Oireachtas Joint and Select Committees

Tuesday, 5 February 2013

Joint Oireachtas Committee on Jobs, Enterprise and Innovation

Reform of National Micro and Small Business Support Structures: Discussion

1:30 pm

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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I welcome the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, and his officials, Ms Clare Dunne, assistant secretary general, Mr. Dermot Sheridan, principal officer, Ms Áine de Bairtiséil, assistant principal officer, and Ms Claire Madigan, assistant principal officer. The purpose of the meeting is to discuss the reform of national micro and small business support structures and what emerges will feed into the debate within the committee on this matter, which is being led by Deputy Áine Collins.

Before we begin, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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I provided a submission for the joint committee which, I presume, has been circulated to members. I will not read it, rather I will deal with the broad issues involved. Perhaps members might then raise whatever concerns they harbour.

The programme for Government contains a commitment to reforming the system of supports for small and micro businesses. This is also a central plank of the Action Plan for Jobs 2012. Our ambition is to make small business a more central part of the national enterprise strategy. To a degree, small business has been operating on the fringes. The steps we are taking will bring it to the centre of enterprise strategy and help us in developing a much stronger local service. There are six key elements to delivering this change.

The first is the establishment of a centre of excellence within Enterprise Ireland which will be responsible for improving the environment for small business to bring the sector into the heart of national enterprise policy. It will build on the success of the city and county enterprise boards by developing new thinking and best practice with regard to the supports for small and micro business and strong development at local level. The local enterprise office will act as a first-stop shop. During the national consultation process following publication of the 2012 Action Plan for Jobs it was clear that people did not know what was available to them. Many small and medium enterprises did not know about the many good ideas and schemes available. This is not surprising because small business does not have the managerial time to allocate to research on the web to become familiar with these ideas. The first-stop shop will supply information on the necessary agreements and memoranda of understanding with the Revenue Commissioners, the Credit Review Office and the Companies Registration Office. The third element is to have an integrated national network in place of 35 separate boards. An integrated national network, with a centre of excellence, will set performance targets and provide for seamless progression for small business into the more ambitious programmes of Enterprise Ireland. Separate boards do not serve the needs of small business as effectively. An integrated national network will have the scope to be innovative. We decided to locate the office within the local authorities.

Reaction to our proposals has been positive. Most of the criticism has been directed at the idea of bringing the former county enterprise boards under the umbrella of the local authorities. This is essential in order to exploit the full potential of local areas to deliver a better environment for business. It is true, regrettably, that many small businesses regard the local authorities as part of the problem, as opposed to part of the solution, in creating a vibrant local business network. Enlisting the support of local authorities, to have them buy into their role in creating the best possible local environment, is central. This support will include important local services such as access to the planning and licensing systems and fire certification process. Local authorities can provide important services and opportunities for small businesses. We are aiming to have more open accountability as to the quality of that local business environment and to benchmark the progress being made. I refer to the pricing and quality of the service offered to small businesses by the local authorities. The County and City Managers Association has recently produced a document listing 2,000 positive facts about the work of local authorities across the country. We want to see these good ideas being copied across the network, particularly if local authorities are delivering something extra to small businesses.

More than 90% of our enterprises employing 62,000 people are at the heart of this strategy to build a strong indigenous engine of recovery in the economy. The culture created within the county enterprise boards is pro-enterprise which must be enhanced within the new environment. Those who created that culture will be incorporated into the service in order to maintain that continuity. The Enterprise Ireland small business centre of excellence will provide the training and supports to maintain this culture.
The Government approved the priority drafting of the Industrial Development (Micro-Enterprise and Small Business) Bill which will provide for the formal dissolution of the county and city enterprise boards and the transfer of their assets and liabilities to Enterprise Ireland. It will provide for the setting of a formal date for the simultaneous dissolution of the county enterprise boards and the formal transfer of staff, functions, assets and liabilities to Enterprise Ireland; the transfer of CEB staff to Enterprise Ireland as a first step in order to give legal certainty to the dissolution; and the preservation of certain continuing contracts. The Bill is not intended to set out in detail the service-level agreements which will be more dynamic and evolving documents.

In tandem with the drafting of the legislation, an implementation working group was established, chaired by my Department, comprising representatives of the key State stakeholders such as the county enterprise board network, city and county managers, county enterprise board chairpersons, Enterprise Ireland, the Department of the Environment, Community and Local Government and the Department of Jobs, Enterprise and Innovation.

Other reform initiatives in my Department include the integration of the five employment rights and industrial relations bodies into two bodies. It is a more complicated change management system.

I will briefly outline key elements of the new approach. I have set out the proposed role of the local enterprise networks which will be the first-stop shops providing the grants and supports and acting as catalysts for further changes. The Enterprise Ireland centre of excellence will promote innovation and best practice within the small business network. It will also study international best practice. The new instrument of micro-finance has been established which will be predominantly administered through the local enterprise offices which are the initial point of contact for most applicants. The service level-agreement is the vital document and will be between Enterprise Ireland and the local enterprise offices. I have emphasised the important role of the local authorities. Most far-seeing city and county managers recognise that the success of small business in their county or city will be crucial for their longer term success and it is important to harness that commitment.

The service-level agreement will set out protocols relating to budgets, project evaluation and approval; robust performance indicators; the roles and responsibilities of respective bodies; benchmark best practice; make provision for technical support to train and support staff who will produce annual plans to a high standard. The Enterprise Ireland centre of excellence will sharpen the mentoring area which has considerable potential to support businesses, even those which are not grant-aided. I refer to the success of businesses raising a loan and managing business which hinges on the quality of the mentoring system.

There is scope both to improve the quality of mentoring and also to develop specialties in mentoring attuned to the needs of individual businesses. In having a national network we will have a better opportunity to have a better fit with enterprises that emerge which, perhaps, have more specialist or sectoral needs that are particular to them.

There has been a great deal of consultation. The latest round of consultation ended on 18 January. We received more than 80 submissions, which we will obviously factor into the continuing development of this programme. We are determined to press ahead with this as rapidly as possible. Clearly, we are anxious to do it well but we also want to provide a good product that will support small business, which is at the heart of this. I will work very hard with Deputy John Perry, the Minister of State with responsibility for small business, to ensure not only that we secure the necessary buy-in across the system and within local authorities, our existing networks and within EI for the delivery of this but also, at the next stage, to ensure there is good understanding of what is available. When we launch the new offices with their logo there must be good quality information behind it, so when people go there they can expect a high standard of service.

There is much work still to be done. We are proceeding with that. Like all of these initiatives for change, it depends on the goodwill of the people to make this a success. The working group on which Clare Dunne, Dermot Sheridan, Áine de Bairtiséil and Claire Madigan are working is approaching this in a vigorous manner. Obviously there are always issues to be resolved. Unions have concerns about a change like this but we are managing that process. We are determined to push ahead rapidly with it. I believe it will be a worthwhile change in an area which most Deputies would recognise as being central to a successful enterprise policy.

1:45 pm

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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Deputy Dara Calleary apologised for having to leave before the Minister's presentation. I call Deputy Tóibín.

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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Go raibh míle maith ag an Aire mar gheall ar a chur i láthair. I wish to mention briefly the issue of upward-only rent reviews. I spoke to the owner of a small business over the weekend who has three outlets. Two of them are under upward only rents and he is having major difficulty getting a reduction in them. There is the threatened closure of B&Q in Waterford and Athlone and the other outlets are also under major pressure. Upward-only rent reviews are costing hundreds of jobs each month in this State. The advice from the Attorney General, which none of us has seen, is that we cannot do anything about it without a constitutional amendment. Will there be a constitutional amendment to make that change? Last week, when the Minister of State, Deputy John Perry, was asked about upward-only rents he said that they were not an issue in the closure of businesses in Ireland. I considered that a shocking thing for a senior Government Minister to say. Does the Minister agree with the Minister of State that upward-only rents do not have an effect on the closure of businesses and does he have confidence in the Minister of State, Deputy Perry's, ability to do the job, given that so many businesses have closed due to upward-only rents?

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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Will the Deputy try to keep to today's discussion, which is about small business?

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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It is an issue for small businesses as well.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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I accept that.

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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With regard to the LEOs, I agree the county enterprise boards have been in a no-man's land for a number of years, including before this Government took office, and they must be reformed. Could the Minister furnish the committee with the number of jobs that each of the county enterprise boards created in the last number of years, so we can get an understanding of what the objectives of the new LEOs should be in the forthcoming year? We could then measure the output of the LEOs and the cost per job as well.

The Minister has been getting input from private business with regard to the LEOs. Some of that input came after the decision was made. Perhaps we could get some of that input and an understanding of it.

My other question is about credit for small business. Niall O'Donnellan, who is the liaison between Enterprise Ireland and AIB, Bank of Ireland and Ulster Bank, told the Committee of Public Accounts last week that the Irish banking system is not fit for purpose for lending to the SME and exporting sector. This is still a major issue for small business. I met a small business owner in Trim yesterday whose business is ready to go. He has a grant from a development organisation but the banks will not give him the money for a long enough period to spend it and then draw down the grant to cover it. The system is still hampering small businesses in a major way. Does the Minister agree with Enterprise Ireland's representative? What can he do with the banking system by using the public interest shareholders?

If the Chairman will permit me to raise another issue, Tara Mines in my constituency has threatened temporary closure of the mine. Many small businesses deliver to Tara Mines and the industry is very important in the local economy. Will the Minister try to persuade the management in Tara Mines to stick with the wage agreements it agreed less than nine months ago-----

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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You have raised the issue. It is not fair to the other members.

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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First, I have absolute confidence in Deputy John Perry. Not only is he totally committed to the small business sector, he also knows a great deal about what is happening in that sector. For a long number of years he has been pointing to the vulnerability of some elements of the small business sector, particularly the retail area and the over-shopping that was allowed to be developed during the boom years. He has an acute understanding and if people had listened more to his warnings about the hazards of what was happening during the boom years, we would be in a stronger position now.

Clearly, upward-only rent is a major concern. Everybody went into this in good faith, hoping a solution could be found. There has not been a possibility of a solution other than the State, through the taxpayer, compensating individuals for any loss incurred in the revision of an upward-only rent. That option is not open to us in the current financial climate in the State. To be fair, the National Asset Management Agency, NAMA, which is a big property owner on behalf of the State, has applied changes in its rules. I believe the penny has dropped with landlords to some degree as to the true state of businesses and many rents are being negotiated down. That is not to say it does not remain an issue, because it does. Certainly, it was an issue in the B&Q case. There is no doubt that there are individual areas where very high rents are a problem.

On the overall data on job creation, I have the provisional 2012 figures. The number of jobs created was 6,905 gross and under 1,000 net. There were job losses in the sector as well as gains. Roughly speaking, the cost per job sustained is approximately €6,000. Clearly, we take into account that it has to be assessed over a number of years to see the overall impact. In total, nearly 1,000 projects were assisted and there were many participants in soft support, as it were. I can get the breakdown by county for the Deputy as it is available. As regards the type of comment received, Claire Madigan has been going through them.

I have read some of them but not them all. We are going through them exhaustively. We intend to publish them in their entirety so people will have access to them.

There is a mixed bag of reactions. By and large, everyone recognises that this is a matter that we need to get right. There has been much comment on how we could make the centre of excellence one of really good quality such that it will provide a new sense of leadership in the sector. Deputy Tóibín acknowledged this was in a little bit of a no-man's-land. We will be building on the existing strengths of the CEBs. We also hope to deliver in other ways.

There is ongoing comment on whether the local authority is the right home for what is proposed. From the start, this has been an area of debate. We are moving from one system to another so there will naturally be some criticism, but we are determined to make the partnership really work. It is important for the future of local authorities that they be able to administer on a devolved basis for Departments such as mine, deliver a high-quality service and bring their unique skills to the party. By this I mean enterprise development in their neighbourhoods. I accept this is a new departure but we are determined to make it work.

I did not see Mr. Niall O'Donnell's full statement but I could not disagree with him if he is saying the banks are not fit for purpose. The banks became organisations that were built around debt, property, construction and commission earning. They must completely reorient themselves to become organisations built around relationships, small business and exporting. That is a journey that they certainly have not completed. However, to be fair to them, they are on that journey. Many of them are making significant changes that will bring much better staff into decision-making positions, but one need only look at the statistics to note that we have one of the highest refusal rates in Europe. There is still a considerable turnover of decisions by the CRO, which indicates that that office does not feel the banks are making the necessary decisions. Not enough cases are getting to the CRO. The banks need to make a lot more progress to have a system that serves the SME sector, including the SME exporting sector. They are working on it, however, and we are working with them. The Government is holding them to account and, through bodies such as Enterprise Ireland, we are trying increasingly to get them to build sectoral knowledge and engage in the sort of relationship banking that is important.

With regard to how one forces the banks to do something, there is an element of carrot and stick. While we have a shareholding in the banks, we cannot abandon the fact that they are responsible for evaluating risk. The taxpayer does not evaluate risk. We want to reach a point at which we can recover the taxpayers' money from the banks. It is important that they become capable of standing on their own and providing a service of excellent quality to small export-oriented businesses. This is the route we must go. It is not a question of politicians telling the banks that they must lend to particular individuals. There is a process of change that we need to oversee within the banks.

1:55 pm

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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Will the Minister consider holding a referendum on upward-only rent reviews, given that the Constitution as it stands will not allow for change in this area? While I agree there has been good work done on reducing rents associated with NAMA, there are hundreds of rents payable to Departments, including the Department of Jobs, Enterprise and Innovation, the Department of Agriculture, Food and the Marine and the Department of Arts, Heritage and the Gaeltacht, that are subject to upward-only reviews. These Departments, as landlords, charge upward-only rents. Will the Minister commit to change in this area such that the rents will reflect market rates? How often does the Minister meet representatives of the banks?

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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If I allow questions that are not part of the main discussion, every member will ask three or four additional ones. We will continue with the conversation on LEOs, if that is acceptable, and then ask the Minister to give answers.

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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Some of my questions were not new.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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If we open up a discussion on every issue, we will not conclude the main topic. We are supposed to be considering the proposed changes regarding the LEOs. Deputy Collins is working on a report and I want to address that. If there is time remaining at the end, we will return to the other issues. Deputy Tóibín will be on top of the list.

Photo of Áine CollinsÁine Collins (Cork North West, Fine Gael)
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I thank the Minister and his colleagues, who are very welcome to the committee. I am quite happy that LEOs will be part of local government on foot of the realignment of the local partnerships. People on the ground are often very confused about where to go to get help. Having a one-stop shop will be of great benefit to the client. Supporting the client is paramount. I am delighted that the centre of excellence, which will be in charge of the training of the staff in the LEOs, will be managed by Enterprise Ireland. It has a good record and service in this regard.

I am glad the Minister mentioned mentoring. Since he brought it up, I will ask a question on it. Does he envisage that mentoring will still be provided in the current system? Will there be a stand-alone network of mentors feeding into the various agencies and sectors? Will people who are not part of the LEOs be able to gain access to mentoring under a State system? If so, how will the process work?

What I am really trying to figure out is what will be different for the client in this experience. When the client seeks a service, will it be a question of funding or the delivery of training? What kind of training will be delivered? Will it continue according to the current model? What will be different in terms of supporting the client?

While I appreciate that resources may not be available, will it be possible to have a relationship-management approach whereby we could bring the people in the local enterprise offices into the field to meet clients and businesses to determine their needs and help them?

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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I thank the Deputy for her comments. We are not moving immediately to a stand-alone mentoring system outside the service. We provide for mentoring within a network overseen by Enterprise Ireland's centre of excellence. There will also be Enterprise Ireland's own mentoring service.

I envisage a natural evolution of an improved service in the development of the mentoring service over time. It will not be different tomorrow, but we will move to make it different over time. We have already expanded the role in that CEBs are providing the first point of contact with micro-finance, which is entirely outside the traditional area of manufacturing and internationally traded services. I refer to those in the domestic economy to whom a service is being provided. We will seek to develop instruments to support innovative businesses, even those that do not fall into the traditional categories. This represents a natural evolution.

From my experience of banks turning down credit applications and my work with the CRO, it is clear to me that the quality of business plans and the mentoring support is not up to scratch. The way small business presents its face to banks is not good enough. It needs to be improved and we need to work on it. It will be important to extend a network from the LEO into the wider business community, be it through chambers of commerce or others working in this field, to improve in this area. It is an area in which we need to learn and develop rather than one we need to enter with a proposal for a stand-alone operation.

Relationship management, as mentioned by the Deputy, already exists to some extent. We will improve all the time the quality and range of mentoring support. This will represent a central gain.

Let us consider what will be different. Obviously, there will be a difference in respect of micro-finance. There will be a financial instrument to support businesses outside the traditional sectors. There will also be central training, and central standards will be set. Enterprise Ireland, through its network, will be helping to develop the skills and the reach of the enterprise office.

This will change over time but the immediate thing must be the first stop shop. We will go live with that so people can have confidence that if they go to one place, they can find out about credit review, microfinance or seed capital relief from Revenue. Whatever it is, they will have good access to that point. We will develop this service as we go along. I do not believe this is the end. This is just putting in a new structure and we need to develop and learn from what we have.

2:05 pm

Photo of Michael ConaghanMichael Conaghan (Dublin South Central, Labour)
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I welcome the Minister and the senior staff from his Department. I wish to raise two general issues. With the standing down of the 35 city and county enterprise boards - I know their performances were mixed - was there any general assessment of how they fared? Obviously, some did well while others did not. I think people would like to have access to that kind of knowledge, in particular in terms of passing on the good learning to the new structures.

The issue of funding has been raised already. Funding is the lifeblood of small and medium-sized enterprises. The criticisms of the banks are like a refrain from an old ballad in that they just go on and on. Presumably much of this criticism is valid but where would the Minister say it is not valid? If it is valid, as most people instinctively feel it is, when will it end? We have been promised action and that the next initiative would be the one. Where are we in regard to the demand for the lifeblood of small and medium-sized enterprises? When will we reach a point when the demand is matched by the supply so that this vital sector gets a chance to perform to its potential in terms of job creation and so on?

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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I welcome the Minister and his officials. When Enterprise Ireland was with us in November going through its view of the LEOs, I had a concern that the small local company, which was not interested in exporting and which would never be an exporter but which still could be an employment creator and provide a viable service - I am not into displacement; we do not want to encourage that - would be lost in the LEO structure, in particular in an Enterprise Ireland structure. In his presentation, the Minister acknowledged some improvements there. He might just reflect on that and that the LEOs should be good for all companies.

The Minister for Environment, Heritage and Local Government, Deputy Hogan, proposes to bring all the Leader funding - the Leader enterprise strand - into local authorities. Will the LEOs deal with Leader funding or will that be a separate wing of the local authority? If it is to be a separate wing, does that not undermine the whole one-stop-shop approach because certainly in Leader areas, Leader enterprise funding is essential? It will be under the local authority but will it be under a separate part of the local authority? Do we have EU approval for the enterprise side of things?

The Minister mentioned that the LEOs will be the one-stop-shop and that he wanted to start to increase the services. As he is redesigning the industrial relations machinery, will the LEOs have a role in being a one-stop shop at that end as well in terms of maybe providing NERA advice, or being an agent for NERA on the ground in terms of providing advice as opposed to enforcement?

The Minister referred to local authorities in his report and I have concerns about bringing an enterprise function into local authorities and I am still not convinced. He rightly mentioned that many local authorities have initiatives supporting enterprises but many of those are at town council level. Many of the really good initiatives at local authority level have come from town councils which will be abolished. In the larger local authorities envisaged by the Minister for the Environment, Heritage and Local Government, Deputy Hogan, how will the Minister protect that spirit of enterprise and creativity? Will he give us an update on where we are with the industrial relations issues?

It is a bit of a bugbear but the 35 county enterprise boards all have 35 different brands and logos. One would not realise that the county enterprise board is actually a nationwide model. The Minister mentioned in his report that he has appointed a company to design a new logo. Will it be one brand and one logo for the entire country rather than many different ones? Did an SME get the gig?

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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We did a study of county enterprise boards before we embarked on this change, which was broadly positive but made recommendations for change. We are taking on board the sort of recommendations it made and are integrating them into the new proposal. Some of them are on the sorts of themes Deputy Calleary raised, that is, to ensure innovative companies, which might not be immediately looking to export, do not fall between the crevasses. We recognise that and microfinance is the first instrument which recognised that and expands the range of instruments to support them. We are trying to make it easier to export so we established a firsttime exporters' division and Enterprise Ireland is targeting approximately 2,000 companies which it believes have the potential to export. Obviously, in a very depressed domestic market, exporting is a very important element. To a degree, the LEOs will be the feeder stock to that initiative. We are trying to pick it up on both sides. There will be a broader mandate for the LEOs than now exists.

Deputy Conaghan raised the whole issue of banking which goes back to what Deputy Tóibín raised. Clearly, the refusal rates here are too high but correspondingly, during the boom, the acceptance rates were too high. The pendulum swung from accepting every loan application without scrutiny to a miserly attitude to risk. We need to build the expertise within the banks back up to a point where they can make a quality assessment of bankable projects. We are not interested in them backing projects which are not bankable but we need to get them back into the space of fair assessment of bankable projects. We have a considerable way to go but I see improvements and I think those are reflected in falling refusal rates, which have been reported. Anecdotally, there is more effort in this field but there is a long way to go.

There is also a recognition across Europe that reliance on banks to provide the full response to enterprise needs will not work and that one needs new sources of stronger non-bank finance coming into the field. Over the past 12 months, there has been nearly €2.5 billion in non-bank finance instruments. The National Pensions Reserve Fund now has an equity fund, a restructuring fund and credit fund. Our Department has a development capital fund, the loan guarantee scheme, the microfinance scheme and the innovation fund. We will launch a new tranche of the seed and venture funds. Banks need to get better at doing their business but there is also part of the spectrum which needs to be filled out. We have launched these new instruments but it will be important to monitor them to see if they are fit-for-purpose and are filling the gap. There will be a continuing gap even when the banks are fully functioning. There has been a change and we need to have new financial instruments to support it. It is not just as simple as getting demand and supply back on track. Both sides of the market have changed and we must respond to that.

In regard to Deputy Calleary's other point, Leader companies are separate, are funded by the EU and are working to a different mandate. We will have protocols to ensure there is not duplication and so on. The LEO is a first stop shop rather than a one-stop shop so we are not saying it will deliver Leader supports to Leader or deliver seed capital from Revenue. Someone who goes to a LEO will get easy turnkey access to the delivery of whatever he or she seeks, whether it is a credit review, seed capital tax relief or otherwise. That is the ambition.

We had not considered NERA as a service. Clearly we ought to have a compliance understanding.

2:15 pm

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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For the advice side.

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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Exactly. It would apply equally to health and safety. As the Deputy knows, the HSA has done a lot, such as developing the well-received BeSMART initiative. I do not see the decision on town councils impinging on reform because it is an enterprise initiative.

I agree with the Deputy about logos. We will have a single logo spanning the network and Designworks won the contract. It has 12 to 15 employees, which fits into the definition of an SME and is just larger than a micro-company.

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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I hope it does not need a loan.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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I am conscious that Senator Mary White must leave shortly, so I call on Deputy Lawlor, Senator Quinn and Senator Mary White, in that order.

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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I thank the Minister for attending. Last week we had a fruitful meeting with his Department's Secretary General, and I welcome today's meeting. I assume the Minister will return shortly to update us on the jobs initiative and An Action Plan for Jobs. Perhaps he will allow the committee to make an input into the 2013 action plan for jobs.

A lot of high-quality people from the county enterprise boards, CEBs, will move to the local enterprise boards, LEOs. The Department might not take the good part of the CEBs. Some of the CEBs are useless while others are excellent. The Minister should target and identify the CEBs that have proven to be successful and use them as a model for LEOs. Resources have been a problem for CEBs in my county of Kildare and they will be a problem for LEOs. So many people will apply for and seek loans that the LEOs will not be able to meet demand. Some CEBs did not fulfil their role by not utilising the funds that were allocated to them. Instead of reinventing the wheel, the Minister should examine the successful CEBs and use them as a template for LEOs.

I hark on about two issues. First, the LEOs will be the first stop for the microenterprise fund. Second, although a large number of young people are unemployed, we have a high entrepreneurial base among them, the highest in Europe. I do not like quoting the Minister but he referred to young people gaining access to the microfinance fund. Perhaps he will direct LEOs to place an increased emphasis on assisting young people with ideas when they apply for microfinance. Many schools have participated in CEB schemes and there is a lot of competition among them. A lot of good ideas have emanated from schools but they have found it difficult to secure microfinance. They should not be handicapped simply because of their youth. I hope LEOs will play a role in identifying young entrepreneurs and, as the Minister said earlier, they should be given bonus points when it comes to the allocation of funding. I have met a couple of people who have found it difficult to secure microfinance.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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I allowed Deputy Tóibín to raise an issue on banks and I allowed Deputy Michael Conaghan to make a contribution ahead of me. I will allow more comments on banking in a few minutes. I remind members that Senator Mary White is in a hurry.

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

Photo of Mary WhiteMary White (Fianna Fail)
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I must leave shortly because I have a meeting with the Tánaiste.

Photo of Feargal QuinnFeargal Quinn (Independent)
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I welcome the Minister. The concept of incorporating the local enterprise boards into local authorities is sensible. I have been struck by the number of main streets in towns that have been devastated. The shops and businesses are empty because shopping centres have been built on the edges of towns. Yesterday Sir Terry Leahy commented on the issue and said it was a shame but that the move was driven by consumer demand. A local enterprise board incorporated into local authorities has a much better chance of solving the problem. The solution will not be easy and it is a difficult question to answer.

During consultations, many organisations represented small and medium-sized enterprises such as ISME, SFA, RGDATA, Retail Excellence Ireland and Retail Ireland. How was it possible to consult so many organisations? Was it done jointly or independently? How did the Department manage to get around the problem?

The third objective is to reduce the number of licences before encouraging new people to open a business. One objective is to dramatically reduce the length of time it takes to open a new business here. That time has been reduced considerably. Can the Minister touch on the steps that his Department can take to improve the matter?

Being paid on time is a great challenge for small enterprises. What has happened with timely payments, particularly State payments? Are we getting anywhere near solving the problem?

Photo of Mary WhiteMary White (Fianna Fail)
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I welcome the Minister and his team. I am concerned about what will happen to LEOs but I accept, as a fait accompli, that they will be established. As I have said on numerous occasions here, the quality of the county and city enterprise boards has been inconsistent, which brought them into disrepute, and I blame the Department. I was told by people on different county and city enterprise boards that some of its people were not up to the job and that boards did not have a strategy. Many of the boards were left to lie fallow without adequate funding and, therefore, I am critical of bureaucracy.

The Minister has put his heart and soul into his job and the Minister of State, Deputy John Perry, is also committed to small and micro-industries and knows the important role they play in creating employment. All of the paperwork and actions plans have left me worried about the projects. As much as 95% of the success of any project in any country is a direct result of the people at its helm, the drivers of the project. On numerous occasions here I have asked how we can ensure bureaucrats will not be transferred from local authorities to enterprise boards. We need people who are passionate about entrepreneurship and creating employment. We need people with a mission, not bureaucrats. I am sceptical about the initiative and I shall continue to be. I support the Minister's aims. However, we must closely monitor the initiative for the boards in order to ensure that the bureaucrats do not take over from the Department or a local authority. How will the boards be funded? Funding was a problem for the city and county enterprise boards. Some of them had loads of people but no money. What is their budget? There are good schemes and I know the Minister is doing his best. I would be happy if I could be convinced that the people joining the county and city enterprise boards were passionate about creating jobs, but with my experience of them I will be hard to convince.

Who will be the watchdog? Reference was made to Enterprise Ireland but I am concerned because bureaucrats do not create jobs, regardless of all the good reports and so on.

In terms of my experience, I differ from some of the people on this committee. The point about mentoring is exaggerated. I do not go with the idea that people will not have the stomach to develop a business and bring it to the market without being mentored by somebody.

Where will the funding come from? How will the Minister make sure, with all his passion for this area, that good people are employed by these enterprise boards who will be understanding of the people who come with the projects to create employment?

2:25 pm

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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A number of questions have been put, but could we deal with the local enterprise offices aspect first?

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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Yes. To answer Deputy Lawlor, we are approaching the completion of the 2013 action plan for jobs. It has to be signed off and we hope to publish this month. We are at a very late stage in that regard. I have had some individual submissions on this from members but the Deputy is right that there is best in class and then there are others. Part of the role of having a centre of excellence is that it will promote best-in-class practices. We will reinforce that by having competitive funds to ensure that, based on the quality of what people are doing, they will be able to draw down additional funding. There will be a competitive element in the funding as well as an allocation.

Deputy Lawlor has talked previously about the importance of young entrepreneurs, and we have many programmes that are equally available to young and more established microfinance competitive starts. There may be a case for examining a tranche. Last year we had a very successful tranche aimed at women entrepreneurs. It started at €250,000 and was so over-subscribed that we increased it to €750,000 within months. That worked as a way of having a particular brand and looking for entrepreneurs in a particular class. It is worth considering whether we can do something in that sphere.

To be fair, there is a great deal happening in this space also. I launched UStart in the universities. The Young Scientist exhibition does something around entrepreneurship. There are a number of elements to this. The Department is working on an entrepreneurship strategy and we will be looking at this entire area. We will definitely consider the Deputy's interest in young entrepreneurs and their potential.

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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I thank the Minister for that. I will make a presentation to him that was given to me last week on a youth entrepreneurial fund. It came from a group of young people in Celbridge and it contains good proposals.

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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I thank the Deputy for that.

Senator Feargal Quinn raised the issue of high street decay. Many practices have changed, and I have seen that myself. Increasingly, pubs and bookies are in the centres of towns and much of the traditional shopping is migrating out. Ultimately, it is down to the customers, but some local authorities have had initiatives to try to revive streets or particular areas, with some success. There is scope in that regard and it is right to bring the local authorities into the fold because they are important determinants of the way towns develop and the other elements, such as parking, that change the environment. It is good to have them inside the enterprise tent.

We consulted electronically, but obviously we went to all the small business units. We created a consultation document, which we published. There has been a very good response rate.

We will have an initiative in 2013 to try to simplify licensing, starting with the retail sector. Forfás did a study of 159 licences during the course of last year which found an element of duplication and showed how the process could be streamlined and simplified. We will have an initiative in that sphere and if it works in retail we will move beyond that.

Regarding on-time payment, I signed that order for the European directive, which I believe comes into force around the Ides of March. It creates a new obligation on companies to have certain practices from which they can opt out, but the default mode is paying on time. Some people would like to see it being made compulsory, but that is another day's work. The State is already monitoring this, and it has been extended to different tranches of State activity, but all central Departments have been paying within 30 days. This has now dropped to 15 days and they are meeting that target. We are trying to widen the circle to make sure the State is paying on time and bringing in extra players. Undoubtedly, in this climate it is an area in which businesses can help one another by having responsible practices. It is important that the bigger suppliers recognise the pressure on smaller suppliers that is caused by not paying on time.

I do not dispute what Senator White said. Most members acknowledged that not all county enterprise boards were of equal quality. That does not lie at the door of our Department; local authorities had their own boards. We are now seeking to address that by having a centre of excellence that will provide technical support to lift the standards of those who are weaker. As I said to Deputy Lawlor, we will also have a competitive element and therefore the better will do better in the allocation of funds. That also helps people to improve. There will be benchmarks under the service level agreements. The way in which different enterprise offices are performing will be more transparent. That is the new professionalism in the public service. People want to work to high standards and we will assess standards. The Department has a strategy. It is one I am behind and we intend to push ahead and deliver that strategy. Until we see the change, Senator White is entitled to be sceptical, but we are convinced we will deliver it. The criticism is that it is all paperwork. It could be said that our action plan for jobs is all paperwork, but in terms of the public service saying it will be accountable quarter by quarter on the delivery of a broad strategy, I have never seen that in my lifetime, and I am a long time in politics. We have seen many strategies but we have rarely seen a public service-----

Photo of Mary WhiteMary White (Fianna Fail)
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The Minister's target for jobs that he set-----

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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That is a challenge.

Photo of Mary WhiteMary White (Fianna Fail)
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-----is not making much progress.

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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We are making progress. When we came into office there was a rate of job attrition of 90,000 per year from the private sector.

Photo of Mary WhiteMary White (Fianna Fail)
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The Minister is telling me that.

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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The figure is now plus 12,000. It is a dramatic turnaround. It is not where we need to be but it is progress and we have to continue to-----

Photo of Mary WhiteMary White (Fianna Fail)
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Where will the Minister get 88,000 jobs before 2016?

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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I am dealing with the Senator's questions. The Senator is aware that we have to build new sectors that will employ people. Recent years saw excessive growth of domestic banking, property, construction and retail that was unsustainable. We now have to build a stronger enterprise base that will be founded on innovation, exporting and enterprise, and that does not happen overnight. Someone like the Senator who has been in business would know that. The Government cannot wave a magic wand so that enterprises are suddenly taking on people by the hundred thousand. We have to re-engineer the structure, try to fix the banks, reform elements of our own activity such as licensing, wage setting or whatever, and create a better environment, but that is what we are about. It will not happen overnight. It is naive to think it is about clicking one's fingers. It will not work that way.

Photo of Mary WhiteMary White (Fianna Fail)
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I disagree with the Minister. Can I-----

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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No. Senator, to be fair-----

Photo of Mary WhiteMary White (Fianna Fail)
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It is important. The comment the Minister made about the boards is disingenuous. That is a good departmental response to what I said. The boards were shackled by the lack of vision of the people in the Department. I know that from my discussions with the groups.

2:35 pm

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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The budgets are fully protected. There will be a competitive element to reward innovation and excellence in the way the service is delivered. Mentoring is an area that has potential. The Senator is correct that there is no substitute for an entrepreneur. Many people do not have expertise across the full range of their business and if they want to break into, say, an export market there are as many failures as successes. Sometimes the failures are the result of basic mistakes. For example, someone may choose the wrong person to partner with at the start or may not explore the market.

Photo of Mary WhiteMary White (Fianna Fail)
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They did not have-----

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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We need to raise the ambition of our enterprises if we want to create new jobs and we all need to support them in the direction in which their ambition takes them. It is the same for any of us. We do not all start off knowing the intricacies of moving into the French or German market. That has to be supported and that is the reason we have enterprise agencies with representatives in 28 countries - to make it easier for people to do that.

Photo of Mary WhiteMary White (Fianna Fail)
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I accept the Minister is doing his best.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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Senator White, in fairness to other colleagues, Senator David Cullinane is waiting to contribute on LEOs.

Photo of Mary WhiteMary White (Fianna Fail)
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I thank the Chairman.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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There are three Deputies who are to come back in with other questions.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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We are here to discuss supports we can give to the small and micro-business sector. An issue that has arisen frequently is that of prompt payments. The Minister will be aware of the EU directive on the matter, about which the organisations representing business - ISME and the Small Firms Association - are unhappy. They see it as a sticking-plaster solution. They carried out a survey this year which found that the average payment period in Ireland for SMEs is 71 days, an increase of two days on the previous quarter; that 40% of businesses are experiencing delays of three months or more; and that 14% are waiting for more than 120 days. Some of these are State contracts, and money is awaited from the State. Prompt payment is one of the many issues that affect business, and it needs to be dealt with. I would appreciate the Minister's views on the EU directive and what legislation can be introduced in the State, as the support organisations are calling for payment within 30 days to be enshrined in legislation. That would be their preference. They were very much opposed to the preference for 60-day payment contained in the directive.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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That issue is not part of today's discussion. There are a few other questions as well. The Minister may answer whatever questions he can and if he does not have the information he can forward it at a later stage.

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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I will be brief. It has been mentioned that a referendum on patents will be taking place in the State this year. That could be an ideal time for a referendum on upward-only rent reviews also. Some 50,000 jobs have been lost in the retail sector in recent years and 30,000 more are in danger. This is a key competitive problem. The Departments are landlords with upward-only rent reviews. I do not have the most up-to-date figures but halfway through last year there were hundreds of contracts with tenants. I am aware of one firm in Donegal which lost its business with the Department of Agriculture, Food and the Marine as a result of the upward-only rent policy.

In regard to Tara Mines, my request is that the Minister go to the management in an effort to ensure that the business does not go down the route of using an aggressive threat against the workers to seek a reduction in their wages.

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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Upward-only rent reviews is one issue. There are big companies that can afford the examinership process, but most people cannot afford that process. There is still a problem in provincial towns where landlords who are locked into mortgages are not dealing with tenants. As Deputy Tóibín has said, the State is also a player in this regard. As a landlord itself, it is enforcing upward-only rent clauses. Whatever about private companies, the State can lead on this issue.

The Secretary General appeared before the committee last week and has provided figures today in respect of the credit guarantee scheme and the microfinance scheme. Under the credit guarantee scheme only ten approved credit guarantees had been issued up to 22 January, representing about €1.117 million. This seems low; is the Minister happy with the scheme? The Minister may not have the information with him, but how many requests were turned down? An issue we raised with the Secretary General last week and one we are hearing from companies is the interest rate on Microfinance Ireland. He gave a very good and robust explanation of it in relation to risk factors. There is a 5% margin on the product for Microfinance Ireland, which is a high margin in the current climate. Many companies would be pleased to have a 5% margin.

A serious problem is unfolding in Monaghan with regard to employment at Silvercrest and at the other company whose name emerged this morning. Has the Department consulted with the enterprise board, the local authority, IDA Ireland or Enterprise Ireland on the issue? Can the Minister give the committee any information on the Department's or the agencies' response to what is a potentially serious issue?

Photo of Anthony LawlorAnthony Lawlor (Kildare North, Fine Gael)
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I wish to raise the response from banks. A number of people have been in contact with me in regard to the delay in getting a response back from banks, as a result of which they cannot apply to Microfinance Ireland for funding.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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I am conscious that many of these questions are not for today's discussion. The Minister is welcome to come back to the committee with the replies if he does not have the answers.

Photo of Richard BrutonRichard Bruton (Minister, Department of Jobs, Enterprise and Innovation; Dublin North Central, Fine Gael)
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Just before Deputy Cullinane came in, Senator Quinn had raised this issue. The Senator is correct in saying that the EU directive is coming in. The only legislation in this field is the legislation I introduced in 1996 in respect of the State's obligation to pay its bills on time. That Act is effective but it does not apply to every State agency. The Senator is correct in saying we need to get the full gamut of State agencies paying on time. We have been trying to get a voluntary code in this area as well as the EU directive. The EU directive provides a framework within which businesses should operate whereby they must pay on time and if not they must pay interest, including penalty interest and so on. Given the need for a culture of compliance, we are working with the business organisations. It is largely business-to-business. Where one business seeks a longer period before making its payments, it means another person is left without. It is important to get businesses working in this field. It is not an area in which one can easily pile in with legislation because one does not know the pressures under which an individual business is operating. There is a need to develop codes of practice and we are working on that issue.

It is not the Government's intention to have a referendum on upward-only rent reviews. We will have a patents referendum but that is a different issue and has to do with the patents court.

I do not know the full details of Tara Mines situation, but the LRC is available to support both sides in any situation. We have an experienced service that will lend support.

Deputy Calleary said that examinership is prohibitive for some companies. One issue that is being provided for in the companies legislation that will come before the House in the near future is that we are bringing examinership to the Circuit Court, which will significantly reduce the cost. That should make it more accessible to people. The Deputy is correct in saying the credit guarantee scheme is only in its infancy. We will be monitoring it to ascertain why there is not a greater uptake. We are conscious that the uptake is low. The Deputy raised the issue of microfinance. The rate available is keener than what was available from similar players in the field. I am confident that under the chairman the administration will be kept to the minimum. It is a very tight ship and there will be no excess. The board reduced the original rate, which was mentioned. If we can reduce it we will certainly do so. It is taking on an area of credit that is high-risk. As it is going to be a loss-making area, we are trying to achieve a balance, making sure that people get access to funds and that there is reasonable cover for the taxpayer in taking the risk.

We will closely monitor the development of this and other schemes by means of which the State is taking an initiative to drive forward on new sources of finance in order to see whether we are getting matters right. There is a one-year review in respect of the credit guarantee scheme. If it needs to be tweaked, then the one-year review will facilitate the carrying out of a proper evaluation.

The Deputy referred to a number of companies in Monaghan. The issues in this regard do not relate primarily to enterprise, rather to the products involved. The companies in question must get to the bottom of this matter in order that they might be in a position to re-establish the robustness of their products from the point of view of source, origin, etc. This is an important process and no effort is being spared to ensure that the reputation of this extremely important sector will be restored and that there will be no question as to the fact that the companies in it operate to the requisite standard. Obviously, we will monitor the position through Enterprise Ireland. We will be available to assist in any way possible but it is crucial that the investigative work should reach a conclusion. The Minister for Agriculture, Food and the Marine, Deputy Coveney, is working might and main to deliver in this regard.

Deputy Lawlor referred to delays on the part of the banks. The latter have agreed with the Credit Review Office a certain format for accepting loan applications and for a 15-day turnaround in respect of decisions. The position in this regard is monitored. The past number of reports have indicated that the banks are not delivering on the 15-day turnaround. This is a matter in respect of which they must improve their performance. We will be taking steps on this issue. It was announced earlier today that the mortgage and banking committee is being expanded. I will now be a member of the latter and I will certainly bring the concerns of those in small business to the table. As has been pointed out during this meeting, the banks can do better. Obviously, they have problems through which they must work but there is no excuse for failing to deliver in respect of the 15-day turnaround in order that people might, if their applications are unsuccessful, move on to try to access other sources of funding.

If Deputy Lawlor wishes to bring the particular case to which he refers to our attention, we will pursue it. Mr. John Trethowan of the Credit Review Office is a very pragmatic individual and is very active in this field. I urge people to bring their cases to him. There is a small flow of cases at present and Mr. Trethowan is overturning the decisions made by the banks in more than half of the cases brought to his attention. This clearly reflects the fact that banks are too quick to refuse applications. Perhaps the Deputy could bring the case in question to our attention and that of Mr. Trethowan and we will try to pursue it.

2:45 pm

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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I thank the Minister and his officials for attending. We dealt with more issues than were listed on the agenda, which is typical. I also thank members for their contributions.

The joint committee adjourned at 3.55 p.m. until 1.30 p.m. on Tuesday, 12 February 2013.