Mr. Neil McDonnell:

ISME thanks the members of the Joint Committee on Enterprise, Tourism and Employment for its invitation to make a written submission today.

A small open economy can endure some cost sectors that are higher than others. Ireland’s difficulty, however, as a peripheral nation in Europe’s Atlantic north west, is that all our major business cost groups are significantly ahead of EU averages, among competitor small advanced economies in particular. Our energy prices are consistently the highest in the EU. Our median gross hourly earnings are consistently in the top four in the EU. Our statutory minimum wage is consistently the second highest in the EU, after Luxembourg. Our standard 23% VAT rate is the fifth highest in the EU and our reduced VAT rate of 13.5% is the second highest in the EU. Our rate of rental price growth is the fifth highest in the EU from a very high rental cost base, and Insurance Information Institute data show Ireland with the second highest insurance cost per capita in the EU, with a high growth rate in non-life costs to 2022.

Countries with high levels of productivity can tolerate and accommodate a high cost base. Unfortunately for Ireland, the most productive sectors in our economy are inhabited mostly by foreign multinationals employing large numbers of workers. The indigenous areas of the economy need to increase their productivity, yet crowding effects from multinationals with high salaries and large non-salary benefits, also known as Dutch disease, affect indigenous SMEs in particular.

Productivity is a direct analogue for profitability. Despite a consistent media narrative that SMEs are making a lot of money, Revenue data, in particular, point to a lack of profitability among SMEs, especially among micro-businesses. It does not follow from the above that ISME is against the setting of a national minimum wage. We favour doing so, as it introduces a wage floor, provides transparency as to minimum costs of service provision and prevents wage dumping and a race to the bottom in the economy. However, we note that minimum wages are not the driver of wages in an economy. The country with the highest median wages in the EU is Denmark and it does not have a statutory minimum wage. Furthermore, European Free Trade Association members Switzerland, Norway and Iceland all have higher wages than Ireland, yet do not have a statutory minimum wage. Productivity in our indigenous enterprise sector can only be raised by upskilling our indigenous SME workforce, yet at the very time we need to it most, the Government plans to expropriate funds from the National Training Fund in order to expand veterinary, medical and dental training facilities in our third level colleges.

While the objective is laudable, the method is not. The NTF is funded by a levy on employers and is intended, by law, to be spent on adult and in-work training for our workforce, where the need is greatest. We ask you not to permit the amendment of the National Training Fund Act to allow this.

Despite it being published five years ago next month, nothing has been done to deliver reforms suggested by the Kelly report on civil justice. Our inefficient, ineffective and highly expensive legal system lies at ground zero in our lack of accommodation, infrastructure and affordable insurance, yet nothing is being done to tackle a legal lobby that refuses to countenance anything beyond their own financial interest. Today, the Seanad is voting on a travesty of a defamation reform Bill, one that falls far short of what is required to ensure a just and equitable society where citizens can express opinions and retailers can protect their shops and stock. Yet the interests of abusive and vexatious defamation litigants are being protected in order to preserve fee income.

Members will have our full written submission and we are happy to take questions on it.