Oireachtas Joint and Select Committees

Tuesday, 29 January 2013

Joint Oireachtas Committee on Jobs, Enterprise and Innovation

EU Scrutiny Report: Discussion with Department of Jobs, Enterprise and Innovation

1:30 pm

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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The purpose of this meeting is the consideration of the six-monthly EU scrutiny report of the Department of Jobs, Enterprise and Innovation, in particular the smart regulation agenda, COSME, Horizon 2020 and state aid modernisation.

I welcome Mr. John Murphy, Secretary General of the Department of Jobs, Enterprise and Innovation, and his colleagues to the meeting. He is accompanied by Mr. Philip Kelly, assistant secretary, corporate services, EU affairs and trade policy; Mr. Tommy Murray, principal officer, EU affairs and Internal Market; Mr. Gerard Monks, principal officer, trade policy; and Mr. Paul Cullen, principal officer, industrial relations.

The committee considers these interactions with the Department on EU issues very important in the context of Parliament's enhanced role in EU affairs following the Lisbon treaty. This engagement today is also particularly relevant as Ireland now holds the Presidency of the EU Council.

Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the Houses, or any official by name in such a way as to make him or her readily identifiable. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they give to this committee. If you are directed by the committee to cease giving evidence in relation to a particular matter and you continue to so do, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given and you are asked to respect the parliamentary practice to the effect that, where possible, you should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. I ask Mr. Murphy to make his presentation to the committee on the six-monthly EU scrutiny report.

Mr. John Murphy:

I thank the Chairman for the invitation to discuss my Department's six-monthly report to the Oireachtas on EU developments. My colleagues have already been introduced. I will broadly introduce the key legislative and policy developments that accord to the various Council formations during the six-month period January to June 2012, which is the period covered by the statement. The report covers three Councils that fall within the remit of my Department, the Competitiveness Council, the Employment, Social Policy, Health and Consumer Affairs Council, commonly known as EPSCO, and the Foreign Affairs Trade Council.

It is important to note that the Competitiveness Council has a broad cross-cutting remit which covers the Internal Market, industry, research and space. While my Department takes the lead on this Council, given the wide sectoral issues involved, a number of files fall under the remit of other Departments. During the period of this report, the Council met on three occasions under the Danish Presidency. Many of the dossiers discussed at the Councils during that period are ongoing. Many are still being discussed at Council and we hope that they will be progressed during the Irish Presidency.

My Department is playing a central role during our Presidency in driving the EU policy agenda embodied in the overarching policy theme of promoting sustainable economic growth and jobs and building Europe's competitive advantage. As Presidency, Ireland is focusing on measures to promote growth and employment in accordance with the "Compact for growth and jobs", as agreed by Heads of State and Government in June 2012. The Presidency is placing a strong emphasis on advancing proposals that can boost the EU's competitive edge globally and add greatest value to jobs, growth, competitiveness and investment. I will now address the specific areas that were covered in our six-monthly report through each of the Council formations.

The Competitiveness Council reached an agreement on the essential elements of the competitiveness and SMEs programme - it is called the COSME programme - for the years 2014-2020 with a planned budget of €2.5 billion, which is the current figure. The aim of this programme is to strengthen the competitiveness and sustainability of EU enterprises, and to encourage an entrepreneurial culture, promoting the creation and growth of SMEs.

The Council held an orientation debate on draft regulations concerning European Venture Capital Funds and European Social Entrepreneurship Funds. The proposals are part of the set of 12 Single Market Act 1, SMA1, proposals and are a sub-set of the Commission's action plan to improve access to finance to SMEs.

In the are of state aid, the Council took note of a presentation by Commissioner Almunia on the Commission communication regarding the modernisation of the state aid policy, which was published in May 2012. The communication outlines an integrated strategy for reform of state aid policy. We endorse the objectives set out by the Commission on the modernisation of state aid, the principle of a more proportionate and differentiated approach to application-enforcement of the state aid regime, and we look forward to a more simplified and speedy transparent approach to state aid procedures.

In the priority areas of the Single Market Act, SMA, the Council provided a political orientation on the modernisation of public procurement policy and on the revision of the recognition of professional qualifications. The Council also adopted Conclusions on the governance of the Single Market and the Digital Single Market.

In the area of smart regulation, the Council conclusions at the February Council focused on a future smart regulation agenda with a strong end-user focus. The conclusions called on the Commission to further improve the smart regulation agenda by, among other matters, keeping end users, business - especially SMEs and micro-enterprises - consumers and public administrations in mind and involving them in evaluations of regulation in order to identify unnecessary burdens.

In the area of consumer issues, the objective of the proposal for a directive on alternative dispute resolution, ADR, together with the proposal for a regulation on online dispute resolution, ODR, is to provide for simple, fast and affordable out-of-court settlement procedures for resolving disputes between consumers and traders arising from the sales of goods and services through the intervention of an independent dispute resolution entity. The proposals depend directly on each other and have to be seen and dealt with as one package. The Council agreed a general approach on both of these proposals in May 2012.

Furthermore, the Commission published its Communication on a European Consumer Agenda called Boosting Confidence and Growth on 22 May 2012. The communication sets out four main objectives and identifies key measures needed to empower consumers so as to ensure that consumers are put at the heart of all EU policies.

A debate on a draft directive aimed at improving the system of recognition of professional qualifications with the purpose of facilitating the mobility of skilled workers across the EU was held by the Council. The proposal envisages the creation of a European professional card as well as measures designed to more effectively exploit existing instruments.

The modernisation of the public procurement policy in the EU was the subject of an orientation debate. The three proposals for modernising public procurement are: a draft directive setting up the new legislative framework; a draft directive on procurement by entities operating in the water, energy, transport and postal services; and a draft directive on the award of concession contracts.

The Council also took note of a Presidency report on the progress achieved concerning the reform of the public procurement legal framework. Much of the discussion focused on two key subjects: the use of electronic systems in public procurement - e-procurement; and the governance and monitoring of the procurement procedure.

In May, Council Ministers addressed the last outstanding issue in the draft agreement for the creation of a unified patent court, with a view to finalising the patent package. The debate showed that further work was needed to reach consensus on the location of the central division of the Court of First Instance for the future unitary patent jurisdiction.

In December 2011 the Council and the Parliament reached a provisional agreement on the two draft regulations implementing enhanced co-operation in the area of unitary patent protection. We are hopeful of finalising the necessary legislative instruments and to fully implementing the unitary patent and the unified patent court which will be of significant benefit in lowering costs for enterprises in Europe seeking to obtain blanket patent protection in the European Union by virtue of one application.

In the area of company law, the Commission presented linked audit proposals towards the end of 2011 - a proposal for a directive amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts, and a regulation on specific requirements regarding statutory audit of public-interest entities. Both of these were discussed at the Council with a view to progressing the technical work required on these legislative proposals. It is intended that the proposals address the deficiencies in the audit area perceived by the Commission as having been uncovered by the global financial crisis.

In the field of research and innovation, the advancement of the Horizon 2020, which is the European funding programme for research and innovation for the period 2014-2020, is on-going. During the Danish Presidency, the Competitiveness Council agreed a partial general approach - pending agreement of the multi-annual financial framework - on the overarching Horizon 2020 Framework Regulation.

There are two European Institute for Innovation and Technology, EIT, Commission proposals being considered at EU level as part of the Horizon 2020 package of proposals. In line with the Action Plan for Jobs, we will pursue funding and other opportunities under EU Horizon 2020 for specific sectoral activities of national importance.

On space, the Council held an exchange of views on the implementation of the space flagship programme GMES, which is the European Earth Monitoring Programme, from the year 2014 onwards. The overall objective of the GMES initiative is to support Europe's goals regarding sustainable development and global governance of the environment by providing timely and quality data, information, services and knowledge.

Turning to the Employment Council, the focus of the Danish Presidency was on stimulating growth and creating new jobs for Europeans. Ireland will have responsibility for managing the European semester in the first half of 2013. Building on the experience of the Danish Presidency, we will present an agreed roadmap for the handling of the process during our Presidency. Last year's second semester process developed into a full multi-lateral review of the country specific recommendations, CSRs, addressed to each member state. Although member states did not always fully agree with the Commission's proposals for country specific recommendations, there was nonetheless a broad agreement in terms of those issues that represent a challenge for the EU and its member states. There was also a broad acceptance within the Employment Council that reforms are needed but that implementation must remain in the hands of the member states. The operation of the Europe 2020 semester process in the first half of 2012 demonstrated that there are many learning and development insights to be gleaned from the process.

On the trade side, the Trade Council met twice during the Danish Presidency, on 16 March and 31 May. Political agreement was reached between the Council and the European Parliament on two major legislative files - the Regulation governing transitional arrangements for bilateral investment treaties and the regulation reforming the general system of preferences. The Council adopted conclusions on the EU's approach to trade, growth and development based on the Commission's communication on this subject. Regarding the negotiation of EU free trade agreements, the Council gave political agreement to a trade agreement with Colombia and Peru as well as discussing in detail that with Canada as well as the possibility of opening negotiations with key strategic partners such as Japan and the United States.

At the EU-US summit in November 2011, a decision was taken to establish a high level working group on jobs and growth. The working group is tasked to identify policies and measures to increase US-EU trade and investment to support mutually beneficial job creation, economic growth and international competitiveness in consultation with all public and private sector stakeholder groups. The report is expected shortly. Assuming the report will point in the direction of opening up negotiations on a free trade agreement, it will fall to the Irish Presidency to steer through the Council a negotiating mandate for the Commission to start trade talks with the US. In this regard it should be noted that Ireland will be the first country to hold an informal meeting of trade Ministers during its Presidency, which will signal the priority given by Ireland to the EU's trade agenda and its capacity to contribute strongly to economic growth and job creation.

Given the diverse range of dossiers covered by each of the Councils, it is possible to provide only a summary overview on the legislative and policy developments covered by the six monthly report. During our Presidency we look forward to managing and progressing these key dossiers with a view to advancing and contributing to a pro-growth and pro-employment agenda throughout Europe.

1:45 pm

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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I thank the Secretary General. It was down to our agenda problems that we did not have him before the committee previously to discuss the report. I am conscious it deals with the first six months of last year. We intended to discuss it in November but we had to defer it. We will bring the Secretary General before the committee again immediately after the Presidency when we are ready to review how it went.

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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I welcome the Secretary General and the officials and I wish them well for the next five months with what is an intensive schedule. We are now five years into the economic crisis and I have lost count of the number of orientation debates held. When will Europe get its act together on how serious this crisis is for business? We are focusing our Presidency on unemployment and employment creation, as did previous presidencies. This is the context for my questions. We should not be having orientation debates five years into this. We should have answers and, at this stage in 2013, we should also have a backup plan for if these answers do not work. Unemployment is the biggest issue facing Europe, in particular youth unemployment. We have nice fluffy flags flying in Presidency capitals which then move to the next capital, but we are not putting a dent in the figures while we keep stating it is a key issue.

Is the figure of €2.5 billion for COSME agreed or is it still being negotiated as part of the multi-annual framework? What does COSME mean for a typical SME? How will it help a typical owner-manager, never mind a big corporation, to keep his or her business open, and provide new business and employment opportunities and breaks to employ people? Unless it means something to business people on the street, it is European talk which does not really mean anything.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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Is a mobile phone nearby? It is causing a problem.

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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I apologise. With regard to smart regulation, the committee has ongoing discussions about the burden of regulation, which is a very serious issue for business in this country. Deputy Lawlor has done some tracking and much of it comes from Europe. We seem to be determined to implement to the bone every regulation coming from Europe. The debate on regulation has gone on for many years and the conclusions of the Council in February 2012 called on the Commission to improve the smart regulation agenda further by keeping engineers, end-users and businesses in mind, which is nice. These are the people who must pay to implement these regulations. In many cases the burden of regulation is forcing people to give up. It has become so heavy that people would rather close shop than have to take on the expense of it. While many of the regulations are necessary and worthy, the notion of keeping the user in mind sums up for me how the real business people and employment creators - neither officials nor politicians create jobs - are at the back of the queue.

Every country in Europe, particularly those in the programme, have serious unemployment issues and there is no sense of a plan coming from Europe to address them. I get a sense that member states are very much being left to their own devices. In the next session we will speak about the adequacy of the response here. When we, and previous presidencies under the Cypriots and the Danes, make unemployment a priority, it creates an expectation among people that something is about to be done, but nothing is done and it moves on to the next Presidency. At the end of our term, as the Secretary General of the Department of Jobs, Enterprise and Innovation what does Mr. Murphy think will be achieved which will result in job creation in this country?

Mr. John Murphy:

Deputy Calleary asked a number of questions. The budget for COSME is not yet agreed because it is subject to agreement of the multi-annual financial framework, which is the overall EU budget for the next seven years. Its purpose and main focus is to facilitate access to finance for small and medium-sized enterprises through loan facilities. In an Irish context it would be best to see it as something which complements the range of measures which the Government is taking to address access to finance for small and medium enterprises. It is a relatively small initiative in EU terms and a relatively small part of the multi-annual financial framework, but it is important for getting an understanding of the issues at European level and getting an EU response.

Deputy Calleary raised the wider issue that we are five years into the crisis and where is the EU plan. It is important to bear in mind the EU's budget. Its capacity to intervene directly to apply resources to a problem is extremely limited. Even if the Commission's proposals for the multi-annual financial framework were accepted by everybody around the table, the EU's budget would be approximately 1% or less of EU GNP.

In many areas of policy the direct responsibility lies with the member state. This is particularly true in the area of employment and social policy generally. However, the role of the European Union, apart from direct intervention through the European Social Fund, is very much to focus on policy and a sharing and understanding of various approaches which work or do not work. The semester process to which I referred is about examining how member states approach this and making recommendations, particularly where member states fail to take action to address issues in the labour market or rigidities in their business and regulatory environments which may impede the creation of jobs. This is very much where the focus of the EU has been, as distinct from massive job creation programmes as such. This is not something which falls within the ambit of the EU or within the resources provided in its budget.

Where the EU has a significant role in terms of facilitating employment is under the regulation agenda. Ireland's focus traditionally has been to try to ensure where proposals are made for regulation that they are proportionate and take account of the administrative and compliance burdens. Frequently we find ourselves in a minority of member states on some of these proposals because many countries have a tendency to legislate for a perceived problem. Our first questions tend to be whether the regulation is necessary, whether it will achieve what it sets out to achieve and what it will cost to implement it.

In the case of the Single Market Act we have been anxious to progress those changes so that the EU can sponsor and make the environment better for business. It is quite a slow process to get a consensus. Then one must take account of getting the approval of Parliament in a co-decision process. Frequently in Parliament, there is a conflict between people who want to see less regulation and people who see a particular problem and think the answer is more regulation. That is not always an easy problem to solve.

1:55 pm

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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Gabhaim buíochas do na finnéithe as teacht isteach inniu agus as an eolas seo a thabhairt dúinn.

Many people watching the presentation or who have read the scrutiny report will have the impression that this is a large EU bureaucracy trundling along making unnecessary work for itself. One of the main objectives of this committee is the extreme job creation crisis in this country. The Government has managed to create one job for every 33 in the past year. It has made advances but there is still a major job of work ahead of us.

With regard to the scrutiny report, it is hard for me to grasp an understanding of the assessment. We are analysing a scrutiny document and I expected an assessment of the quality and evaluation of the programmes, whether they are successful and how they will impact on the Irish economy. I have not got an assessment or evaluation feeling from the report. Perhaps I am wrong and the delegation might give its evaluation. The report covers the first six months of 2012 but the more up to date a scrutiny, the more useful it will be.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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That is more our fault than the secretary general's. It was on our agenda for October and November but the committee postponed it on both occasions. We also prioritised pre-Council meetings and the Department has been very helpful. The Minister also came here before the Council meeting, which makes more sense. The problem was the committee's agenda.

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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I will take that on board. State aid is an issue and one that I have mentioned on a number of occasions at this committee. It is up for renegotiation this year. Ireland has been regionalised historically and each region has been allowed give a particular level of state aid to foreign direct investment, and also to indigenous investment. When those initial terms of reference were outlined, Ireland was in a far different economic position than its current one. Due to the closure of Dell and a few other companies, Ireland managed to change its state aid. I want the Government to fight hard in order to offer County Meath and other counties, which are having difficulties with job creation, incentives to create jobs.

Public procurement is discussed in terms of access, which is important. We do not look at public procurement - or at least I do not get the feeling that we do - as a way to create jobs or act as a tool that will help create jobs. One of the points that we always discuss here is that we feel that public procurement militates against the easy access by small to medium-sized or micro-enterprises. Often public procurement is bunched together rather than broken down so its access is limited. We do not use social clauses enough in this State for public procurement. They are excellent tools for tackling disadvantage, long-term unemployment issues and apprenticeships. I have heard that other EU countries use procurement in a manner which, while not against European law, effects some level of advantage to local work and local companies. In this regard Ireland is the best boy in the class but it is to our detriment again. I would like to hear the Department's thinking on how it will resolve all of those problems which have general cross-party support.

Denmark will hold a referendum on whether to join the unified patent court but will Ireland need to do so? If so, would it be a good time also to have a referendum on upward-only rents?

The Ministers and the Commission had an informal working lunch to discuss the Single Market as a driver for growth in jobs. Has anything more been done to resolve the issue?

Recently agreement was reached on a 60 day payment period. Can the Secretary General explain what legislation can be used to resolve outstanding problems regarding late payment periods? I spoke to the MP Ryan company today which has a contract with Bord Gáis Networks but it still has an issue about its payments. How close is the Department or the State to reaching the 3% GDP target for research and development?

Mr. John Murphy:

There was a requirement on what the scrutiny report could cover which was the development of the EU in the six month period. The report covered January to June 2012 and was laid before the Houses in August. Oireachtas committee are under pressure so it is inevitable that the report is only being reached now. The report was not intended to be a detailed assessment of programmes and I am not sure how one could provide same. The report is on developments within a particular period. One would need a different structure to assess the effectiveness of programmes over a longer period. I am not sure how one would do it but I accept the point made by the Deputy.

The Deputy mentioned a number of issues about public procurement. The EU rules for public procurement protect the integrity of procurement processes and ensure openness and transparency which provide opportunities to ensure access for SMEs. Within Ireland the main responsibility for public procurement policy is with the Department of Public Expenditure and Reform. The National Procurement Service also does a lot of work on behalf of public authorities and works out of the Office of Public Works on a lot of the large-scale procurement issues. My Department works closely with both Departments, in particular on finding ways to improve access for SMEs. For example, we held workshops that brought together large public procurers such as the ESB, HSE, the OPW and local authorities in order to examine ways to make it easier for SMEs, in particular to avoid over-specifying what is needed to procure. Instead of saying I want 10,000 widgets, one would say I have a problem for which I need a solution. Innovative small firms may be able to help devise a solution. Perhaps there is a different way of solving a problem than what was first thought. The Department of Public Expenditure and Reform has also worked on guidelines to ensure that can be broken down into smaller lots without damaging value for money and, therefore, facilitating access by smaller companies.

Social clauses are not a panacea for all our ills. They can just as easily be used to prevent Irish firms from accessing markets abroad as protecting Irish or local firms within our market. I would be careful about what is put into an EU-wide regulation.

The Deputy referred to state aid and the reality is that the Commission has the competence for regional state aid roles. It is not a competence of the Council. The Commission has proposals which would significantly tighten the basis for regional state aid. Along with a number of other member states, we have concerns about the impact of those proposals. We will be lobbying the Commission on what decision it might make, which I expect to come towards the middle of this year.

The Deputy asked whether a referendum would be required concerning the unified patent court. At the moment, a number of states are required to sign the agreement in the first instance and then, subsequently, to ratify it. A referendum would be required in Ireland in order to ratify it. We will not know for about six weeks how many countries are willing to sign the agreement. That must include the three large member states where it is envisaged that divisions of the court would be located. We are not yet clear about whether there will be sufficient member states to facilitate the formal signing of the agreement at the February Council. It might therefore be delayed until later in the year. Subsequently, and prior to ratification, a referendum would be required in Ireland and Denmark.

2:05 pm

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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Can Mr. Murphy furnish this committee with the Commission's plans for tightening state aid? It seems to me that it would be an important piece of work for us. If it is going to be difficult for the Government to provide state aid, it is important that we should have a good debate on it in advance.

I understand Mr. Murphy's point about the detailed events that are happening, but the issue of evaluation is still important. As anyone in business will know, one cannot manage if one cannot measure. If we cannot measure the effectiveness, or otherwise, of these programmes it is difficult for us to have any input other than to watch them go by. We cannot give our perspective or bring political pressure to bear if we cannot measure them.

Mr. John Murphy:

I understand what the Deputy is saying. The purpose of the scrutiny process, in particular, is to bring proposals to the attention of the committee at an early stage and give the committee an opportunity to decide what level of scrutiny it wants to apply. We are always happy to facilitate the committee in that regard. That is the main business of this committee. If the committee wants to undertake broader or longer-term evaluations or assessments, it will need a different process for doing so.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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The option is open to us and we can make that decision ourselves. For the purpose of this meeting, however, the Secretary General can assist us in scrutinising and assessing a particular issue in depth. It is up to us to take that initiative and organise it here with the help of the Department when we need it. The proposals will come down to us anyway as soon as they are ready to be discussed here.

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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Okay.

Mr. John Murphy:

The Deputy asked another question on the percentage of GDP spent on research and development. As the Deputy knows, there are different measures including Government spending, business spending and so on. I do not have the precise figures here but I would be happy to supply them to the committee. Ireland's performance in this regard is at least as good as - and, in fact, better than - the average on a number of headings, despite the impact of the recession. We have worked hard to protect investment in research and innovation because the parts of the Irish economy that have been growing are very much R&D-led, so we want to protect that as far as possible. We have worked intensively, particularly through Science Foundation Ireland, with the Department of Education and Skills, educational institutions and industry to ensure, first, that we get leverage to the maximum amount of private funding to support what the State is doing. Second, it is to ensure that we prioritise well and get the best output from research that has the best chance of supporting sustainable jobs in future. The performance in R&D and the progress we have made in the last ten years have been significant factors in both the IDA and Enterprise Ireland being able to retain, sustain and grow investment.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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I call Senator Quinn who will be followed by Deputy Áine Collins.

Photo of Feargal QuinnFeargal Quinn (Independent)
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Mr. Murphy and his colleagues are very welcome. I thank him for the synopsis he has provided. I wish to touch on the question of state aid again. It seems to me that Europe is losing out mainly to Asia in worldwide competition. It could well be because we have quite strict rules about state aid to manufacturing, export or service companies. Is there a danger that because we are sticking to strict rules on state aid, we are hindering the export business of European companies? On the other hand, we continually hear of other European countries, in competition with us, being able to bend the rules on state aid. I do not know to what extent that is correct, or whether it is just that they are a little bit smarter than we are, or whether we just have a guilty conscience about that aid.

My other question concerns small and medium enterprises, SMEs, which we talked about earlier. How will Europe ensure that if it is going to support SMEs, when SMEs grow bigger - as we encourage them to do - it will not happen that they will be told that as they have become too big they are no longer an SME and these rules no longer apply to them? For a number of years, I was chairman of a sensible regulation committee and found it interesting to examine this matter. One of the challenges we had was that if the rule does not apply to small companies, what happens when they get bigger? We want small companies to get bigger but if they do, the rules begin to apply to them also.

I had not heard of the European professional card before now, but it seems to make a great deal of sense. I cannot believe it takes a long time to do, but maybe it needs the agreement of 27 countries as well as each association and organisation in each of those countries. It sounds sensible and I hope it goes ahead.

Photo of Áine CollinsÁine Collins (Cork North West, Fine Gael)
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I welcome the Secretary General and his colleagues. How does Europe, and the Department, define an SME? Is there a standard definition that would clarify the matter for us all?

We appreciate that regulation is necessary, but how is it valued in the rest of Europe? As regards the food sector specifically, we constantly hear that if one wants to sell in an open market in Ireland one must adhere to this or that regulation. When we go on holidays to France, however, every street market is selling food, yet we are all part of Europe. How are regulations measured, therefore? What happens if it is not working in other countries, or is it just that Ireland is good at enforcing it and making it harder for people to set up business?

It is great that we are high up on the research and development scale, which is really important. How do we assess research and development, how much of it is commercialised and how can we improve it? I have no problem with the amount of money we spend on R&D. The more tax credits we give to companies the better, as far as I am concerned.

I cannot help but comment on a seven-page report that does not include entrepreneurship. If Ireland, and Europe generally, are serious about solving the employment crisis, yet we do not even address entrepreneurship, where do we expect the jobs to come from?

Mr. John Murphy:

I will take Senator Quinn's questions first. The area of state aid is a bit like procurement where people say they have the impression that no small company can get a contract. Likewise they will say they have the impression that things are done much more easily in every other country. It is only when one goes to meetings in other countries that one realises everybody is saying this, so they cannot all be right.

As regards whether we are stricter or more lax in applying State aids, for better or worse the Irish public service applies the law. As regards EU matters, when we have been found not to have applied the law the penalties are severe. For example, the penalties for late transposition of EU directives, which usually happens for valid domestic legislative reasons, are severe with daily fines.

This joint committee is the first place in which we would be chastised for not having applied the law correctly had we exposed the Irish State or companies to litigation because of failure to apply the law.

As for small and medium-sized enterprises, SMEs, there are standard definitions of SMEs depending on the nature of the regulation. It is either less than 250 or less than 500 employees. In our domestic programmes such as, for example, the suite of programmes that Enterprise Ireland runs, we distinguish between micro-enterprises, scaling-up companies, companies we are seeking to get into export markets and then the larger companies and try to tailor the support offered to match their circumstances. I fully agree with the Senator's comment that we wish to see small companies find ways of growing. One of the challenges in Ireland is to prevent small companies that get to a certain size from sitting back and being comfortable with that but to think of ways they can go, including getting into export markets in cases where they might have been happy enough to stay within the Irish and United Kingdom markets. Instead, the challenge is for them to think about going further afield. We work very intensively, for example, with Enterprise Ireland on trade missions and we will identify the group of companies or the sector that can best benefit from that kind of intervention. We use our Minister and other Ministers, as appropriate, to head up these missions and over the past year or two, we have increased substantially the amount of such work that we are doing.

On regulation, there are exemptions for SMEs. Generally speaking, a company that goes beyond that threshold ought to have the capacity to deal with the aspect of regulation from which it previously had been exempted. That is a reasonable general proposition that is applied across different types of regulations. This is the principle that we apply in company law on the requirements for different levels of information and so on.

As for professional qualifications, I am unsure whether I have the detail on that issue to hand but will find it. The Senator asked about how long it takes to agree something like this and I note some of these items pertaining to a common passport for different aspects of industry have been on the European Union's agenda for years. However, one need only consider how long it has taken to pursue certain reforms domestically for some of the professions to consider how much more difficult it would be across 27 countries. I will be happy to get the details of the professional card for the Senator.

2:15 pm

Mr. Philip Kelly:

While the proposal seems like a good idea, the directive as it stands provides for almost automatic recognition for nurses, doctors and architects on the basis of there being a kind of harmonised training with regard to duration and content for them. In respect of other professions, so-called, this is not the case and the card is meant to be a kind of passport for them. However, this brings one into the anecdotal territory of the Austrian chimney sweep who has a professional card and whether Ireland, when allowing chimney sweeps in or out, will begin to issue professional cards or whether they might in fact not be adding to barriers. There is a debate under way within Europe as to whether a number of professions should be deregulated before they are given a card and that running debate essentially is one of the issues that has added to the delay.

Mr. John Murphy:

I will turn to Deputy Collins's questions. She asked how the Department assesses research and development and its importance. A substantial research prioritisation exercise was undertaken, in consultation with the industry and various other stakeholders, in the last year and a half. It was led by Jim O'Hara, who is a former chief executive of Intel in Ireland, and that group identified a number of sectors in which we should prioritise public funding because they offered the best prospects of economic return over time. Rather than dissipating scarce resources over a large number of sectors, we must concentrate our effort in the sectors that are likely to give us the most significant return. I should add that the funds to which I refer, which come through Science Foundation Ireland in the main, are not the sum total of public funding for research. There are other sources, through the Irish Research Council, which funds basic research in the universities, because it is important that it not be neglected.

Photo of Áine CollinsÁine Collins (Cork North West, Fine Gael)
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Enterprise Ireland also has innovation vouchers.

Mr. John Murphy:

Yes, there are many other avenues of funding for smaller companies and so on. This funding is assessed. A call for proposals is being assessed at present following on from the research prioritisation exercise. Essentially, that involves two tests, namely, excellence of the scientific quality of the research and the capacity for commercialisation and whether it is linked to the actual needs of industry and so on. This also will be internationally peer-reviewed, which is important for a small country such as Ireland. I suppose the test of this will be over time. My concern is to ensure that we try to get the balance right between what one needs to invest to get jobs tomorrow as opposed to what one might wish to spend to get jobs today. It is a very difficult balance to strike, particularly in the context of the present crisis. However, given the importance of research and development of the Irish economy, it is very important that we try to protect our level of investment in research and development and in particular to increase what we can leverage from the private sector, which we have been doing successfully.

The Deputy asked about entrepreneurship. I should point out the report is about developments during that six-month period. We have put a particular focus upon entrepreneurship for the Irish Presidency. We are anxious, for example, that our informal Council will have a particular focus on entrepreneurship and we will consider the financing of entrepreneurship, of which we have good experience in this country when compared with other countries. Enterprise Ireland, for example, effectively operates as the largest venture capital company in Europe. It takes equity stakes in very small companies and finances them at a very early stage and this is experience that we would like to share. Interestingly, in the context of our co-operation with the United Kingdom, this is an area its authorities have examined and they believe the offering they provide to small companies is not as good as the range of programmes we offer. It is interesting that this is the area in which they would like to gain from co-operation with Ireland. We wish to focus on access to finance and are working with our colleagues in the Department of Finance and with the European Commission to get a strong focus on that around the time of our informal competitiveness Council.

Photo of Áine CollinsÁine Collins (Cork North West, Fine Gael)
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I thank Mr. Murphy. While I acknowledge that Enterprise Ireland does fantastic work, it is in a very narrow area. For example, there is nothing there to help or support an Irish company that is in retail, for example, were it to expand within Ireland. I acknowledge there is high jobs growth in the technology sector and so on but I believe there are many other sectors that should be but are not being considered. We cannot ask Enterprise Ireland to do all of that when its framework is very specific in respect of the role it must play. This is a matter that should be brought into consideration. In addition, I asked about regulation and how it is viewed across Europe. I gave the example of food and would appreciate a response in that regard.

Mr. John Murphy:

I apologise. I meant to revert to that question. On the remit of Enterprise Ireland, it is focused on companies that are or can be in the export sector and that is for very good reasons. Were Enterprise Ireland to try to get involved in funding every small business, one would have a huge deadweight and displacement impact. That does not mean there the State cannot do things through other programmes. Consequently, the provisions to improve access to finance or to working capital, for example, would be extremely important to the retail sector. Moreover, the Deputy must remember that every job supported by Enterprise Ireland and the IDA in turn supports jobs in the domestic economy, which is the sector about which she essentially is talking.

On the question of regulation and how it is enforced, there are different issues in this regard. First, there are issues concerning licensing and who administers regulations, how they are administered and the manner in which that can impose a burden on businesses if they must deal with several different authorities which might have slightly different requirements. This is something that recently has been examined, at the request of the Minister, by Forfás, with a view to bringing forward proposals to try to streamline licensing. The starting point for this will be the retail sector, because that sector is particularly affected, especially if one has a combination of food and drink or of food on or off the premises and so on. There can be a large number of different licensing requirements to be met. In the area of markets, there are many vibrant markets, including within the Deputy's own constituency, and I have attended many of them over the years.

Whatever the regulations are, they have not stopped them from thriving. I had occasion to travel regularly to Paris in a previous job and I always passed a street market on my way to a particular meeting. The efficiency with which it was run was top class. Whatever regulations there were, they were being enforced, that was plain to see, but it was a vibrant and efficient market so it can be done. We are in the business of ensuring regulation is proportionate and sensible and not impossible to comply with. There must, however, be agreement. Within the European Parliament there is a very strong pro-consumer lobby which pushes for more food safety and greater regulation rather than less.

2:25 pm

Photo of Áine CollinsÁine Collins (Cork North West, Fine Gael)
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I appreciate that when it comes to food safety but I am talking about country markets in my constituency where women would be baking at home and bringing produce to market on a Friday morning. We had to close such a market because the women needed a particular licence to produce food at home and a licence for a market stall. It was not viable to keep it going. That does not happen in France. A person in France can produce something and sell it on the street without any problems but we cannot do that here. Those are the issues of concern to me.

There was an older issue where if a person traded at the side of the street for years, he or she almost automatically received a trading licence but there would be no piece of paper. There is a great difference between us and other parts of Europe. The committee might look into this in greater depth.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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I will move on to the next issue. There will be a chance at our interparliamentary committee meeting on 28 April to discuss the whole area of entrepreneurship and the blockages that exist for small business. We can tease that out formally then. There is an informal meeting in March but we can formally discuss this in April.

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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I welcome the Department. It is a shame we do not see the witnesses on a more regular basis. This must be the first visit in almost two years.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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That is our own fault but we will make sure to have more regular visits.

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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Currently we are transposing around nine EU directives into Irish law. What is the breakdown of those directives? I have not seen anyone carrying out regulatory impact assessments. It is difficult to find out who is in charge of a section in the Department and who analyses the impact of the various EU directives that are being transposed into Irish law. Who is responsible for this?

On the administrative burden for small firms, statistics in a report by the Bruegel think tank in Europe showed only 1.2% of European businesses are classified as large companies. The remaining 98.8% of EU businesses are small and medium enterprises and of those, 92.1% employ fewer than ten people. The focus of the Department, however, seems to be on Enterprise Ireland and the IDA. The report also stated that 85% of all new employment will be created by SMEs and the vast bulk of SMEs employ fewer than ten people. The emphasis is totally placed on companies with in excess of 50 employees, but the bulk of new employment will come from those companies with fewer than 50 employees. I see nothing to give me any hope that the Department recognises that.

Almost 85% of administration costs are associated with EU directives. In 2008, the Government decided to reduce the administrative burden on businesses by 25% by 2012, irrespective of any change in Government. That was the policy that was to be part and parcel of planning in the Department. Are we close to achieving that target considering the burden of administrative costs is very high for small companies?

EU procurement was mentioned. No section of the Department seems to be responsible for procurement, it appears to be the responsibility of the OPW. Is there any contact between the OPW and the Department of Jobs, Enterprise and Innovation? How regularly do they meet?

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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Those questions would be better in the next session. I want to close this session as soon as possible.

Photo of Seán KyneSeán Kyne (Galway West, Fine Gael)
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I welcome the Secretary General and officials from the Department and wish them well in the Presidency and in their efforts on job creation.

Youth unemployment is a Europe-wide problem. We have heard about it in countries like Spain and Greece but the figures from Sweden are a surprise, where there is up to 24% youth unemployment. The issue is clearly linked to the global problems in finance and banking.

On the reform of state aid, ESB, An Post and Telecom Éireann were vital services. Today broadband is as vital and I welcome Commissioner Almunia's report that states the revision of several state aid frameworks in strategic areas such as regional aid, environmental aid, risk capital and broadband are being looked at. Was Ireland pushing for these changes in broadband, in particular, because despite the national broadband plan, there are still wide areas of rural Ireland where there are problems that could be directly addressed by state aid?

What record does Ireland have in terms of procurement of services across the EU? Do continental countries have greater chances of procuring services from neighbouring countries within the EU?

If there is a mandate for the EU-US summit, what are the inherent dangers for Ireland from such a free trade agreement?

Mr. John Murphy:

On the transposition of directives, the general principle is the division that deals with the issue is responsible for transposing the directive. If the directive relates to state aid, as an example, one of the principal officers in the competitiveness and jobs division who deals with state aid would be the file officer.

The time for the regulatory impact assessment is before it becomes a directive.

We would always be anxious to ensure that this is when the work is done by the Commission because once it is transposed and there is a requirement to legislate, one does not really have that much room for manoeuvre. We cannot sort of say the directive says X but we will go off and do something completely different.

2:35 pm

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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I do not mean to interrupt but I am talking about proposed directives.

Mr. John Murphy:

Deputy Lawlor phrased the question in the context of transposition.

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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Sorry.

Mr. John Murphy:

For proposed directives, it is no problem. The whole purpose of this scrutiny business is that we give members details of what we think are the critical aspects of the proposal and who is the responsible officer.

Mr. Philip Kelly:

The Commission is obliged to produce a regulatory impact assessment, RIA, on the legislative proposal. Through a scrutiny note, the Commission proposal and the relevant RIA should be available. The Commission's RIA, of course, looks at the EU-wide impacts rather than the country-by-country impacts. That falls for consideration and informs negotiation by individual member states as discussion on the draft legislative proposal goes forward but, as the Secretary General said, it is a matter for each Government Department to use RIAs as a kind of bargaining tool or a counter in the debate in EU working groups if they want to change the Commission proposal.

Mr. John Murphy:

The fact that the vast majority of firms in Europe are SMEs, which is correct, was referred to. I emphasise again that, as part of the EU agenda and outside it, we are very focused on the importance of SMEs. In the past two years, and despite the recession, an average of 2,000 new firms were formed every month in this country, so it is extremely important that we find ways to support them. It would be incorrect to say the Enterprise Ireland programmes, for example, are totally focused on larger firms. It has a suite of programmes which are focused on very small enterprises and at ways of helping them to grow. In fact, the vast majority of Enterprise Ireland's 3,500 portfolio firms are SMEs.

It was said that 84% of administrative costs were associated with EU directives. I am not sure to what that 84% relates.

Photo of Áine CollinsÁine Collins (Cork North West, Fine Gael)
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Compliance costs.

Mr. John Murphy:

Compliance costs for what?

Photo of Áine CollinsÁine Collins (Cork North West, Fine Gael)
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I refer to compliance costs for businesses relating to EU directives - the administrative burden.

Mr. John Murphy:

That is 84% of-----

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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It is 84% of the costs associated with compliance with EU directives.

Mr. John Murphy:

Yes.

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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Do RIAs take into consideration the costs for companies of transposing a directive into Irish law? The RIA does not seem to take into consideration-----

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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When Deputy Lawlor refers to administrative costs, I presume that includes record-keeping and record management, which is a big part of many of the directives.

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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I refer to a Forfás report.

Mr. John Murphy:

It is not 84% of all administrative costs.

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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No. It is compliance costs associated with EU directives.

Mr. John Murphy:

This is a slightly circular argument. By definition, one would expect that the cost of complying with a regulatory requirement would be an administrative cost.

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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I know, but the point I am trying to make is that when doing a regulatory impact assessment, are we taking those things into consideration-----

Mr. John Murphy:

Of course.

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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-----to make an argument with the EU Commission that when a directive is transposed into Irish law, it will have an adverse affect on businesses here?

Mr. John Murphy:

The important issue is the total level of the compliance cost with a proposed EU directive. A high proportion of whatever that cost will be is an administrative one. The issue is whether it is a large or a small cost and whether there are sensible ways to reduce it.

The objective of reducing the administrative burden by 25%, which was set some years ago, was also referred to. We are directly involved in progressing that initiative. We have been working with other Departments to do a base-lining methodology and to apply it to whatever measures are being taken to see if it is reducing administrative costs. I can tell members that we have just about achieved that objective ourselves, in particular through improving customer service in the areas where we directly interface with business - for example, the Companies Registration Office, in the health and safety area, in the industrial relations area, in work permits and so on.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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Has the Department achieved the target set out in 2008 of reducing the cost by 25%?

Mr. John Murphy:

We have and we are working with other Departments to ensure they do as well. Some people have done very well in this area, in particular the Revenue Commissioners. Others have more progress to make.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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Are members happy enough with the answers?

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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There was one more question in regard to linkage, although maybe that will come up later.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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Maybe we will deal with it later.

Mr. John Murphy:

Deputy Kyne asked about broadband and state aid. There is a general principle that state aid is allowable if one can demonstrate that there is a clear public interest and that there is clear evidence of market failure. In the case of our proposed broadband plan, we would argue that both of those tests are satisfied and, therefore, it is possible to devise ways to implement it which meet state aid requirements.

The Deputy spoke about procurement and neighbouring countries. The statistics show that the vast bulk of public procurement tends to be accessed by firms within the country concerned. That is certainly the case in Ireland. I expect that there would be slightly more open markets in say the Benelux countries where distances are smaller and a country on either side of a border is effectively in the local economy.

The Deputy also referred to an EU-US trade agreement. At a level of general principle here, the EU and the US are the two largest trading blocs in the world and there are significant potential gains from an appropriate trade agreement but there must be balance and reciprocity. We would certainly be anxious to secure a mandate on that basis because we see significant potential gains, in particular for Ireland because we are a small open economy and we are strongly represented in the sectors of interest to trade between the EU and US.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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We have e-tendering proposals on our agenda. Is there any feedback on what it could contain and on where it is at? In regard to Horizon 2020, the overall budget is still under negotiation but is there any update on it?

Mr. Philip Kelly:

E-tendering is covered by one of the three public procurement files which are currently being progressed and which we hope to have completed under our Presidency. That will make it mandatory for people to facilitate e-invoicing. That is one of the three procurement files alive and, hopefully, moving to closure in six months.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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Great. Will we get an update on that in the next-----

Mr. Philip Kelly:

Yes.

Mr. John Murphy:

I will need to come back to the Chairman on Horizon 2020.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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That is okay. I know it is not in the overall budget negotiations but an update at some stage would be fine.

That concludes this part of the session. I thank Mr. Murphy and the officials for coming here today to engage with the committee during a particularly busy period for the Department. On behalf of the committee, I thank the officials for their engagement with us in general. In 2012, this committee scrutinised approximately 100 EU proposals and the Department would have given us briefing notes on many of them. We further scrutinised and delivered reports on 12 proposals. There was much work involved and we thank the officials for that. We also had three pre-Council meetings. I am conscious of the comments made that we are a bit behind with this report but I stressed that we felt it was better to have pre-Council meetings as well. We look forward to inviting the officials back after the Presidency when they will update us on the developments and achievements during that time.

The joint committee went into private session at 3.30 p.m. and adjourned at 4.45 p.m. until 2.30 p.m on Tuesday, 5 February 2013.