent from companies and Enterprise Ireland or the appropriate body looking after exports. It was quite critical of the unevenness and lack of strategic thinking. There was a lot of penetration in some countries, while in others there was none. The example was that France is traditionally not that easy to penetrate. The successful companies were talking about the difficulties they had tackled and overcome. They had gained a great deal from that effort.
I am a bit concerned that there may be something lacking in the strategic approach to Europe where some countries seem to have a lot of penetration while others lack that strategic perspective. I wonder if there is an issue there because the article was quite detailed about these gaps and what could be gained from a greater level of penetration across the board. There are markets and customers there, and this company in particular overcame a lot of difficulty but found very profitable outcomes.
That is a fair comment. One of the problems is that in the last number of years we perhaps forgot that we were a small open economy that makes our living from trading. The property boom saw Ireland's export market share fall six years in a row. There are all sorts of explanations for that, including that we became less cost competitive. In the past two years, there is more alertness among business and the agencies to open up new exports markets. They are looking afresh. There is a need to look more strategically and that is one of the tasks of the export council chaired by the Tánaiste.
For example, this year Enterprise Ireland led a trade mission to the south-eastern states of the US, which would be a non-traditional market but where there are rich pickings for Ireland. Some 60% of growth is in those five US states. It is an area we ought to penetrate. This year we had the first trade mission in five years to India. There is a realisation that we need to spread our wings and that growth will come from different locations.
The other side of that is that we must have the companies. Certainly, if one is talking about India or China, one must have companies willing to go the long haul. Entering the Chinese market is not for people who are not willing to look at it as a long-term project, to put feet on the ground and to try to develop it.
Mr. Paraig Hennessy just pointed out to me that Enterprise Ireland looks regularly at its offices across the globe and opens, closes, strengthens and weakens them depending on where success and potential are greatest. The need to open up new export markets will put pressure on the ingenuity of companies and the agencies.
I thank the Chairman and the Minister. In regard to the shortfall in spending in Enterprise Ireland this year, sometimes when there are shortfalls, they have an impact on the next year's budgets. Does the Minister have any ideas on that? Obviously, it is hugely important to support businesses and innovation so I am concerned that because Enterprise Ireland was not able to spend this year, it will affect next year. In regard to Shannon Development, the overall allocation for 2011 is to support 28 projects, sustain 730 jobs and yield a further 660 jobs, which is a good return on investment. How real are those extra 660 jobs and what timeline is involved?
I am not sure I have the timeline for those. The biggest explanation was the €15 million in the innovation fund which will obviously be taken up next year. We have achieved an increase in our capital budgets based on the expected flow of projects. We will have a capital budget next year of €514 million versus €508 million. That is based not only on existing programmes but also where we seek to introduce new programmes, such as the temporary loan guarantee, micro-finance or another call on innovation funds. New programmes will be developed as well as funding existing programmes.
The priority of Government is to support enterprise. As the Deputy will know, if he looks across the capital budgets generally this year, they got a very severe hammering - down €750 million across the board. Against that background, we were allocated an increase in budget. That reflects the importance of enterprise at this time.
In any year, there will be waxing and waning and one must apply uniform robust standards throughout the year. However, we do not anticipate shortfalls or over-provision. One of the features of the agreement this year is that we have been given more discretion to carry over our own resources. For example, if Enterprise Ireland has an equity that matures - say a company sells out and it gets a lump sum back - traditionally that went to the Exchequer and out of our budget. However, under the new arrangement, we will retain that so it gives Enterprise Ireland a new policy instrument. Where opportunities arise, it can turn over its equity holdings to invest in new start-ups. I do not anticipate that there will be a shortfall next year.
I refer to the €15 million of the €21.5 million that arises due to timing issues in regard to expenditure. Is all of that timing problem associated with clients not coming in or is any element of it associated with perhaps inefficiency within Enterprise Ireland, although that is not a reflection on anyone? With the withdrawal of this €15 million, are there companies which might have expected some support but which are now disappointed? Working in the private sector in the past, at the end of the year, one could always accrue money for capital projects, link it to the project and not spend it until the following year. I would be interested to hear the Minister comment on that.
In regard to the €6.5 million from the lower than expected grant claims, does it relate to specific programmes or is it across the board? In regard to the reallocation of €12 million of the €21.5 million, what will happen the remaining €9.5 million? Are there any productive purposes to which it might be put before year end or early in the new year?
It is not so much disappointed companies. In regard to the venture fund, expressions of interest were due in September 2010 and the closing date was the end of 2010. They were selected in April but the legal agreement with the first of these commitments is being completed and the venture capital management is in the process of hiring its Irish presence.
This came up under the innovation task force. The idea was that we needed to see new types of venture capital finance providers in the Irish market. There were potential high growth companies which needed expertise that was not available in Ireland. We needed to bring in people with expertise in ICT or life sciences. The aim of this was to get such funds to come in. They have proceeded apace and perhaps one could say they might have done better one month either way but I have no reason to believe the fault was on the side of Enterprise Ireland dragging its feet.
This project will last for ten years. When this fund is up and running, the draw-down will be over a ten year period so it is a long-term planned project which will provide finance over a long period.
There are always disappointed companies, whether some existing venture capital fund or the venture capital was disappointed that it could not get enough qualifying companies. There are rules which companies must meet. Business plans must come up to tests. I am not saying that there are no companies that felt they should have got funding. However, the systems in place in Enterprise Ireland are robust and are selected. The project flow is expected and the funding is provided.
The idea of a closing date is quite arbitrary. We would like to think that within an organisation such as Enterprise Ireland, there could be certain flexibility in that regard.
Up to 10% carry-over can be permitted but where one seeks to strengthen an area where provision was not strong enough, such as in the property area, one must vire the money. The opportunity here is to strengthen an area which we believe is of strategic importance. In terms of the property market, there are not enough resources there to maintain that. It is a conscious decision to strengthen one part of our portfolio of supports. The balance of the permitted carry-over is being allocated to county enterprise boards and the programme for research in third level institutions, PRTLI.
I thank the Minister. I welcome the efforts to provide additional funding to the IDA and Shannon Development. The work of Shannon Development in the mid-west region, including Kerry, is excellent. I hope we can build on that in future years.
Because County Kerry is currently lumped in with County Cork, the county finds itself at a strategic disadvantage to County Limerick for example, when offering tax concessions to companies wishing to locate in the county. At a recent meeting of Kerry County Council there was discussion on the strong feeling in the county that Kerry should be classified with Limerick rather than with Cork. The performance of the IDA in Kerry has been criticised over the years. Some of the criticism is fair while some is populist and unfair.
There are barriers preventing companies locating in Kerry rather than in other counties. The peripheral nature of the county is a major problem. We need all the help we can get but at present we cannot offer the same concessions to companies as are available in Limerick. A change in the classification would help the county as a location for foreign direct investment and should be addressed.
Perhaps there are other counties in similar situations which could also be reviewed. The issue of peripherality is standing in the way of many counties, and they need extra help. This issue could be looked at, especially in the case of Kerry where the problem has certainly presented itself.
The problem may lie with the designation of the Border, midland and western, BMW, region against the rest of the country. Grants can be provided in the BMW region. Regional designations are based on EU criteria which have been in place for a long time and I am not sure if they are amenable to change. I will check that for the Deputy and get back to him. Kerry has had difficulties. Many projects prefer city locations.
Before my time, Limerick was given priority because of the difficulties associated with the closure of Dell. There was a major effort by the IDA to target Limerick as a location that had suffered a loss and to market its assets and labour force. I will get back to the Deputy with those details. Under some indicators Kerry has done very well and not so well under others. I will come back to the Deputy on that matter.
Some of the performance indicators classify Kerry with Cork. One of Kerry's difficulties is that figures for the Cork-Kerry region are quite positive.
The figures separate Kerry from Cork.
When the figures are broken down the Kerry figures are sometimes not quite as good.
What about football?
We are doing well on the football field but we need help in the job creation field.
This is not a tax issue. There are no tax advantages in one county versus another. It is related to the BMW grant designations.
The overall incentives are making the difference.
The EU has determined that certain areas get grants over and above others. That facility will be reviewed in 2013. It was designed at the height of the Celtic tiger and we are a long distance from there. It should be one of the objectives of the Minister's Department to renegotiate those determinants as soon as possible. The designation of Limerick was changed due to the closure of Dell. A derogation was granted for that. County Meath, for example, falls between a number of stools. We are not in the BMW region yet Kildare and Wicklow get far greater investment from Enterprise Ireland and the IDA than we do. It is of the utmost importance that those rules be thrown out and a new set designed to take into consideration the new economic environment.
I will follow that up and get back to the Deputy on the potential for that.
With regard to the pace of decision making by Enterprise Ireland, how do we compare with other countries? Are we slow in deciding whether or not to grant-aid a company or work with a fund? In many cases, particularly in the ICT sector, businesses need quick decisions. It is important that we work at the same pace as every other country. Perhaps we do. I do not know. Does the Minister have information on this?
My experience has been positive in this regard. When cases come to my attention and people are unhappy it is usually because a business plan has not been completed or some of the requirements set by Enterprise Ireland have not been met. That can result in delays. By and large, Enterprise Ireland turns applications around quickly. Approvals are not cash restrained. It is not as if Enterprise Ireland is rationing grants. Deputies bring cases to my attention when they are unhappy with the pace of decision making, but in most of those cases a piece of the jigsaw is missing.
The question is valid and we will look at the turnaround times of decisions. As a general rule, the taxpayers need to have closer monitoring of all Government programmes to look at what value is being delivered. It is certainly one of my ambitions to look at programmes more closely and make sure each one is performing to the very highest standard. That is something the Minister for Public Expenditure and Reform is keen to develop. There is an expectation that service level agreements will be made with most of our agencies during the course of next year, to bring greater formality to the expected level of service performance. This is certainly an area where we need to make sure standards are the highest they can be.
I have a final question. Will the IDA property portfolio be an issue for the agency? In previous times, this committee would have been delighted that the IDA could fund its own projects. Will the property problem be an ongoing one? Will we be back here next year looking at the same thing? Could the Minister's Department direct or encourage the IDA to release some land it has been holding for a long time in certain areas? This issue has come up at previous committee meetings. In certain areas land could be put to use by a local authority or another agency to create different types of jobs. The IDA seems to hold onto its land bank. That was fair enough when the IDA thought it might need the land. Could we not now consider releasing some of that land in places where it is not being used by the IDA?
The IDA has a mandate and it manages this independently, under legislation. It is independent of me as Minister. Its land bank is stratified across strategic sites, gateway sites, technology parks, hub locations and other locations. Obviously, the Chairman is right that, in the present climate, there will be financial pressure on the area, but the authority will have to manage it as best it can. Clearly, I cannot pretend that there will not be more problems. For 2012, the fact that we have made provision like we are making today, it will take the pressure off 2012. The authority has managed it well in the past. Landholding is much less of a feature than it used to be. Advance sites and factories were a feature of industrial policy in the past. Now it is more about having strategic locations and ensuring one can respond. There is not quite the same pressure. Where IDA Ireland disposes of land it will seek commercial prices. It has a mandate to follow and will manage the resource accordingly.
Are there any more questions on subheads C3 or E2? No. Everyone seems happy enough and we will conclude. I thank the Minister and all of his officials.