Anthony Lawlor (Kildare North, Fine Gael)
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We will have a discussion with the representatives of the Association of County and City Councils on the operations of the local enterprise offices.

Before I welcome the representatives of the Association of County and City Councils, I would like to acknowledge the presence of a group of nine 16 to 23 year old Romanians from the Future Diplomats Club of the Partnership of European Association who have joined us in the Visitors Gallery. They are very welcome to follow the proceedings of this afternoon's meeting. I hope they enjoy their stay in the country and the tour of the Dáil that they will have later.

I welcome the members of the Association of County and City Councils. I acknowledge that I was a member of that esteemed association at one stage in my career. I welcome Councillor Constance Hanniffy, Councillor Peter McVitty, Councillor Luie McEntire and Councillor Michael O'Brien to discuss the operations of the local enterprise offices.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

I call Councillor Constance Hanniffy to make a presentation on the operation of the local enterprise offices.

Ms Constance Hanniffy:

On behalf of the association, I thank the Acting Chairman, Deputy Lawlor, and the members for affording us this opportunity to address them. I will deal first with the local enterprise offices and how they have come to fruition and then deal with the county enterprise boards.

As the members will know, the local government reform programme, as specified in the Putting People First document, is a wide-ranging programme embracing many aspects of the local government services to the community. We, as an association, welcome the commitment to tangible action in reforming the Irish local government system within the wider context of the reform of the public service as a whole. A key requirement of any modern local government sector is that it is empowered to deliver a wide range of devolved functions from central government. Therefore, we acknowledge the commitment made jointly by the Minister for Jobs, Enterprise and Innovation and the Minister for the Environment, Community and Local Government to move towards integrating the functions of the existing county enterprise boards into the local authority framework under the title of local enterprise offices.
This transition makes great sense as it will bring the support services for small and medium-sized industries and businesses into close co-ordination with the local authority sector which already delivers a range of aids and services to the business community. We fully endorse the wording in paragraph 3.1.1 of Putting People First, which states that local government has "unique characteristics and a strategic position that make it well placed to lead economic development ...". That is very true. The local knowledge inherent in local government will complement the enterprise promotion experience of the enterprise boards. It has been estimated that 95% of businesses in this country, of which there is more than a quarter of a million, employ fewer than ten people. Therefore, it follows that these businesses are at the heart of local communities where they are a source of valuable employment.

However we, as elected representatives, are concerned that the local knowledge available within the local authority system will be limited because the new arrangement for the local enterprise offices does not provide for a meaningful input from the democratically elected councillors in each county and city council. As the members will know, nobody knows the nature and nuances of local communities better than local elected members who are elected by those same people who form the environment in which many businesses flourish and in which many enterprises provide an economic boost to their communities. In the current situation, as the members will know, the elected members are members of the county and city enterprise boards and sit at the board table where decisions on grant aid are agreed and endorsed. They bring the process of democratic accountability to the enterprise boards.

In the proposed situation with the new local enterprise office configuration, there will be no board or democratic input into the granting or refusal of assistance to small businesses. It will be an executive function for the county and city managers to perform as a member of an evaluation committee. The evaluation committee will change and will now become an evaluation and approval committee and I understand its members will come solely from the business sector. The members of the evaluation committees have always come from the business sector. In fact I sit on the evaluation committee in Offaly as a representative of small business. This will mean that the local knowledge and the democratic accountability embodied by the elected members will not be a factor in the new local enterprise offices. We see this as a deficit. We believe it is important that the elected members have an input into the assessment of projects to be supported by the local enterprise offices. Councillors have been members of the county enterprise boards since they were first set up in 1993. Their input was considered very valuable up to this point today but when the new local enterprise offices take over they will no longer be needed. They will be surplus to requirements.

Whether the funding is sourced from local government, enterprise funds or Europe, as part of the money which funds the enterprise boards comes from European funding, it is still public money being expended at local level and it is vital that there would be a strong level of democratic endorsement in this process.

There is a need for an input from the elected members into the decision-making on support for small business not less than that provided by elected members in county enterprise boards. Such democratic involvement will also provide for an effective link with other local authority processes which underpin the promotion of business at local level. The making of the county or city development plan is one such example of a major local authority process which has a significant impact on business development and is the responsibility of the elected members to decide and to make.

The Putting People First document envisages an indirect role for elected members through a new strategic policy committee in each county and city council. However, the function of this new committee is not spelled out and it falls short of giving an opportunity to bring specific local knowledge to bear on a case-by-case basis as happens in the case of the enterprise boards.

While the strategic policy committee will report to a parent council on local polices to support small business, the new local enterprise offices, LEOs, will take their detailed guidance from the Department of Jobs, Enterprise and Innovation. Such multiagency operations are not new to local government, but the potential for ambiguity in the delivery of the service needs to be rectified. The limitation of local discretion in the support of small business is also exacerbated by the proposal to reduce the limit of assistance which can be approved at local level from €80,000 to €40,000. In other words, the existing county enterprise boards could offer support up to €80,000, but the new LEO structure will be limited to a €40,000 ceiling. Any request for support above that sum must go to Enterprise Ireland for approval. This is a retrograde step in terms of devolving responsibility to the local government sector.

A further distancing of the enterprise develop function from the county and city councils could result from the emphasis in Putting People First on giving binding economic policy functions to the regional authorities. The proposed authorities will be the link between development agencies and local government. This used to happen through the county development board structure. While regional strategies certainly have a place, it surely is working against the intention of the LEOs as a flexible business support unit integrated within the county and city councils to bind them with plans made a considerable distance from the reality on the ground.

The process of relocating the enterprise offices under the title of LEO in the local authorities is at an advanced stage and a service level agreement has been finalised between the local authorities and the Department of Jobs, Enterprise and Innovation. While we welcome this transition as a positive and sensible reform, its potential will not be realised without the input of elected members in a specific and tangible way. We understand legislation underpinning the transition is being drafted. We urge the members of the committee to look towards securing a role for their democratic counterparts at local level in the processes of the new LEOs.

On 31 December 2012, in the BMW region, we had a total of 3,153 new businesses supported by county enterprise boards. Up to 33% of the assistance given was to businesses involved in manufacturing, which is positive for job creation. I note with interest that the new dedicated microenterprise and small business unit has been established in Enterprise Ireland with a new focus on the microenterprise and small business sector. Within it is a centre of excellence which will have a key role to play in maximising the impact of each LEO. If the LEOs are to reach their full potential, it is important that the strength of the county enterprise boards which had a local focus and an ability to respond to local issues and demands is fully harnessed.

I thank the committee for allowing me to make this submission on behalf of the Association of County and City Councils.

Deirdre Clune (Fine Gael)
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I thank the councillors for their presentation and bringing this important point to our attention. The committee has previously discussed the development of the LEOs with the Minister. It was welcomed that the expertise of Enterprise Ireland was keying in with local authorities to provide a one-stop-shop. The association is speaking to the converted as I have served on a county development board and know the value of local authority membership on it. This is a matter we can put to the Minister as he is drafting the legislation. Enterprise Ireland will play an important role in supporting local authorities in the development of the LEOs. Is that the association’s view also?

Ms Constance Hanniffy:

Yes, it is.

Deirdre Clune (Fine Gael)
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I just wanted to clarify that. The role of the elected local representative should be included in the new structures. The committee can discuss this issue and make recommendations on it to the Minister.

David Cullinane (Sinn Fein)
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I welcome the councillors and thank them for their presentation. We are anxious that the LEOs will be up and running and in place soon. There have been some delays in getting to this stage, as well as a lack of consultation in the earlier stages of the process.

The fact that we still do not have the Bill that will give effect to the establishment of the LEOs is a concern, so from our perspective, we want these up and running and we want them to work, function and add value to the work of local government, which they will. We also want them to help people who depend on the enterprise boards across the State so we hope that can be moved on in the coming weeks and months.

One value local government could bring to this process is ensuring we have a consistent approach across the State. Any objective evaluation of the work of the enterprise boards has shown variances across the State. I will provide a number of examples. Mr. O'Brien is from the south east and might be interested in these figures. Carlow created 205 additional full-time equivalent jobs last year. In the same period, Kilkenny lost 96 jobs, Waterford city lost 17 jobs and Waterford county gained 20. There are problems in respect of different areas, how they work and how the uptake of Government programmes differs. The microenterprise loan fund was designed to provide loans to small enterprises. There has been very poor uptake from some local enterprise boards, some of which have not even progressed a single application. I hope the new structure would provide a level of consistency across the State in these areas.

However, there also needs to be flexibility and targeted funding in areas with high levels of unemployment. We all agree that resources should be targeted where they are needed most. There are some areas with unemployment black spots and historic issues with entrepreneurship. The local authorities will obviously be very conscious of those deficits and will be able to put a better shape on how the resources are targeted. I hope that would be part of it as well.

My final point concerns best practice. One of the criticisms of the new structure is the argument that local authorities come from a different culture to business and enterprise and that there should be a clear separation of the two. I do not buy into this argument. If one looks at Belfast City Council, one can see how it has been the lead authority in driving enterprise development in the city and has been a good model that has been accepted by people outside the North. It has been a good body in terms of drawing down European funding and enterprise development in general. I could give numerous examples. I think we can put that argument to bed. Local government has enterprise units that are anxious to be able to expand their potential. I am excited about the potential of this and believe it needs to be rolled out but the crucial factor is getting it to the stage where the LEOs are set up and we can then start to see how they work. If there are problems down the road, we can tweak and fix them. I am supportive of the establishment of the LEOs. The caveats are that they must be targeted in terms of funding and consistency in service provision must be achieved.

Anthony Lawlor (Kildare North, Fine Gael)
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Would Mr. O'Brien like to respond?

Mr. Michael O'Brien:

We are pleased with the response from both members. As a member of a national delegation, I cannot deal with the south east with the same freedom as Senator Cullinane but we have had contact with our opposite number, the National Association of Councillors in Northern Ireland, and are quite aware of its input into the development of enterprise at local level. We share the frustration both members mentioned about wanting to get the whole thing up and running quickly. However, we are going through a very dramatic process of local government reform and want to make sure it is correct as much as the Members and the Oireachtas. In respect of the presentation by Ms Hanniffy, the question arises of who adjudicates over the adjudicators. We are saying there were always checks and balances in the old system in that we must answer to people every five years if we get it wrong. We would be concerned that the democratic element will be lost.

We also understand that in the process of developing the changes that are designed to take place, the idea at the embryonic stage is for the Department of Jobs, Enterprise and Innovation. Now it has moved with a particular ethos which we believe to be hostile in some cases to what local government does in terms of the democratic process. In particular, representation from small business has always indicated a hostility that is unwelcome in this day and age. We are being looked at not just nationally but internationally in terms of how we are going to develop local government. The State has signed the European Charter of Local Self-Government through the Council of Europe. The core of this charter is the necessary devolution of functions to local government. Here is something that is rowing against that. It is removing the devolution process that should be dealt with at local level from local authorities and sending matters back to central government, which is against the ethos for which we stand.

We welcome what both members just said and want to see the LEOs up and running but we want to see it done properly. The adjustment proposed by Ms Hanniffy involves the democratic element of decision making in the new LEOs containing the checks and balances we can produce.

Ms Constance Hanniffy:

I would like to respond briefly to Senator Clune. I acknowledge that Enterprise Ireland will be key in the LEOs and how they operate. It is key to the operation of the enterprise boards because the overall national policy for local enterprise development is set by the micro-enterprise policy unit in the Department of Jobs, Enterprise and Innovation. The operational guidelines and the monitoring of activities of the county enterprise boards are the responsibility of the central co-ordination unit within the Department so there will not be any change to that. That will be a structure that will be enhanced and I understand is underpinned by this service level agreement between local authorities and Enterprise Ireland. I have not seen what that contains so I cannot give the Senator an outline of how that operates but I see enterprise boards as being key.

What was there, what is there at the moment and what is proposed without a democratic input and with a reduction in funding worries me. There are three types of grant aid given by the enterprise boards. Under the priming grant, a maximum of 50% up to €80,000 can be given. We have the business expansion grant, the feasibility and innovation grant and refundable aid. I understand that these grants will not change and that this will still be the mechanism but the reduction from €80,000 to €40,000 clips the wings of any major developments relating to job creation.

I know it is hoped that LEOs will streamline the passage of those with a decent or large application for a project to Enterprise Ireland. In other words, they are the front door through which all State supports for small and micro businesses can be accessed. I also thank the committee for its support for our suggestions.

Hopefully, it will look towards them at the legislative stage.

With regard to Senator Cullinane's comments, I agree there have been delays in consultation. Issues remain about human resources but I will not go down that road. Hopefully, they will be sorted out in the coming weeks and months. He said there was a lack of consistency throughout the country. There was because some boards operated more pragmatically than others. Some counties had more entrepreneurial people than others and, therefore, they were more willing to access the funding in some counties than others. This may still be the case when the new LEOs are up and running.

The Senator referred to the funding that was not even processed by a number of enterprise boards under the loan fund. There are also issues around that because access to funding for SMEs is a huge issue. The banks are not lending even though so many billion euro is supposed to be set aside for small business loans. As somebody who has knocked on the door with a few people, the answer is not great. That is an issue and I do not know who will strengthen it.

Best practice is key and, as Councillor O'Brien explained, we have had a great deal of contact with our friends and neighbours in Northern Ireland. We know how they operate and we know the strength local government will have to provide a proper home for the new LEOs, but we still have issues with democratic accountability and the amounts of funding they will be allowed to disperse.

John Kelly (Labour)
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I refer to how the county enterprise board structure operated in the past. I was a member for seven years in County Roscommon. Local knowledge is crucial. For example, on one occasion the valuation committee recommended support for a project in my area and refusal for another project. I argued that the project they recommended would fail and I was proven right and that the one for which it refused funding would be a success. That year it won the enterprise of the year in the county. Unless elected members with local knowledge are on the boards, they cannot work. If any of us ring a civil servant about an issue, he will tell us how something cannot be done and that is the road we are choosing to go if the local input of country councillors is not maintained.

Áine Collins (Cork North West, Fine Gael)
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I welcome the councillors to the meeting. This is an area in which I have been involved for many years. I have always had great concerns about the inconsistency of enterprise boards' as someone on the ground who has accompanied small business owners to meet board officials' and about their role. Although they give out money, I have always been concerned about the many training courses around the country, which are not evaluated, and so on. We have for some time been hearing that LEOs will be the magic wand to sort all this out and I look forward to that. While everybody appearing before the committee has discussed them, nobody has outlined what they will do. They are supposed to benefit people on the ground who want to set up or expand a business. That means they will only have to make one telephone call to get a range of supports.

Local government reform, Leader funding and so on will be part of this under the social economic committee. My understanding was that everybody would have a say on the committee and the LEOs would also be represented on them. I am not privy to the contents of the upcoming legislation or the implementation report but that would make sense and my understanding is public representatives will have that role. It is in all our interests to discuss what we will do for small business instead of how it will be delivered and who will have responsibility for it. That has got us into problems over the years. We built structures and the people within them spent their time keeping them in place. We need officials on the ground helping people who are at the pin of their collar and who are exhausted from trying to keep their businesses open, maintain employment and keep the economy going locally. I regularly hear in my constituency that nobody is talking about small business and supports and nobody is giving them credit for hanging in there and for trying to start new businesses, yet failures are discussed as if they are punishments. Fair play to anybody who starts a business. I have never met anybody who set up a business with the intention of failing. Something happens along the way and they often fail but they do not start out with that intention. Everybody on the committee knows my view on mentoring and that is where support should be targeted in order that people are guided, helped and given a different focus.

I refer to the activity of Microfinance Ireland since it was set up last October. As of 6 May, the number of applications received was 173, the number of loan approvals, 60; the number in progress, 16; the number declined, 82; and the number withdrawn, 17. Reference was made to the banks but the greatest problem they face is the lack of activity. New business is not coming forward and people are afraid to lend. There is fear and while the banks face many issues, this is one of the biggest.

Barry Cowen (Laois-Offaly, Fianna Fail)
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I thank the members of the delegation, particularly Councillor Hanniffy, who is a former colleague. Given the delay in the legislation, we are in a vacuum and unable to investigate the minute details, which would answer many of our questions at this stage. I hope that as a result of the Boundary Commission completing its duties at the end of this month, the legislation will follow soon after. We can then have an open and frank debate about the implementation of the aspirations, how they can be tweaked and how we can work together to bring about a successful conclusion by negotiation.

I agree with the concept of the reintegration of these bodies into the local authorities but I am disappointed about their configuration because it will not do what it says on in the tin. As the presentation pointed out, the ownership will not be with those who have democratic accountability and who work on the ground on a regular basis meeting and consulting people seeking jobs and people in industry and business and this has to be addressed. I am of the same mind regarding the local development companies. Their integration back into local authorities will not give autonomy to the elected members. I would rather if that were done by negotiation rather than imposition. The details will be in the legislation to enable us to address those issues.

With regard to the difficulties and failures in the economy regarding local businesses, there may be a role for county enterprise boards in the new configuration to address the current deficiencies. I hope every opportunity will be taken in that regard. I am conscious of the proposed strategic investment bank and the role it might have in providing funding to local enterprise boards to address the gap that exists because of the poor level of banking provision. As Councillor Hanniffy said, they tell us consistently about the millions and billions of euro that are being lent but they equate to nothing but the reconfiguration of existing loans because anybody I meet on a regular basis who is seeking finance and assistance is not being met with the reception that those figures suggest.

A specific audit needs to be carried out, especially in the regions, of the success or failure of various enterprise boards to target areas that have experienced difficulties more recently because the IDA is targeting large urban centres and cities. This is evidenced by site visits statistics in different regions. That is not necessarily of the agency's own doing but as a result of the input of multinational companies setting up in the country. That would allow the specific targeting of regions that are at a disadvantage currently.

I hope adequate time will be allowed for debate, adjudication and assimilation and ultimately for arriving at a successful conclusion with regard to the legislation that is proposed. There ought to be an avenue for a negotiated agreement with all stakeholders at the table in order to account for the efforts of all the elected members, considering that we all share the same wishes and aspirations for those we represent. If there is a means by which there can be an improvement – this might well be one of them – every effort should be made for it to work practically.

There are other aspects of the document about which we could talk all day and on which we will not elaborate. We should examine specifically the area targeted in the councillors' presentation. Many of us are in total agreement in regard to the sort of democratic accountability and responsibility that we would like to see upheld. We agree with the concept but let us get the configuration right so we can all work with it.

Michael Mullins (Fine Gael)
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I welcome the delegates, all of whom I know and have met many times over the years. Having served on an enterprise board for a number of years in a county that boasted of having a very successful board, I am pleased to welcome the delegates to hear their presentation. Many very successful businesses that have operated in my county, Galway, over the years got a start from the county enterprise board and grew large from being very small acorns. We are now in very difficult times so it is urgent to get the local enterprise offices up and running. The concepts of the one-stop shop and closer working relationships between Enterprise Ireland and the local authorities are very much to be welcomed.

I agree with the delegation that the icing on the cake would be to have the element of democratic accountability included. We will certainly talk to the Minister to determine whether there is an opportunity to have some element of representation or democratic accountability included in the legislation that is framed.

As Deputy Collins rightly stated, there is real urgency. In communities, small towns and villages, there is a feeling that small business has been neglected and that nothing is really being done to support and assist small businesses. In all our actions, we must do everything possible to ensure that whatever structure we put in place delivers the desired outcomes, supports small businesses and encourages entrepreneurs who have good ideas and the potential to create and grow employment.

The submission states 250,000 businesses employ fewer than ten people. If all those businesses could create one extra job, imagine what it would do for our economy. There are many people with ideas. There are considerable opportunities to grow small businesses if finance becomes available. There are considerable opportunities to create new start-up companies. We must consider manufacturing seriously because this is where the growth will be in the future. Many of the success stories of previous decades, in addition to existing manufacturing facilities, were started with help from the city and county enterprise boards.

I wish the delegates well. We will do everything possible to support their view on having democratic accountability embodied in the new local enterprise offices. We will try to tease out how that might actually work. I appreciate the delegates' submission and wish them continued success.

Mr. Peter McVitty:

I thank the members for their support. It is obvious we are all singing from the same hymn sheet. I wish to make it very clear where I stand on the matter of local representatives not having a say on the next body. It would be a massive loss to an area. I come from a very rural part of County Cavan. In making my remarks, I do not mean disrespect to the people who were told they would be on the boards. We are told they will be from the business community and there will probably be accountants. I have seen accountants on the enterprise board in Cavan. There will be people from the chamber of commerce. Many are from urban areas. Some of the people from such areas do not understand the rural part of the county.

Ms Constance Hanniffy mentioned figures of €50,000, €40,000 and €100,000. However, if people starting up businesses are able to get €4,000 or €5,000, it will give them a little push to get them started. Small businesses must be supported. It is only common sense. If one starts a business and has, perhaps, from one to five people working for one, and if one has a love of one's area and a bit of pride, one will want to see the business work. One will not step back and let the business fail. I have been a member of the enterprise board in County Cavan since 1999. In that time, local representatives from all parties fought their corner for people from rural areas. Only for this, the recipients would not have got money. I know that for a fact.

The enterprise board in County Cavan works extremely well because it has a cross-Border arrangement with Fermanagh. It involves tourism and a geopark. We work extremely well with local elected representatives North and South of the Border. I appeal to the members of this committee to do everything in their power to ensure that the local representatives have a say in the next body that is set up. I strongly believe they ought to. This cannot be emphasised enough.

Deputy Cowen referred to the IDA. For whatever reason over the years, the IDA has not been able to get away from the east coast. We would welcome it very much in the rural part of the country. I have sat with IDA representatives on boards. I have seen them sit at meetings and giving nice glossy presentations, but then the momentum dies and one does not hear from them again.

Deputy Collins made it clear that the small businesses must be supported. I appeal to the Deputy to make sure the voice of small businesses is heard.

Mr. Luie McEntire:

Coming from County Longford, where the majority of small businesses got start-up funding from the enterprise boards, I am glad to say the majority of the small businesses, which may employee only ten, 15 or 20 people, are still in place as many of the big operations have gone out of business. I fully agree with what the speakers have said. The local representative is the link between the local community and the CEOs and those on the enterprise board. What is the advantage of taking the local representatives from the boards? It is stated more powers are supposed to be granted to county councillors. When one considers what happened with the VECs and health boards, one realises we have no say whatsoever.

Each of the committee members has been a local representative and knows that there was a time when one went in and personally made a case for one's constituents. Most of the time that worked because the red tape was cut through. It is the exact same in this instance. The local representative brings invaluable knowledge to those boards. If the committee members have the final say we appeal to them not to leave the local representatives off the boards.

Ms Constance Hanniffy:

I thank those who have contributed to this discussion. Deputy Cowen made a valid point when he said that we must consider a targeted review of the existing community enterprise boards to see exactly what they have done and how they have achieved it before we can benchmark the new LEOs against them. That is very important. If and when that process takes place we will see the necessity for, and results of, the democratic input into ensuring their success.

I welcome Senator Mullins's support in looking for the democratic mandate for this. I agree with Deputy Áine Collins that a great deal of money has been spent on training and mentoring but I have a problem too because training and upskilling is now so fragmented between the Leader companies, some educational companies, some private companies and the enterprise boards. The enterprise boards have provided targeted training and upskilling, as I know from my own experience.

I accept that there will be elected representatives on the new SEOs if and when they come to pass but they are socio-economic committees and I do not know what will be the link between them and the new LEOs. Nobody knows that yet so we are talking in a vacuum until we see legislation and tweak it and until we see the working arrangement between the Department of Jobs, Enterprise and Innovation and the local authorities. I thank the committee for affording us the opportunity here this afternoon and I value its input and support in this matter. We are working in something of a vacuum but we have tried to be as realistic as possible and as forthright in providing what information we have while we are in this vacuum and await the legislation.

Anthony Lawlor (Kildare North, Fine Gael)
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I thank my former colleagues on the ACCC, Councillors O'Brien, Hanniffy, McVitty and McEntire. I also acknowledge Mr. Liam Kenny, who is the chief executive of the ACCC, a fellow county man and historian.