Mr. Ian Martin:

The Small Firms Association is the voice of small business in Ireland. It represents more than 7,500 companies and has six affiliated organisations. I run my own business, Martin Services, which employs approximately 20 people in the first aid and hygiene sector in Dublin, Cork and Belfast. We have some experience of a different marketplace. I am joined by Ms Patricia Callan, who is our director, and by Mr. A. J. Noonan, who is a member of our council and the managing director of Rhonellen Developments.

We have been asked to discuss two issues today: our proposed solutions to the unemployment problem, with specific reference to youth unemployment, and our pre-budget 2013 submission, which has already been circulated among the members of the committee. The two issues are linked because this year's budget must prioritise growth, which in turn will deliver real and sustainable jobs. Half of private sector employment is in the many small businesses that employ fewer than 50 people. Some 655,000 people are employed in more than 200,000 small businesses. Therefore, it is logical that this is where most future job creation will come from.

According to the Small Firms Association's autumn employment survey, some 42% of firms are planning to increase their employment levels. Some 7% of firms plan to increase those levels significantly, 43% are planning to maintain them and 14% are planning to decrease them. The live register data hide the fact that there is a lot of churn in the labour market. Many new jobs are being created by entrepreneurial small businesses. However, many more jobs continue to be lost, particularly in traditional domestic traded services, as a result of the collapse in consumer confidence.

Mr. O'Brien has spoken about barriers to job creation. According to 46% of those who responded to our survey, there is not enough business in the local market. Of the respondents, 33% cited the cost of doing business as a barrier to job creation, 10% mentioned employment law and 9% mentioned the lack of skills. Despite what is going on the marketplace, unrealistic salary expectations were encountered by 3% of those who responded to the survey. While the Government has a limited impact on the first of those factors - the lack of business in the local market - we believe that a more targeted spend from the public procurement budget of €14 billion would help the SME sector. It would do a great deal to mitigate the next three factors that were mentioned.

At a very basic level, it is essential that budget 2013 does nothing to increase the cost of employment to employers. As a key element of this, the Government must introduce a means of job-proofing all Government policies - for example, by conducting a cost-impact analysis of how all Government proposals will affect jobs. The proposals from the Department of Social Protection to increase employer PRSI, to pass on the cost of the first four weeks of sick pay to employers and to introduce mandatory employee pension provision will destroy job certainty, just as the decision in budget 2012 to slash the employer's redundancy rebate has damaged our ability to save more jobs. In this instance, we are talking about saving jobs rather than creating jobs. These proposals should be abandoned immediately.

Current PRSI reliefs to support employment, such as the employer job PRSI incentive scheme and the reduced lower rate of employer PRSI in certain sectors, should be extended until 2015 at least. Lack of awareness of these schemes is still a problem. While we have promoted them among our own members, a more effective communication mechanism would be for the Department of Social Protection to issue a certificate to jobseekers outlining the schemes for which they are eligible and which would reduce employers' costs. Each jobseeker could include his or her certificate when he or she makes a job application.

On the need to target youth unemployment, the potential for offering a direct subsidy to employers to take on young people should be examined. The simpler the system, the more effective it will be. The Government must make work attractive. Nobody should be better off on social welfare than in a job, when benefits are included. Members of the Small Firms Association throughout the country are frustrated in their efforts to create jobs and recruit staff due to the disincentives created by high social welfare payments, falling wages and high labour taxes. The system needs to be simplified with the immediate introduction of a single social insurance payment for those of working age. Rates should be reduced for the long-term unemployed and for those under 25. A voluntary PRSI contribution for the self-employed should be introduced as a safety net. It is crazy that a self-employed person who loses his or her business can hardly qualify for any of the benefits that exist. This would encourage more people to take risks and create more work for themselves.

We need to re-examine the bureaucratic burden that is imposed on small firms by employment law. Such companies have to try to comply with over 40 different enactments. The same burden that applies to a company with one employee also applies to a company with 1,000 employees. Small companies do not have human resources managers. They find compliance with National Employment Rights Agency inspections, joint labour committees and registered employment agreements, etc., to be a major deterrent to job creation. This must be rectified and reviewed.

On youth unemployment, we have identified the high national minimum wage as being a particular barrier to recruitment, as employers can now source more skilled and experienced employees at these low wage levels. We have identified two major issues with regard to this country's lack of skills - keeping the skills of our existing workforce up, which is the more neglected of the two issues, and investing in management capability. Money should be reallocated from the national training fund, to which employers contribute for this purpose. Any Government-funded training for the unemployed should be for courses that are directly linked to jobseekers' ability to return to the labour market. A work placement element should be built into all programmes as standard. We have supported the JobBridge and Springboard programmes. We feel they should be better promoted and enhanced, particularly among jobseekers.

In regard to budget 2013, in general the Small Firms Association is supportive of the Government's previously outlined plans to have €2.25 billion in expenditure cuts and €1.18 billion in tax increases, €960 million of which will be new measures, and €220 million of which will be the carry-over from measures introduced in 2012. This promised two-to-one split must be honoured.

The budget, as mentioned by my colleagues from IBEC, should be balanced through cuts, not through tax increases; we are very much against any tax increases. OECD research shows that while changes in corporation tax and income tax have a particular impact on GDP, consumption tax has some impact and property tax has limited impact. Therefore, there should be no change in corporation tax, income tax, capital tax or any indirect taxes. Tax revenues should be raised only through the introduction of a properly implemented, broadly private property tax. Government revenue from fuel should be capped, and private sector pension support maintained. The Croke Park deal must be reviewed, with incremental pay increases and allowances removed. If necessary, social welfare rates should be cut, rather than taxes increased, to balance the budget.

The tax system as we know it should support investment and jobs, which are vital to this economy. The Government should allow funds to be released to small businesses through the introduction of roll-over relief, the early release of certain pensions and an increase in the cash accounting threshold for VAT to €2.5 million, and it should extend and enhance the employment and investment incentive scheme, EIIS. It should introduce a finance voucher scheme and tailor the foreign earnings deduction and the research and development tax credit for micro-businesses.

We need and want certainty. We know that annual kite-flying exercises are having a devastating effect on spending in the domestic economy generally in the run-up to the budget and on consumer and business confidence, which forces postponement of investment decisions. It is critical that this is overcome and explanations given of what is required via tax increases, charges and cuts in the next three years, in as much detail as possible, to allow people have the confidence to make investment and expenditure decisions now.

We believe that the primary rationale in framing this year's budget should be to create an economic environment which is conducive to small business growth and job creation. I thank the members for their time and look forward to answering any questions they may wish to put.