Damien English (Meath West, Fine Gael)
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I welcome Ms Majella Fitzpatrick, Mr. Fergal O'Brien, chief economist and Mr. Tony Donohoe, head of education and social policy with the Irish Business and Employers Confederation, IBEC. I also welcome Ms Patricia Callan, director, Mr. Ian Martin, chairman and Mr. A. J. Noonan, a member of the Small Firms Association, SFA. Mr. Martin is also a managing director of management services and Mr. Noonan is managing director of Rhonellen Developments. I thank the witnesses for coming here today.

I had thought that we would meet the delegation earlier and I apologise for the delay. I hope that the delegations have found the earlier part of the meeting informative and useful. Due to a change in the ministerial rota for parliamentary questions some of the Opposition spokespersons are missing. Deputies Peadar Tóibín, Dara Calleary and John Lyons are in the Chamber attending Question Time. The Deputies wanted to hear the presentation and I apologise on their behalf.

Part of today's meeting deals with pre-budget submissions. I can arrange another meeting between now and December if we need it or the delegations want to attend again to debate the submissions. We have the transcripts but I have no problem arranging another meeting.

Today we are also discussing employment and youth unemployment for which my committee is compiling a report that it will finalise shortly. I hope its findings will inform the budget and the action plan for jobs next year. A working group comprising a small section of the committee has been established and everything that the delegation says today will inform its findings. Please do not worry because all of the transcripts and data will be used.

The groups have been here before so I will not repeat the rules of the committee. I call on Mr. O'Brien to commence his briefing. He will be followed by Mr. Martin.

Mr. Fergal O'Brien:

Good afternoon, I thank the Chairman and members for the invitation to appear before the joint committee. Let me introduce my colleagues from IBEC, Ms Majella Fitzpatrick, our director of communications, and Mr. Tony Donohoe, head of education and social policy. I am the chief economist.

The items on our agenda are the pre-budget submission, and jobs and unemployment, specifically youth unemployment. Our pre-budget priorities very much align with the issue of jobs, which is the focus of business. I will be brief when giving the feedback IBEC has received in the past number of months from its 7,500 members. The single most important thing the Government needs to do in the budget is not to put additional costs on work and employment. IBEC draws its members from right across the economy and has 60 to 70 sectorial organisations. We represent companies in the multinational sector that are doing quite well and in the more stressed sectors of the domestic economy, be it retail or other small and medium-sized enterprises engaged in the domestic market.

One of the main concerns of the SMEs is the policies that are being floated around about putting additional costs on work. The statutory sick pay proposals are very much at the sharp end of this issue. I know my colleagues from the Small Firms Association will outline their perspective and the impact it will have on their ability to employ people. We are aware of the concerns in companies of all sizes that if such proposals are introduced it will mean savings will have to be achieved elsewhere in the labour cost bill. For most companies, whether they employ ten or 100 people, it will mean they will hire fewer people next year and cut back on overtime or introduce redundancies. Such will be the impact of any levy on employment. This will be the case even in some of the larger organisations. Multinational groups will have their labour cost budgets completed and should the Government put an additional cost on work in the December budget, those savings must be found by reducing the pay bill in another way.

The focus of our pre-budget submission is on how we can create more jobs in the economy. We see some private sector companies recruiting quite significant numbers at present. For example, some sectors in technology and medical devices and in the pharma-chemical sector have significant skills shortages that are limiting their growth.

The issue coming up on our tax agenda is related to property tax. Our members are quite concerned about the property tax. The Government's proposals and suggestions that the property tax may be delivered through the income tax credit system is seen by IBEC as a de facto tax on work. That tax will be come out of people's pay packets on a monthly basis. It will be another tax on work which will take from the merit of having a property tax in the first place. It would be branded as a tax that only workers will pay. It would act as a further disincentive for people who are out of work to take up a job. We have concerns about the problems in respect of the incentive to work in the Irish economy.

There has been a poor analysis of the PRSI burden for Irish employers. While we acknowledge the PRSI rates for employers are relatively low at 10.75%, as we do not have a cap on the bill or there is no step down as one goes up the salary levels, one finds it becomes a significant competitive disadvantage, particularly for the employer of higher end staff. We see this in the multinational sector where some locations and sites would be competing internationally in a multinational group, so the Irish staff will be competing with a site in the Netherlands or in the Unites States and the employer's social security cost is a significant competitive disadvantage. Very often it is one of the reasons Irish companies do not win projects. While the rate of PRSI might be low, the actual amount the company pays is quite high because of the structure of our system. It is a fallacy that the employer's PRSI is low in Ireland. We need to do some proper analysis and have a full debate and discussion on the matter.

The main issue for the challenging labour market and the reason so many people are out of work is that demand is so weak. Some of our members are again hiring people and some are meeting international demand. For companies in the domestic economy, demand remains exceptionally fragile. We support the €3.5 billion budgetary adjustment as there is no other way of adjusting the public finances and it must be done now. However, even in the constraints of a difficult budget, we must ensure that what we do will be revenue neutral and would support some activity in the domestic economy. I discussed some of these suggestions with the committee in the past and we are still pushing quite strongly for Government to look at innovative ways whereby we can get some spending and activity into the domestic economy. We have made a suggestion about the limited early release of some pension funds, which we think has significant potential. This has been done internationally. We have seen the experience in Denmark and Iceland. It is one of the few ways we can get money that is currently invested outside the county and put it into our consumers' pockets. It will give the Government a windfall when the funds leave the pension fund and it means we can avoid the need for some of the more damaging taxes in terms of making the adjustment.

The household construction sector is another good example. We see this massive surge in terms of the informal economy activity. With a bit of clever engineering of taxes, or a grant scheme, we could bring some of that activity into the formal economy and get more tax revenue for Government and generate new activity which does not cost the Exchequer anything.

Child benefit payments are very topical. From our experience of previous reductions in the child benefit payment, we know that if one takes the child benefit payment from those at the lower income spectrum, that takes the full 100% of that cut straight out of the domestic economy. If one can find some way of targeting the adjustment then one will limit the damage to the domestic economy. It does matter how one makes cuts and savings. If one does it across the board, one is more likely to limit the spend in the domestic economy. If Government can take a more targeted approach it will still get the savings but will reduce the impact on spending.

We have looked at the research which would suggest that about a quarter of the child benefit payment is going into savings accounts. We have a suggestion that will incentivise people to spend that money via an electronic card format. If people wanted to be paid in cash, they could get it, but at a reduced amount of cash. It would be a saving for the Exchequer. People who would opt for the electronic card model would get discounts from retailers. It could be a win-win all round.

In terms of the broad SME sector, access to credit for investment remains challenging. We think there are some clever things we could do in the budget around the tax agenda, particularly in terms of encouraging the re-investment into small businesses, from the sales of some businesses. We have many success stories of businesses being sold. Right now the tax system does not give an incentive to keep that money in the economy and to put it to work in other start-ups or business opportunities.

The business expansion scheme was a very important source of funding for many businesses. The follow on we have in terms of the employment investment incentive scheme does not seem to be working. We know it is a tough investment climate but we need to change the focus of the scheme. We need to attract a new type of investor. To bring that new type of investor in, we will need to do something about the risk that is built into the scheme. We have looked at the detail of the state aid rules and we think there are things that could be done that will attract more investors with a reduced level of risk. That would have a big impact.

In regard to mobile investment, Ireland's offering remains attractive but our competitors are catching up with us in the wider business tax. The Minister spoke about innovation in particular. The UK has closed in on us in the past couple of years. It has reduced its corporation tax rates and has done some very clever things around intellectual property and patents which is really getting the attention of mobile investment. We need to look at that issue.

On the unemployment agenda, we have two main issues. We have been very supportive of the Pathways to Work initiative. On paper it is a very good plan. If delivered fully, it can make an impact but we have a great many concerns because as of yet we are not seeing the change on the ground. We are not seeing this connection with the workplace. For us the key in terms of upskilling, training and labour market activation is to keep all the action as close to the workplace as possible. We have not seen that. In terms of the Pathways to Work initiative, getting a strong engagement with employers will be crucially important. We know there are initiatives being rolled out in the Department. We need to see them properly resourced.

The real key to success is going to be getting that client intervention and client focus correct. We are not certain that the system as it is currently set up has the capacity to do that; new delivery models will most likely have to be considered. If we are not getting that intervention right, we will not provide the support that is desperately needed by hundreds of thousands of people who are out of work and want to get back into the workplace.

The creation of SOLAS and the local education and training boards presents a significant opportunity to reform, reshape and modernise the most crucial component of the system that improves people's skills and gives them the training they need to find work. We have significant concerns about the degree to which employer issues and requirements are being built into that model. We are going through such reform in the economy that it is very important for us to grasp the opportunity to design these things properly. We are not yet seeing that in the roll-out of SOLAS.

My colleague, Mr. Donohoe, is much more of a specialist on the area of youth unemployment. I will make a few brief comments on it. The efficiency of the education system will be key. That brings us back to the point about the need for proper interaction between the requirements of business and the requirements of employers when we are focusing our resources and our investment in the education system. I do not think there can be any one-size-fits-all solution to youth unemployment. Very different types of young people are out of work. They have very different skill levels, education levels and requirements in terms of upskilling.

I think Ireland has done incredibly well, across the qualification space, in terms of the number and quality of students coming through our third level education system. We have shortages, deficiencies and vacancies right across the skills base. Interestingly, we even see from our members that it is not just the high-tech guys who say they have unfilled vacancies. Many engineering companies cannot get apprentices, for example. We need to focus our resources right across the skill level and qualification level systems. There are vacancies at all levels. It is not just a matter that relates to third and fourth level computer specialists.

I would like to speak about the European agenda. Initiatives such as Youth on the Move and New Skills for New Jobs potentially have a lot to offer. IBEC will be very engaged with some of these agenda items with a view to the Presidency. The crucial thing is that we will need some funding as well. There are funding opportunities out there, for example under the ESF. We would like to see a really strong focus on where those opportunities might be.

I have probably taken too much time for my opening remarks. I will leave it at that. I will be happy to take comments and questions.

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.

Damien English (Meath West, Fine Gael)
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I thank Mr. Martin. Does Ms Fitzpatrick have anything to add?

Ms Majella Fitzpatrick:

No.

Feargal Quinn (Independent)
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I thank both witnesses for opening our eyes to the many problems they face. I have travelled around Ireland for a television show, mainly to visit small businesses, and the difference between some very enthusiastic small businesses and others who have almost given up hope until they are sparked off again is amazing. Something that surprises me is the number of people who are looking for employees but cannot find them. Mr. O'Brien mentioned apprenticeships. I did not realise there was a problem in that respect but I ask him to discuss Springboard. Mr. Martin commented that people may not have enough information about Springboard and JobBridge. This is the where the Government is at least doing something to get people in to fill those gaps. I am amazed to hear some of the high-tech companies say they cannot get Irish employees and must bring them in from elsewhere.

We need a new spirit, and it is more likely to come from entrepreneurs. When I went to a meeting in Brussels some time ago we flew in on a Sunday but the airport workers were on strike. On Monday, the bus workers were on strike. On Tuesday the taxis were on strike and on Wednesday the railway workers were on strike. They believed that if they stopped work for a day they would get people to do things for them.

I recall some years ago, in a spirit of great enthusiasm, a large number of people here did a day's work for free. Imagine the message we could send out to the rest of the world if people in Ireland, which is faced with a challenge, were willing to work an extra day for free instead of doing what Greece is doing, namely, stopping work for a day. If we could encourage that to happen we would send out a message to everybody in Ireland that we can beat this crisis and show to the eyes of the world that these people are intent not only on paying their debts but on getting the finances right through working harder rather than working less. If that is to happen it will more likely come from employers, whether it is small and medium businesses or IBEC people. I believe an effort could be made in that respect.

Another point the witnesses made - I ask them to return to it - is that social welfare payments are discouraging people from going out to work. I thought that issue had been sorted out. I understood that in general terms most people were better off working rather than not working. The witnesses might touch on that also.

Mr. Ian Martin:

I will take a couple of points. If an employer wants to recruit somebody who is on the live register to work in an office, for example, there are many different schemes available, but employers do not know about those schemes. If the Department of Social Protection were to provide a list of the available schemes, people could apply for a job and indicate that they qualify under JobBridge or this or that scheme. That would make it much easier for the employer to make a decision on recruiting the employee, and the potential employee can say he or she wants the job and can qualify under X, Y or Z. The potential employee is giving the employer a reason to recruit him or her. That is the main thing we are trying to establish.

The Senator's suggestion on working for nothing for a day is a very good idea but I cannot imagine how it will work in real terms because of the five-day working week. Do we expect people to work on a Friday or Saturday for nothing? The spirit at the time of the Special Olympics some years ago was fantastic. Many employers are doing some corporate social responsibility, CSR, work through volunteering and giving something back. Compared to some years ago, employees want to hold on to their jobs and are willing to go that extra mile. I have found that in my business compared to what the position was previously.

The Senator also mentioned unemployment benefit. If somebody on the maximum unemployment benefit of €185 a week goes to work for somebody, he or she may be eligible to take up other schemes which are available, but people are not willing to work for an extra €50. It is not worthwhile getting out of bed for €50, and therefore there should be a proper incentive scheme in place.

I owned a lawn-mower business some years ago, and we would take people on for work experience. A young lad of 14 or 15 years of age would come in and get some training on motorbike engines, how to change the oil and so on. It was real work experience. Once a week the person from FÁS would come in to talk to the employee and ask us how we were getting on with him and whether he was learning something, and every week he had to learn an additional skill. A great deal of on-the-job work could be done because somebody returning to work can do a course but many people have never worked in an office environment and do not know how to turn on a computer or do various actions. As an employer I would not object to taking on people I knew would move on after three or four months. I would encourage them to go on, and if they were good at their work they might want to stay. My colleagues may wish to comment.

Mr. Tony Donohoe:

I want to pick up on the Senator's comments on skills shortages and Springboard. We regard Springboard as an exemplar. The Senator is involved in the selection of programmes and is aware of the lengths to which the organisers have gone to ensure those programmes are aligned with the labour markets. That is the starting point in this regard, and it has worked well. The concept of a multi-provider model is also very effective.

The Senator mentioned high-tech shortages. We could have an entire session on skills shortages in the high-tech sector. The reasons for that go back to the school system.

It relates to proficiency in mathematics and so on. Some of the current shortages or the lack of a pipeline of science and technology graduates can be traced back to the bursting of the dotcom bubble. In fairness to the system, it has responded or is responding. Several ICT conversion programmes are being run in consultation with IBEC's ICT Ireland sector and the Higher Education Authority. These have been shaped with industry advice so there is something taking place in this area. Similarly, despite the inevitable detraction of JobBridge, we regard it as an effective programme. The point is that these are exceptions rather than the rule. We do not have the systematic structures in place. We would expect these to go on as a matter of course; we should not have to highlight them. We should have structures whereby employers and the education, training and labour activation authorities come together.

I wish to develop some points raised by Mr. O'Brien. There have been two important developments, one of which relates to the education and training boards. This committee saw the heads of the Bill for these structures and it is coming soon, as is the SOLAS legislation. We regard these tranches of legislation as critical. The heads of the Bill did not give us any cause for comfort. It looked like the same old same old. We did not see provision for involvement for employers and we did not see provision for involvement for higher education. This is surprising because connectedness is an important principle to tie the system together. We did not see any connections with what is currently called the national employment and entitlements service.

As Mr. O'Brien pointed out, we have no issue with the rhetoric relating to Pathways to Work but it has not been translated into reality. We know it is a significant programme. One senior official described it to me as changing the wiring while the lights are still on. It is a big change management programme because the system has been overwhelmed by demand and it is remarkably difficult to try to change its structures.

We are four years into this crisis. We knew we had poor labour market activation structures when we came into the crisis. The experience on the job of anyone who goes into a social welfare office, apart from a few pilot offices, is that there is no difference. The glue that will hold the education, training and labour market activation structures together relates to good guidance and good counselling for people who present in these offices. One figure always sticks with me in respect of this issue. Labour market activation will not guarantee full employment or anything like it. However, it is important because it minimises the number of people descending into long-term unemployment. I recall that during the mid-1990s when the Celtic tiger was roaring and we had 6% growth, we still had 9% long-term unemployment. We do not have that yet, although we will. This is why it is important to get labour market activation, education and training right. Long-term unemployment feeds into intergenerational unemployment, health issues, crime and so on.

Mr. O'Brien referred to apprenticeships and youth unemployment. There is an opportunity for Ireland as we approach the EU Presidency. There is a good deal of discussion of the German dual system. I do not imagine we could immediately transplant a system that has been developed over decades or centuries. It is very much a construction from the German context but there is important learning in this area, especially in terms of the new model of traineeships in the Irish economy. At a European level there is a receptiveness to this idea. We have already seen technical assistance agreements between Germany and Spain to develop some elements of the dual system and we could consider something like that in an Irish context with a view to linking up the world of education, training and work.

Mr. Fergal O'Brien:

I wish to address one or two of Senator Quinn's comments. The comment about the need for Irish business and workers to show spirit in terms of getting over this thing is laudable. One thing we have noticed in many of our member companies, especially dating back to 2009 and 2010 when the decline was at its most dramatic, was the degree to which there were genuine local partnerships between businesses and their employees to try to put right many of their problems. We saw remarkable efforts to change and certain developments that would not have taken place in a decade before the crisis occurred in the space of six months. There was an exceptional spirit. We studied how companies were able to increase their productivity in particular through ambitious, focused change management programmes. That spirit is still in place in many companies and it has been shown in recent years.

There is still a real challenge in the domestic economy relating to demand. We saw this in the case of exporters. They have had cost problems, especially with the United Kingdom because we became very expensive compared to the UK. This was the case for companies working in markets where they knew demand existed if they could only become competitive again. They delivered exceptional change and productivity improvements. If a company implemented such change in the domestic economy it could probably get more business but, unfortunately, such a company is probably getting that business at the expense of another small business elsewhere. This does not mean the display of such spirit will not improve the viability of one's business, whether one is an exporter or working in the domestic economy.

There is an issue with disincentives to work and social welfare payments. Hardly a week goes by in IBEC when we do not hear from someone in a company who informs us that he offered a job to a certain person or number of people but they would not take the job because they said they would be better off on social welfare. There is a complex dynamic in terms of what causes it.

Damien English (Meath West, Fine Gael)
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We must get that data from IBEC. The committee has asked to hear from companies directly in this regard. We want to be able to fight this. One issue is that Pathways to Work is not delivering, and I accept that, but we need a more co-ordinated effort and this committee might have a function in that regard. Perhaps we could get some actual data.

Mr. A. J. Noonan:

I know of one case from last week. A young woman started off in a job but it lasted only one week because she was more comfortable sitting at home on €188 per week.

Damien English (Meath West, Fine Gael)
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There is no doubt it is going on. We know that but we cannot get companies to tell us officially. That is the truth.

Mr. Fergal O'Brien:

The Pathways to Work policy and getting the proper programme of engagement with businesses will be important. This is about the conditionality model. There should be sanctions and consequences for people who are not taking up training opportunities or who do not take up employment opportunities when they arise. That is simply not happening at the sharp end.

Ms Patricia Callan:

A representative of one company rang me yesterday in advance of my visit here. The company is a bakery in the west and it has 50 employees. It starts everyone at the minimum wage but by the end of the month people are up to at least €10 or €11 per hour. It is not minimum wage work. However, the company has taken on several people who have only lasted one week or one month because when they see the wage packet they walk away. One particular person has a husband earning €32,000 and four children. They have family income supplement as well. By the time they paid for the fuel to get to work it was not worth it. In real terms the cost of going to work and being productive for that person was a deterrent. It is not the basic rates, although they are quite high. It is the package and how it works together. This is why it is important to have a streamlined system.

Damien English (Meath West, Fine Gael)
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Even the family income supplement does not close that gap.

Ms Patricia Callan:

No, and that is why we argue in particular for differential rates when people are heading into longer-term unemployment. This is relevant for youth unemployment as well because there must be a particular incentive early on.

Employers need to invest a good deal in training people and giving them experience. It is a real cost for an employer to have someone in the door for the first three or six months. There should be a direct subsidy rather than a tax provision. The tax system is complicated and most small businesses do not really get it. While employer PRSI incentives are lovely and we like them and so on, if one offered a company €3,000 or €5,000 to take someone in, it is a good deal more straightforward.

Damien English (Meath West, Fine Gael)
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You are referring to cash up-front.

Mary White (Fianna Fail)
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I refer to page 11 of Mr. O'Brien’s pre-budget submission. I have spoken many times about it in the Seanad.

I would like to hear Mr. O'Brien's view of the banks' policy on lending to Irish companies? I have formed the impression that the Minister is not hearing what companies are stating, which is that the banks are not giving out money. The British are looking at a proposal for a state-backed enterprise or investment bank. We need such a mechanism.

Let me draw the attention of the delegates to the ESRI report by Professor Tim Callan who has stated people are better off in work, not on the dole. New research from the ESRI finds that 94% of Irish people are better off in employment than out of work, even after taking account of child care and travelling to work costs. I am inclined to believe the findings of that research. There are many myths that social welfare payments are so high that there is no incentive to work. I do not believe this; it is a myth created by the troika and the OECD. That puts paid to the assertion that people are better off on the dole. I believe what the ESRI is stating.

Damien English (Meath West, Fine Gael)
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It is combination of perception and reality.

Mary White (Fianna Fail)
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The troika has been stating our social welfare benefits are too high. We have a crisis in employment, the level of which In the first six months had been decreasing.

Damien English (Meath West, Fine Gael)
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There is no need to go into the statistics. We are seeking solutions.

Mary White (Fianna Fail)
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I draw attention to that fact in order that there is an appreciation of from where I am coming. There has been a decrease in the numbers in employment. We have a crisis. Some 40,000 people are emigrating every year, which breaks down to 800 people leaving the country every week. It is much easier to keep a person in a job than to create a new one. I would like the delegates to outline their views on access to funding. Mr. O'Brien has stated engineering companies cannot recruit apprentices. I would like him to develop that point.

Anthony Lawlor (Kildare North, Fine Gael)
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I wish to raise a number of points. Each speaker has mentioned the gaps in the jobs market. Does anybody have suggestions or ideas on how we can move more quickly to fill these gaps? It seems to take an age to fill the gaps in the market.

I am surprised at what has been said about apprenticeships. Do the delegates have ideas on how we can move more quickly in this regard also? The system in Austria is similar to what is in place here. It has a very good apprenticeship type scheme in place. Will the delegates identify where there are opportunities for apprenticeships? Perhaps the joint committee could help in that regard.

The Small Firms Association referred to the procurement budget of €14 billion. I find it worrying that we are centralising the procurement system. Have the delegates made representations to the Minister in this regard? I have hit him hard about a number of projects and he is not talking to me anymore. The matter is quiet serious because it is beyond the ability of small companies to meet the criteria to get into the ball park. Are there proposals that might persuade the Minister to change his mind because he is not listening to me? There are a number of small companies which were doing good business in meeting local needs, be it in schools or local bodies, but that option is no longer open to them because the rules have changed. There is an attempt to attract large companies. However, bigger companies become inefficient, whereas smaller companies are much more adaptable and flexible in quickly sorting out a problem.

Seán Kyne (Galway West, Fine Gael)
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I thank both groups for their presentations which give us food for thought. Let me address my initial questions to IBEC. Is it using the Croke Park agreement to set pay level for higher grades?

The electronic card for social welfare payments was mentioned. I know that such an electronic card was rolled out in Australia, but there were concerns that there was a stigma attached to it. It obviously would not apply to payment of children's allowance because everybody with an eligible child is entitled to receive that payment. Did IBEC consult supermarkets and retail outlets on whether they were in favour of using that model? Presumably, it would be possible to exclude the purchase of drink and cigarettes with such a card?

IBEC has acknowledged that a property tax will be levied, but it has expressed concern that Revenue will be collecting the tax from a person's pay packet. Will IBEC have an issue with the deduction of the property tax, if that is how employees voluntarily decide to pay it?

How does the Small Firms Association view a third tax rate versus cuts in social welfare or other schemes? It has been said that if child benefit is cut for those on lower incomes, it will mean a 100% reduction in their spending power; for people on higher rates of tax, presumably, it will impact on their savings rather than their spending power. Is there a strong argument for introducing a third tax rate versus cuts in social welfare or other State payments? It is often said that when farmers receive money, they spend it almost immediately. A failure to tackle some of these issues, no more than the Croke Park agreement, will impact on the ability to make payments under farm or social welfare schemes. If it reduces spending power, presumably it will reduce purchasing power within smaller businesses.

Mr. Fergal O'Brien:

I will start and then hand over to Mr. Donohoe and colleagues from the Small Firms Association.

Senator Mary White raised the issue of the access to credit. I am sure the Small Firms Association will have a view on this issue, but the experience of business is that access to credit is variable. In some sectors of the economy businesses are obtaining credit, whereas in other sectors it is much more difficult to access it. There is a great deal of credit rationing. The box might be ticked in terms of approval, but companies are not getting what they need to fully develop their plans, make an investment and get into the export market. Credit rationing and sector discrimination are the major issues. Some sectors are in vogue and do not have the same difficulty in obtaining credit, while others find it much more difficult to access it. It is not universal across the economy, but much depends on the sector in which the business is operating. It remains a significant constraint on growth. One only has to look at the published macro numbers to appreciate this. We do not have the credit flow required in the economy, which is limiting growth and job creation. That is the reason many of our members who have international experience see a State-backed investment bank as being an important part of the solution. If one looks at economies such as Germany and Canada, countries in which there is no credit crisis, they have long since had well established state-backed investment banks which have been incredibly successful, particularly in supporting those mid-sized companies which are trying to break into the export markets with ambitious investment plans.

Mary White (Fianna Fail)
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Let me interrupt Mr. O'Brien at this point. I know that when Connie Doody and I started Lir Chocolates, we received IR£5,000 from the Bank of Ireland in Dundrum. Ours was a new high risk company. Even Mr. John Trethowan agrees that banks are only giving money to safe customers.

The Small Firms Association, SFA, is not talking loudly enough about this issue.

Damien English (Meath West, Fine Gael)
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We need to move on.

Mary White (Fianna Fail)
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The SFA should speak louder about the lack of credit available to small companies, particularly those which will create new jobs.

Damien English (Meath West, Fine Gael)
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In fairness, we shall move on.

Mary White (Fianna Fail)
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Yes, but we need to speak bluntly about this issue, as we need to make something happen.

Mr. Fergal O'Brien:

There are difficulties. The situation is not the same across the board and is significantly threatening to limit the viability of some companies. We have stated this clearly, as has the SFA.

The State-backed investment idea is an important one. In the ten years before the crisis, the economy was exclusively reliant on the banks to fund business growth which was completely out of line with the averages across Europe. Elsewhere in Europe there is a much broader range of financing tools available to businesses. Irish businesses just went to the bank manager and it was easy to get the money, but that is all Irish businesses did. We need to broaden the financing options and models available. I gave the example of making sure the enterprise investment scheme, EIS, actually worked. If we could only get a fraction of the money that went into property speculation for supporting the creation of real jobs and businesses, great things would be achieved in the small and medium-sized enterprise, SME, sector. The tax system also has a role to play in making this happen.

On the State-backed investment bank idea, I am conscious that it would take several years to get that up and running, as there would be complex state-aid issues. However, even after this crisis, we will need such a bank. It is worth investing three years into such a project because it will be important in completing the financing options available to mid-sized companies.

On the point about ESRI research, this is the third time the ESRI has published different numbers on this topical issue.

Mary White (Fianna Fail)
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That is not a fair comment.

Mr. Fergal O'Brien:

I appreciate that, as they were not formally published papers.

Mary White (Fianna Fail)
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It was an aberration.

Mr. Fergal O'Brien:

The point is that it is quite subjective and many analysts recognise that determining the costings of work is complex. Even if we do take into account some of the costs of work, I still agree that for the majority work does pay. The reason we have an unemployment problem is that there is a lack of demand, but at the margins we still have a problem. The welfare system should make sense for everyone to take up employment opportunities. It is a disservice to the 6%, 12% or 20% affected that they are better off on social welfare than at work. That issue needs to be addressed.

Mary White (Fianna Fail)
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We need to accept that, but-----

Damien English (Meath West, Fine Gael)
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I am sorry, Senator, but we are moving on.

Mary White (Fianna Fail)
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It is important-----

Damien English (Meath West, Fine Gael)
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We are taking answers first. There will be ample time to come back to the issues raised later.

Mr. Tony Donohoe:

Regarding gaps in the jobs market, the starting point is that they have to be real jobs. There are, obviously, not vast numbers of jobs available. If we just have work schemes-----

Anthony Lawlor (Kildare North, Fine Gael)
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Mr. O'Brien mentioned that there were many jobs available across all sectors. Is that the case?

Mr. Tony Donohoe:

If one looks at evidence from jobs.ie or the expert group on future skills needs, there are particular gaps in the ICT, languages and other areas. It is not that there are significant gaps, but there are significant skills gaps. This is not acceptable at a time of high unemployment. There will always be a certain disconnection between the providers of education and the markets. This is endemic because of the amount of time providers have available to gear up to respond to fill gaps. Apprenticeships have a particular connotation and are almost exclusively linked with the construction sector in many people's minds. That is where the fallout has been. If one checks FÁS's figures, there is hardly any apprenticeship being offered or taken up at this stage. We have to move to a broader model of apprenticeship and come up with a different name such as professional education. For example, Austria was cited as a country in which there were hundreds of jobs available, many of them high level, that had an apprenticeship type model, a combination of classroom and work placements. There will be an opportunity under the Irish EU Presidency to push the button for action in this area.

Regarding youth employment, the committee may be interested to note that the United Kingdom has introduced a direct subsidy of £2,275 for companies which take on 18 to 24 year olds. It is offering up to 160,000 placements under the scheme. If we are serious about zoning in on the issue of youth unemployment, this might be a way forward.

Mr. A. J. Noonan:

The aggregation of contracts to which Deputy Anthony Lawlor referred is a significant issue. Most of the companies which win these large contracts are not Irish companies; accordingly, we are losing out. I suggest we talk some sense to the Minister in this regard. The French are very good at keeping contracts small and in their own economy. The Minister of State, Deputy Sean Sherlock, spoke about creating the environment for business. In many ways, the environment is hostile to business. The aggregation of contracts will destroy jobs in the economy.

Mr. Martin spoke about redundancy rebates. When a company has to let someone go, instead of letting go of one person, it will let the whole workforce go. Then we will have a bigger problem. It is incumbent on the committee to make strong recommendations in that regard.

Mr. Ian Martin:

I have much experience on the procurement side of business. Much of the all-Irish marketplace is controlled in some way by Government procurement agencies such as health services, local authorities and vocational education committees. Recently a director of Unilever told me he reckoned up to 40% of his company’s detergent sales were through public procurement contracts for Government services. That excludes an Irish SME from the marketplace. I am involved in the first aid and hygiene business. Last Monday a trade customer informed me that he had lost five customers the previous week. There are two companies in my industry which receive nearly every public contract available. Local authorities are afraid to buy from their local suppliers which they have supported for years because of these contracts.

As I am a member of the procurement advisory body, I spoke about this matter to the Minister of State, Deputy Brian Hayes, whose attitude is that he has to get spending down, which I understand. On the other hand, the Minister for Jobs, Enterprise and Innovation is trying to increase the rate of job growth. In my case, we lost a large contract last year worth over €300,000 which forced me to let three people go.

There was a difference of €10,000 in the contract price, but the cost of the disruption to our business was much more than €10,000. It is hitting the small business operator. I agree with Deputy Lawlor's point because I hear it daily in the country. I know in my industry people are being destroyed by what is happening with procurement. Much of the procurement is based on price. I understand that price is a factor, but price also brings quality. There is a cost involved when one chooses a product. If we take the example of what we do in our own homes, one will not necessarily buy the cheapest toilet paper. One will buy a reasonable quality product. Quality actually lasts longer. Two-ply tissue lasts longer than one-ply tissue. That is the reality in the market place.

Ms Patricia Callan:

Senator White raised the SME funding. Let there be no doubt this is the number one priority issue. It is not directly relevant to today's agenda, which is the reason we have not talked about it ad nauseam but we certainly do. In terms of the membership of the Small Firms Association, 27% of our members view this as a critical issue for them in terms of ongoing development. Now it is divided into two specific problems that we need to tackle. In the first instance, it is a case of a viable business which is trading well and the employees are fine but it is bogged down by the owner's involvement with other properties or other developments or something else and it is all tied into the business. We need to find a mechanism of separating out the various strands and doing a very serious piece of work to ensure we save more businesses and thus allow the banks to continue to finance them. The banks will always use the term 'viable'. Viable means a risk assessment and they are risk averse.

A more recent problem, which is potentially an issue of greater concern further down the line is that developing and growing businesses which are not borderline or in difficulty, find that it is taking at least three months to get a decision on their proposals from the bank. They are not getting what they necessarily need. The amount of paperwork, the form filling and the hoops they have to jump through is shocking.

Mary White (Fianna Fail)
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Yes.

Ms Patricia Callan:

That is the real danger because as the economy starts to pick up we need a banking sector that can keep pace with it. There is no evidence that is the case. While the microfinance fund, the loan guarantee scheme and the money that is being released from the National Pensions Reserve Fund to leverage money similar to the State-backed investment bank are all good initiatives around the edges business banking is €30 billion. If we do not have the three main banks actually doing their job, we will never solve the problem. It is a much more fundamental problem. We need to get in behind the branch level decision-making scenario and figure out the barriers and the problems. I know a great deal of work has been done. We are working with the Department of Finance on this issue. These are fundamental issues and will not go away. The problem is not being solved. It is just evolving.

Let me flag the emerging issue of rates. It used to be a case that people would take the money at any cost but as the banks strive to get back to profitability, which they should do, we are beginning to see the price of money increase and that will ultimately damage our ability to compete as well. Money still has to be number one on the radar. If one runs out of money one is out of business and there are no jobs.

Mr. A. J. Noonan:

Funds from the UK are coming into Ireland trying to replace the banks. Many of the banks are closed for all intents and purposes. Certainly in the health care sector there are many UK funds coming to invest in it. They are taking a longer long-term view. They are also looking at other infrastructural projects as well as health care. I completely agree with Ms Callan that there is a significant bureaucracy involved in saying "No".

Damien English (Meath West, Fine Gael)
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The committee has put forward proposals on the investment bank. We do not believe it will take a number of years to set them up. We have worked with various people who are interested in setting them up. This can be up and running quite quickly as a short-term measure. I would not call it a state investment bank because that might focus on State investment. It is the old ICC model. Basically it is a business bank. Some of the money being released at present will be for State projects and we need to ensure it will be available to business of all sizes. It can be done quite quickly. From what we can see, we are hitting a brick wall and there is nearly a fear in certain Departments about setting up another bank. We need to get over that. The allusion was that it could be attached to an existing bank. That will not work. We need a bank like the ICC and its rival, we will continue to push the idea.

Mr. A. J. Noonan:

The ICC.

Mary White (Fianna Fail)
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Yes, exactly. The other issue is the black economy in the construction sector

Damien English (Meath West, Fine Gael)
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Senator White may make a quick comment before she goes to the vote.

Mary White (Fianna Fail)
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What can we do about the black economy in the construction sector?

Damien English (Meath West, Fine Gael)
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The Senator may ask the question and we will get the answers afterwards

Mary White (Fianna Fail)
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The black economy in the construction sector is destroying legitimate business.

Mr. Fergal O'Brien:

I will be happy to follow up with the suggestions.

Mary White (Fianna Fail)
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My e-mail address is senatormarywhite@gmail.com.

Mr. Fergal O'Brien:

Yes.

Mary White (Fianna Fail)
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We must drive that issue.

Ms Patricia Callan:

Deputy Kyne raised the possibility of a third tax rate. While it is all bad for domestic businesses, our arguments are based on balance. On balance, it makes more sense if we must look at social welfare rates which increased by double the rate of inflation in the past decade and are out of line with competitor countries internationally compared to increasing the top rate of tax, which may or may not bring in the amount of money that is bandied about but will certainly, from the perspective of the larger companies that are critical to smaller companies, deter investment entirely. Mobile investment will not come here if their top staff are taxed beyond what is the norm. That is the reality. We can philosophise about it, but on balance our assessment is that a third tier of tax would be detrimental to our overall competitiveness.

There was a discussion on the disincentive to work, be it from the level of social welfare payments or attitude. Our members tell me daily that even with schemes such as JobBridge there are more positions than applicants. It is staggering how few people are applying for the graduate training programme, the established programmes that are available. Whether that is because they think they will emigrate, we must communicate with people about these schemes. There is an appetite in the member companies to take on people, in particular under the JobBridge scheme and to work with Springboard graduates. We are not seeing the applications come through at any level. Even people offering real jobs are seeing very few and poor applications. The applicants may come in but they consider it is not worthwhile to take up the job. It may technically be worth their while but how much more do people have to make to make it worth their while to go and be productive?

Damien English (Meath West, Fine Gael)
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We had a very good presentation from the Department of Social Protection. One can argue the case that when the family income supplement is included it is better to go back to work, but when one factors in the cost of going to work and child care, it takes from the incentive.

Mr. Fergal O'Brien:

Technically, one gets an extra euro a week.

Damien English (Meath West, Fine Gael)
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A number of points have come to the fore. I would assume from what I know that businesses get CVs on a daily basis?

Mr. Fergal O'Brien:

No.

Ms Patricia Callan:

I can speak personally in the context of the Small Firms Association.

Damien English (Meath West, Fine Gael)
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I get CVs on a daily basis, I get letters from people telling me they have sent their CVs everywhere. It is important for the joint committee to hear the feedback from companies. We do not have a list of companies who tell us they cannot get workers. We made a call for this information, but we received no replies. It would help our argument if we knew that there were companies that cannot get workers. We could then go directly to the various social welfare officers who are meant to be engaging with Pathways to Work. I accept it is a pilot scheme but it was meant to be rolled out nationally by May or June 2012. We are way behind that target. Pathways to Work will work if we drive it. It is meant to close the gap so that we do not have a repeat of what happened in the 1980s, when the economy recovered there were still people in long-term unemployment. I believe in the scheme but if we do not drive it will not work.

We had a discussion on offering apprenticeships as a way of creating jobs. Will Mr. Donohoe elaborate on the detail of how to go about that? At that stage nobody was saying that the offer of an apprenticeship were not being taken up. Mr. O'Brien mentioned that apprenticeships were being offered, NGM is one, that are not being filled. That information did not come up before. That is a matter of concern, because it is new information to us.

Mr. Fergal O'Brien:

I will go into detail on that when the Chairman is finished.

Damien English (Meath West, Fine Gael)
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Ms Callan touched on the minimum wage. I am a long-term advocate of the minimum wage. I would not have a problem with a lower wage for the first six months if it would create jobs. Is there merit in considering a lower wage for a period of three or six months to see if a person is suitable? The gap must be closed by a social welfare payment because it will defeat the purpose if the individual ends up with less money. There is a cost to business to take on a staff member.

I have long been an advocate that we should give business an upfront grant of €5,000 or an agreed figure whatever it is, to create a job. People want an employment grant and that is the most straightforward thing. For business to avail of most of the scheme, they must be in profit to get the tax back. It is about cash. I get the impression that in the Department the concept of cash does not get the attention it deserves. One cannot run a business without cash.

We miss out on it in all our schemes. However, it is something we can work on too. Other issues that arise are the youth guarantee, which we can look at in the EU. Many of the issues raised have been covered. We can come back to the witnesses on the others as we move along.

Anthony Lawlor (Kildare North, Fine Gael)
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I would like to ask a question about casual labour and the disincentive in this regard owing to the loss to individuals of their allowances because our social welfare system is not geared up to deal with the more modern economy in which we live and people taking on jobs for ten or 15 hours per week. Have the witnesses made any submissions to the Minister on this issue which would help us strengthen our case? While we have done so, we also need the organisations to put forward proposals for changes to the social welfare system in respect of casual labour, so as to make it much more flexible in terms of allowing people to take up 15 hours work, spread over two or five days while retaining their social welfare payment.

Damien English (Meath West, Fine Gael)
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I would like to make two more points on the black economy. We have had this debate with the Minister for Finance a couple of times. We are hoping we might some move on tackling the bigger projects. There is a black economy that cannot be tackled. However, where there is an outlay of €5,000, €10,000 or €20,000 this can be tackled through a tax incentive or grant system such as provided for in the Nordic countries in particular. We are pursuing that option with the Minister. We would all agree with release of funds from the pension fund.

The sick pay issue is one on which this committee has a strong view. We know that it will not be good for business. I understand the reason the Minister wants to bring it in, mainly from a public sector point of view and management of sick pay. However, I also suspect it is not being managed in businesses as well as it could be. As it is an awkward issue, and employment law is very awkward, I get the impression many employers stand back from tackling the issue of sick pay when a person is not genuinely sick. Perhaps I am wrong. I would welcome the witnesses' views on that. Is more information needed and is there a need for Government to lead the way in tackling fraudulent sick pay? I am speaking in this regard of people who do not turn on certain days rather than those who are genuinely sick. I have seen this happening in businesses down through the years. It is never really tackled. It is let go. However, someone else carries the cost of it. That is part of the reason the Minister is introducing this measure. I am not suggesting it is right. The problem in the public sector is bigger than in the private sector. Tackling and managing it is something the committee might engage in.

I understand Mr. O'Brien wishes to correct something I said earlier.

Mr. Fergal O'Brien:

I would like to make a couple of final comments. On the issue of apprenticeships, my point was that we have unfilled vacancies at all skill levels, some of which are in the mid-scale technical area. That would not be an unfilled apprenticeship as such.

I would like to return to some points made earlier by Deputy Kyne on the property tax. Our concern is that if this is done through the payroll system it will become a de facto tax on work and will be a further disincentive for someone who is out of work to seek a job because they will see this as a tax only paid by workers. It is important that if that model is used there are not widespread exemptions. It may be possible to look at deferral models but widespread exemptions would mean this would essentially be a tax paid by workers. That would be very damaging.

In terms of the social welfare cards, I agree that we do not want to return to the butter voucher days. That is the reason we would have focused on the universal scheme as a good place to roll out something like this, in particular in the case of child benefit, the budget for which is well over €2 billion. It is an awful lot money, which we could spend better in terms of getting at need and impacting on the economy.

On the issue of the Croke Park agreement, one of our concerns, particularly over the past two budgets, has been cuts to many services without sufficient delivery of efficiencies. The Croke Park agreement has many success stories. Unfortunately, given the state of our public finances much more needs to be done. It was sensible to have a framework. It is hoped that the Croke Park agreement or similar framework could continue to deliver the savings that are needed.

On the specific issue of public sector pay, we remain baffled that pay increases in the public sector continue to be made at a time when the country is broke. In the face of severe and, in many cases, socially divisive cuts pay increases continue to be made by way of increment. We believe this is an unsustainable position. In the region of €200 million can be saved. From an equity point of view if nothing else, the Government needs to address this issue.

Damien English (Meath West, Fine Gael)
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Would anybody else like to make some concluding comments?

Mr. Tony Donohoe:

I would like to make some brief comments, if I may, on the issue of sick pay and education in this regard. I believe the GP fraternity could be a target for some education in this regard. GPs continue to issue certificates which are questionable. The point is that they are not doing their patients any favours by so doing.

Damien English (Meath West, Fine Gael)
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The point being that if an employer receives a certificate of sickness there is not much he or she can do.

Ms Patricia Callan:

I would like to respond to a couple of particular comments made. The point we were making today in terms of the minimum wage is that when sourcing workers now one can hire anyone on the minimum wage rate. Therefore, a young person will never be given a chance because the choice will always be to hire the experienced seasoned worker. This needs to be addressed. A 'young' person in this regard is someone aged up to 24 or 25 years. There are exemptions in the legislation on under-18s taking up a first job. In real terms, these are the practicalities of it. It is a barrier at this point in time, notwithstanding all of the arguments we have about it.

In terms of the casual labour issue, we are meeting this week with the high level group on business regulation which comes within the remit of the Department of Jobs, Enterprise and Innovation and is chaired by the Minister of State, Deputy Perry. We have set up a sub-group specifically to look at this issue. The Department of Social Protection is to send some people to meet the group. We are hoping that out of this will come some concrete engagements in respect of which we can come back to the committee. It is certainly an issue.

Anthony Lawlor (Kildare North, Fine Gael)
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We can download it.

Ms Patricia Callan:

That would be very helpful.

Damien English (Meath West, Fine Gael)
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A lot of work has been put into it.

Ms Patricia Callan:

The idea was that this group would send material to the Action Plan for Jobs to be delivered. The Department of Social Protection is not deeply into engaging but we will do our best. We have done a great deal of detailed work on the issue of sick pay. In the UK they spent two years discussing this, looking at it, examining it and travelling up and down and looking at the issues around sick certificates and looking at all the mechanics in terms of rebates and systems. After all that they decided to do nothing because of the recession. That is the person the Minister for Social Protection, Deputy Joan Burton flew in to tell us that we should bring this system in. At that presentation the OECD also sat on the fence. Fundamentally they were talking about different models in different countries and how great it was and when I asked them what actually happens in terms of insurance products for smaller companies, they said they forgot to mention that small companies are exempted. We know that the Minister said she would exempt small companies but the Department promptly retracted that. It is a debacle. It needs more assessment, and work before one can justify it. From our perspective the Minister is just trying to get it out of her Bill and it will be absolutely critical to smaller companies, even in pure cash flow terms having to trump up €188 rather than the equivalent of €90 in the North would persuade somebody like Mr. Ian Martin to locate a job there. One then gets the money back. There is far more complexity.

Damien English (Meath West, Fine Gael)
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We might take on that topic

Mr. Ian Martin:

We employ 20 people in my company and we would need a fund of €8,000 to €10,000 sitting in the bank if all our employees were to take one week's sick leave in the year. We run a service business and may need to employ a person for the day, but they will only work for cash. Nobody will work legitimately for a single day. It is very hard on the service industry to get casual workers.

One of the suggestions I have been making on public procurement is that one should be banned from buying anything off contract. If one goes to tender for a computer system, that should be it. If one wants a different printer one cannot have it. People who have a public procurement contract make the money on the extras. A small business cannot afford to tender to make a loss with the hope that it may pick up the extras later. If one bans all extras on public procurement, one will see prices going up but it will mean that Irish companies can then compete with the multinationals that have big deep pockets.

Damien English (Meath West, Fine Gael)
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Does Mr. Noonan wish to comment?

Mr. A.J. Noonan:

No.

Damien English (Meath West, Fine Gael)
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The issue of PRSI for the self-employed was raised in the presentations by both delegations. It is being discussed by another committee which was formerly part of this committee. It will be raised at its meeting on Wednesday next. We have been pushing it very strongly. There has been some movement on it. There must be a safety net for the self-employed. l hope it will be allowed.

Mr. Ian Martin:

I have been suggesting a voluntary system of PRSI for quite some time and did so last week at a meeting of the AGSB, the Advisory Group for Small Business.

The Minister, Deputy Bruton, and the Minister of State, Deputy Perry, were in attendance. We put forward two proposals. An unemployed person will qualify for some type of social welfare payment under the jobseeker's allowance but such people will need to be on their uppers in order to qualify and they will be out of business. The problem is that if a person's business goes wallop and he or she owns an apartment or a premises which is not income-earning, a total of 4% of the value of that property is regarded as income. For example, the owner of a property worth €200,000, will be deemed to have an annual income of €8,000 which means he or she will not then qualify for the jobseeker's allowance. We are looking for that barrier to be removed for the time being in order to help people.

Our second proposal is that an employee working for a company which ceases to trade who then sets up his or her own business in that trade, for example, will immediately lose the 30 years of social welfare benefits as an employee. We propose that after receiving the dole for three months, the other nine months is parked for a period of five years. It is known that businesses if not successful will fail within the first five years and at least there will be a little kitty available to fall back on.

Damien English (Meath West, Fine Gael)
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That is when people have earned the right-----

Mr. Ian Martin:

I refer to the ordinary guy who decides to set up his own business. There is a fear he will not be entitled to anything if it fails.

Damien English (Meath West, Fine Gael)
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There is an enterprise grant available in those circumstances.

Mr. Ian Martin:

It is 12 months for many of the schemes.

Damien English (Meath West, Fine Gael)
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No, it is down to three months or it should be at this stage.

Mr. Ian Martin:

It depends on the business. It has been taken on board and the Minister, Deputy Bruton, likes the two proposals which is hopeful.

Damien English (Meath West, Fine Gael)
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I thank the delegation for their attendance.