John Lyons (Dublin North West, Labour)
Link to this: Individually | In context | Oireachtas source

The second session is a discussion with the Irish Business and Employers Confederation, IBEC, on its proposals on budget 2014. From IBEC, I welcome Mr. Fergal O'Brien, chief economist, Ms Reetta Suonperä, senior economist, Ms Majella Fitzpatrick, director of communications and public affairs, and Mr. Alan O'Kelly, senior executive.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give to this committee. If a witness is directed by the committee to cease giving evidence in relation to a particular matter and continues to so do, he or she is entitled thereafter only to a qualified privilege in respect of his or her evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her, them, or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I ask Mr. O'Brien to make IBEC's presentation on proposals for budget 2014.

Mr. Fergal O'Brien:

I thank the committee for the invitation to attend. I am delighted to have the opportunity to discuss the budget with the committee in June, which is probably a first. Following the presentation, which I will keep short, we are happy to take questions and debate. We will make a formal pre-budget submission in the normal way this week. We have not made a formal submission yet, but have a fair degree of clarity on the emerging issues and priorities for business in advance of budget 2014. To provide some context, it will be useful for me to set out what IBEC is picking up from the business community and our 7,500 members on the performance of the economy over the first half of the year and the issues arising as a result.

A useful approach is to discuss our domestic and export economies. In the domestic economy, the jobs market, earnings growth, low inflation and falling interest rates look better than we thought they would halfway through 2013. These are the fundamentals facing Irish consumers but improvements in them have not translated into spending. The confidence genie remains absent from the Irish economy. People's finances are perhaps in reasonable condition, but they do not have the confidence to spend meaningfully. While clarity will be provided in the Central Statistics Office national accounts on Thursday, it appears that in the first quarter - and probably in the first half of the year - the consumer market was weak. Despite things being a little better for consumers, they are not going out to spend. The domestic side of the economy is quite disappointing. On the export side, it is a really a tale of two different economies. Our goods sector is finding trading conditions difficult. Goods exports are down approximately 10% in the first quarter as our trading partners in the UK and the main European markets remain in a difficult place. Our services sector continues to perform very strongly. Exports will do fine this year, but it will all be on the back of services.

We have made great inroads over the last couple of years on general competitiveness in the economy but still have a great deal to do. A number of cost pressures and concerns for business are emerging. Electricity costs, for example, are becoming a major issue. On the employment costs front, voluntary health insurance is feeding in as a major cost for employers. Approximately 70% of our members pay some or all of the voluntary health insurance contributions of their employees. While it is a big cost for households, it is also a big cost for business. It is a particular concern at the moment.

IBEC is very conscious of the need to avoid coming to the committee with a shopping list of 101 things business would like to see in budget 2014. We have clear priorities on the important issues and have five key messages on what government should do. The first recommendation is on the scale of fiscal adjustment. This feeds back very much to the weakness in the domestic economy. While fundamentals have improved, spending has not come through. The Government's plan to is to take a further €3.1 billion out of the economy to put us on the path towards budget balance. In our view, a great deal has changed in the last year. Importantly, we have seen concessions in the promissory notes restructuring. We are ahead of where we thought we would be on our budget deficit targets. For the first time since the start of the crisis, the Government has a choice. Until now, we have said the Government had no choice but to live with planned austerity.

The Government should choose to implement somewhat less austerity. We suggest an adjustment of €2.6 billion instead of €3.1 billion and there should be no further additional tax increases. We accept that €500 million in tax increases are already in the pipeline, but there is no need to announce additional taxation measures in budget 2014. If we deliver an adjustment of €2.6 billion, we will still reach comfortably the budget deficit target. The very clear message it would give to Irish households is that the worst of the austerity is behind us, evidenced by a tangible impact of the restructuring of the promissory notes and the strong performance on budget deficit targets. It would not affect us in the bond markets and we would bring growth back to the economy. The upside would not be new taxes through higher tax rates, it would be higher tax revenue through buoyancy. We must focus on growth.

If we can create buoyancy by saying to householders there will be no new taxes in budget 2014, it will have a big impact on the Exchequer finances and on employment and activity in the domestic economy. That is message No. 1.

Message No. 2 is also related to the domestic economy. It is about the initiatives IBEC introduced in the jobs initiative package when the Government first came into office. We think those initiatives, the reduced rate of VAT for the hospitality and related sectors and the lower rate of employers' PRSI for those on lower incomes, have really worked. We have seen a significant employment dividend, in particular, in the hospitality sector. It has protected many vulnerable jobs in the cost-sensitive sectors of the economy. Here we have a stimulus package that has really made a difference. It has more than paid for itself. It is being funded through a pensions levy with which we never agreed, but that pensions levy will exist in 2014 as well. Our view is that the initiatives to which I refer that are working should be retained for at least another year, and then see where we are in terms of the state of the economy.

Our third priority relates to employment costs. I mentioned in the overview that while we have regained competitiveness, there are still many competitiveness pressures in the economy, such as labour costs and energy cost, which are a concern for many of our members. On the employment cost front, we have spoken to the committee about statutory sick pay proposals which we always felt would simply result in job losses in the private sector and in enterprise. Specifically, the medical health insurance costs are becoming a significant item on the agenda for the chief financial officers and human resources directors in many companies. Those companies that are carrying the tab for health insurance costs are really noticing those cost increases. I appreciate households are noticing them as well but from an employment point of view, they now are really on the radar. They are a high-cost item. Where we are seeing increases in the region of 10%, 15% and 20%, and perhaps more with further policy changes, it is a real cost concern on the labour cost front for businesses.

The fourth priority item would be the competitiveness of Ireland's business tax offering. I suppose the business tax agenda has been very much in the media spotlight and the subject of debate over recent months, but one of the points that maybe has not been picked up as strongly as it should have been is that our nearest neighbour, the United Kingdom, is becoming increasingly aggressive and successful in competing for mobile investment. The United Kingdom is probably now our single biggest competitor on many mobile investment projects. Five or ten years ago, the United Kingdom would not really have been in that place. It would not have been seen as a serious competitor. With the United Kingdom's corporation tax rate heading down to 20% and with the type of supports it has brought in on intellectual property and what it is doing for research and development, it has really upped its game. The United Kingdom has the ability to attract much of inward investment. It remains to be seen whether the United Kingdom's decisions on Europe will be an advantage or a disadvantage on the competitiveness front. That has yet a long way to run.

From an Irish point of view, we need to continue to look at our business tax offering. Specifically, we refer in our pre-budget process to the research and development tax credit scheme, which has been in place for approximately ten years. The Department of Finance is conducting a major review of that scheme this year. We believe it is important that the scheme continues to be supported and that it can be enhanced, as we would see it, in a cost-minimal way. The scheme is really making a difference in terms of creating jobs in the economy, particularly high-tech, high end research and development jobs. When one looks at the numbers in terms of the volume of research and development now being conducted in the economy and the number engaged in research and development employment, we have performed strongly. Here we have a Government initiative that is working, making a difference and making Ireland much more attractive in terms of winning those mobile investment projects, but there is more that can be done and we would see it as a particular area of focus.

On the final point of our brief introduction, priority No. 5 relates very much to the domestic entrepreneurial investment climate. There are two specific issues. Overall, in terms of context, we think that the real growth in this economy, when we head into meaningful recovery, will come from the SME sector. We think there lies the real untapped potential of the economy. There are two things we see holding that back: the area of investment finance and investment capital remains a challenging one; and the fact that we are really missing out on the potential of the employment investment and incentive scheme. The scheme, the follow-on to the business expansion scheme, BES, really is not working. It is a great scheme in terms of what it could potentially do but what it is actually doing is quite disappointing. I would love to see us being able to put new energy into that, provide new branding and promotion, and get real strong ownership from Government of the potential for that scheme. When we look back over the past decade in the economy at how much money we all invested as households in unproductive assets, property, etc., if we could only get a fraction of that funding into businesses, SMEs and start-ups, it could really make a difference to the investment outlook. The scheme is in place. There is a couple of tweaks that it needs. What it really needs is a bit of re-energy, re-branding and promotion. It could make a big difference.

My final point on that overall domestic entrepreneurial investment climate is around capital gains tax. We now have a punitive rate of capital gains tax in Ireland, at 33%. It has increased sharply over recent budgets. We would like to see Government give consideration to providing an entrepreneur's relief to make a distinction between speculative investment in the economy and core entrepreneurial investment that supports employment and drives job creation. We need a distinction between what that cohort of businesses is doing and how it is treated in terms of capital gains versus the speculative sector of the economy. We would not deny that the low rate of capital gains tax played a role in the speculative bubble, but what we are seeing increasingly internationally is this distinction between the enterprise gains in the productive sector and those speculative gains. In the United Kingdom, for example, there is a special relief for entrepreneurs. In Ireland, at present, if a person who has been successful in setting up a company and, as many company founders are doing, sells it, there is no incentive to keep that investment in the economy. There is nothing in the tax system to encourage investment in a new start-up or in a couple of new growth companies. The Government is missing a trick there in terms of sending strong messages about the overall entrepreneurial climate, specifically a signal that if one sets up a business and takes the risks, one will be rewarded, and if one re-invests that money, the tax system recognises that.

We have not come in with a long shopping list. There are five issues. I am happy to hear comments, questions and reaction to them, as are my colleagues.

John Lyons (Dublin North West, Labour)
Link to this: Individually | In context | Oireachtas source

The presentation was succinct. If all presentations were like that, there would be much more time for discussion every week.

Dara Calleary (Mayo, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I welcome the team from IBEC. Deputy Seán Kyne and I had a fairly good discussion with Ms Suonperä and IBEC west members in Galway last week, so I will keep my questions relatively brief.

I agree with IBEC's, as it were, austerity-lite proposals. What would Mr. O'Brien say to the argument that some would put forward that if we go the way IBEC suggests, it will send out a wrong message that we are easing off too early and there is a danger that in doing so because we will begin to lose the confidence of the markets? On the specific proposal of the suggested adjustment of €2.6 billion instead of €3.1 billion, what forecasted rate of growth for the economy underpins the IBEC proposal?

On employment costs, I am completely with IBEC. My party tabled a Private Members' motion on sick pay last year. Would Mr. O'Brien reiterate the figures on the health costs, particularly the percentage of IBEC members who pay health costs for their employees? How does that rate, in terms of competitor countries, for what Mr. O'Brien called mobile investment? Is that a particularly Irish phenomenon or do all Ireland's competitor countries in this mobile investment area pay health cover as well?

On business financing, would Mr. O'Brien update the committee on where IBEC's members are in relation to finance generally and bank credit? Why, in its members' view, is there a relatively low uptake of the two schemes? We are trying to get our heads around that in particular. I welcome IBEC's proposal for an entrepreneur capital gains relief. How much would that cost in a 12 month period?

Peadar Tóibín (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I welcome the IBEC representatives and thank them for the efforts they have made to bring forward positive suggestions with regard to the growth of the economy.

At the start, I suppose I could agree with Mr. O'Brien that the emphasis needs to be on growth and away from austerity, and that one of the most important elements of the economy right now is expectations. If people believe that tomorrow will be worse than today, there will be no spending. If people believe that tomorrow will be a better day, that expectations element is really important.

While IBEC is against new additional taxes, what is its view on types of taxes such as the water charge and property tax which are not dependent on income? IBEC’s analysis referred to significant gains in employment in the hospitality sector. Can the delegation go into more detail on this?

Our focus has been on reducing businesses’ cost base before looking at employment costs, because a significant element of society is in poverty. For example, electricity and diesel costs are the fourth highest in Europe. There are also issues such as high charges for professional services, rents and rates. However, sometimes the average wage cost hides the distribution of wages. One could have variability between upper and lower wages but still have a high average wage. Does the delegation have any information on this?

The largest take-up of research and development has been with multinationals. Small and medium-sized enterprises, SMEs, are key to economic growth. There is a danger that export growth could be jobs free. The SME sector is critical for job creation. How can we incentivise more take-up of research and development by our indigenous SME sector?

Chambers Ireland also proposed a cut in the capital gains tax rate. IBEC proposed an incentive scheme to allow for re-investment of capital gains profits into business. Could the delegation give more detail on how this incentive would work to get entrepreneurs to lock such gains into re-investment?

Mr. Fergal O'Brien:

On the right amount of austerity and what the markets think, over the first five months of the year we were in a sweet spot with bond yields but they moved against us a little bit due to various external factors. While the markets are examining how the public finances are being fixed, they are also looking at growth in the economy. We could keep delivering on market expectations on austerity. However, if we disappoint on growth rates, one could give up what one gained for good fiscal housekeeping. We think consumer spending is pent up and it will be unleashed when confidence comes back. While 85% of the fiscal adjustment is behind us and budgets will get easier at some stage, consumers do not believe that. The time horizon is so distant for them, it is not influencing their decisions on consumption. There has to be a tangible benefit and dividend for householders that we have done the hard yards, restructured promissory notes and outperformed in reducing the budget deficit.

Will the bond markets penalise us for lessening austerity? I do not think so excessively. I believe it would be a strategy worth pursuing in what it would give us in growth and jobs. Our current growth forecast for next year is 2.5%. We have a good deal of room for manoeuvre within that in terms of doing less austerity and still reaching a budget deficit target of under 5%.

Ms Reetta Suonperä:

On the growth forecast, even plugging in the Department of Finance’s own growth forecasts, we would still reach a deficit of 4.5% next year where the target is 5.1%. That is a conservative estimate and does not factor in any growth bounds from lessened austerity. Conceivably, if a little more was done on the tax side, there would be stronger growth.

Mr. Fergal O'Brien:

We are within strong safety boundaries with that assessment. The State would get back the revenue on the buoyancy side.

Our surveys show that 70% of our members are paying some or all of the health insurance costs of their employees. It has become a significant labour cost item and has registered with the multinational sector. It is a concern.

There is some unmet demand in access and availability of credit. Our real concern is where the investment finance will come from when we return to growth. Have we a sufficiently robust and healthy banking system that can provide that investment finance? As we have told the committee in the past, Ireland was excessively reliant on banking finance in the past. This will have to change and we are going to need a much more diverse funding model. We would see schemes from Enterprise Ireland, such as the employment investment incentive scheme, and other funding mechanisms such as the National Pensions Reserve Fund playing a role in diversifying availability of credit. The employment investment incentive scheme is not really delivering and it can be adjusted to make it work.

I agree with Deputy Tóibín on consumer expectations. People feel more taxes will be introduced and we are still waiting for consumer confidence to come back. The savings ratio is still incredibly high and there is no sign of it coming down. If there were a greater certainty for households, spending would come back because the capacity to spend is evident in the savings ratio.

We have detailed analysis of the jobs benefit of the measures introduced to help the hospitality sector. We are making a submission on this to the Government tomorrow which we will also send to the committee. Our analysis shows these measures really worked, brought in jobs, revenue for the Government and are worth keeping. Given the wider fragility in the domestic economy, it is far too early to remove these emergency measures.

Electricity costs to business have come to the top of the agenda again. In particular, large energy users tend to be in internationally competitive sectors. For some businesses it can be a really large cost item.

Very often, it can be non-pay labour costs, for example pensions. We see many employers who are still trying to work through issues such as defined-benefit pension schemes, which carry incredible costs. Health insurance costs are also an issue. While we do not have useful international comparators, we know that in countries where business pays somewhat higher social insurance costs, that buys a great deal for employees in pension and health benefits. Employers do not have to pick up that tab. In Ireland, much of the cost is on a certain cohort of employers - the larger ones which are competing internationally. They are more likely to have pension schemes and health insurance. They carry a great deal of additional cost in terms of their fully loaded labour costs. In Germany, social insurance contributions pay for pensions and the bulk of health care. In Ireland, they do not and much of the cost is left with the employer.

We have done a great deal of detailed work on the research and development tax credit, feeding into the Department of Finance review. I will send the details of the work to the committee. I fully agree on the significant challenge on take-up among SMEs. We have suggested to the Department of Finance that there would be considerable merit in having what may be termed a "research and development light" scheme for SMEs. It is complex, involving a great deal of heavy tax analysis and issues of defining research and development activity. It would be useful to have a simpler, pro-formascheme for SMEs, published by Revenue and promoted by Enterprise Ireland. Many SMEs are carrying out research and development but do not realise it. They are not getting support and a dedicated scheme could make a real difference. I am happy to send our specific suggestions in that regard to the committee and to engage on them afterwards.

Áine Collins (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The witnesses are very welcome. It is always nice to have IBEC in. We are here in good time. We have discussed the budget a great deal already. The Small Firms Association attended in that regard. The witnesses will be glad to know regarding their first suggestion that the Minister for Finance will report back to us in September to let us know the figures and what he will do with regard to the budget and austerity measures.

I agree that VAT reductions for the tourism and hospitality sectors have worked very well. We would all like to see the measure continued and carried over to other sectors, particularly the building trade. Employment costs are important, particularly from the point of view of small businesses who take on staff. We have all realised finally that it is the small businesses that will be the backbone of the country and create the jobs. I mentioned the research and development tax credit earlier. It must be extended. By 2020, we must be investing three times more in research and innovation than we are investing now. We must start the process. I agree with the idea of a light scheme for small companies, many of which are conducting research but not getting support. This goes back to my earlier comment on business supports, of which we do not have enough. It is time to do more for small businesses and to make supports more accessible. Now is the time to do so with the introduction of LEOs and the realignment of Leader programmes. We need far better supports, improved accessibility and improved qualifications among those providing supports.

Tax investment is interesting. I speak about it a great deal. The employment incentive scheme and the seed capital scheme have not been taken up. A business has to spend the money before it can recover it through the seed capital scheme. I wonder if there is an alternative. A business must invest the money in its capital. Could not a person who sets up a business just claim it back even if he or she did not invest it in the company? There should be an easier way to make that happen. When we changed the old BEF scheme to the employment incentive scheme, it no longer seemed to have the same bite. How can we improve access to it? My view is that anyone who invests in a new business should get tax relief. That is all probably angel investment, which we should have if we are serious about entrepreneurship and growing the economy. Is it something we could look at in terms of the employment incentive scheme? I would be delighted if Mr. O'Brien and Ms Fitzpatrick could send me any information they have in that regard.

Seán Kyne (Galway West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I welcome the representatives from IBEC. I attended with Deputy Calleary and others a meeting in Galway a couple of weeks ago at which we went through a number of the points under discussion today. Does IBEC have a concern about the earlier timing of the budget given that November is the key tax month to plan for things? Is there a concern about a possible impact on the validity of the budget figures? It has been noted repeatedly that people have significant savings and that there are issues of confidence. Despite the deficit narrowing and the assurances which have been made, is the departure of the troika what is ultimately required as the trigger for spending?

At the meeting in Galway, a number of issues of concern were raised, including health costs. Concern was also expressed on the ease of obtaining sick certificates and about litigation costs which multinationals must report back to the USA. Are those representative of people's concerns? The witnesses referred to reductions in corporate tax rates and better incentives in the UK. Mr. O'Brien mentioned the impact of uncertainty on the UK into the future. Is there scope in the period of uncertainty for us to regain some ground, emphasise what we have here and improve it? There is concern that multinationals might suddenly depart from the EU.

Anthony Lawlor (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Would it better in terms of the budget deficit to take a bit more out and use the bit over which we take out to invest back in the economy? I am thinking in particular of construction. The bulk of unemployed people are on the construction side of things. A lower VAT rate for construction was mentioned. An alternative approach might be a grants system for the extension or renovation of houses. That would get the smaller operator involved. We often talk about the small businessman, who in this context is the plumber and small builder. Nothing has been put in place for them. Nationally, it is all about large contracts for roads etc. If IBEC has any ideas in that regard, I would like to hear them.

On employment incentives, I have people telephoning me all the time asking if anything is available. There does not seem to be anything. I understand about PRSI, but people are looking for grants to take on someone extra. While they can take a person on part-time, they would like to take him or her on full-time to grow the business. Could something be made available for that? People talk to me about information. SMEs are finding it difficult to locate information. There is a raft of schemes which are available to them but they do not seem to be all in the one spot. We have spoken before about creating a portal of some kind.

Damien English (Meath West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

That is on the way. A one-stop shop.

Áine Collins (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Mentoring.

Anthony Lawlor (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

A small business should be able to press a button and find everything that is available. I would love that to happen. Any suggestions from IBEC would be very helpful.

Mr. Fergal O'Brien:

I will ask our communications guru, Ms Majella Fitzpatrick, to deal with the last issue.

Ms Majella Fitzpatrick:

We had this exact conversation the last time we were here. I agree with Deputy Collins that there are more schemes to be developed and more creative ways to do things. Right now, however, we have a great many schemes and supports. The problem is that small businesses, in particular, including the one and two-man shows to which Deputy Lawlor referred, do not know where to go to access information. If they do access information, they may not understand it. They do not have time to look.

We must make a real concerted effort, not only in terms of a portal. We should provide both technical solutions and people solutions, involving bringing people together to work on this over a period of time of perhaps six or nine months, and really target the information to the relevant persons. We could do that through collaboration between business and Government. We could work out easily who are the ones who need what particular information. In a short period of time, we could do something to get the word out there. Of course, once one business benefits from something, that is the reference and it will travel like wildfire. People pick up information from their peers. It would be worthwhile putting a concerted effort into that. In fact, I am chatting to Microfinance Ireland. Obviously, it is confident in the scheme but it knows it is not getting the take-up that it should. They are going to see how we, across IBEC, can pick the relevant persons from the relevant sectors that are the appropriate size that would benefit from that kind of funding. Those are the kinds of efforts. They are time consuming. They take commitment on everyone's part but those are the kinds of lengths to which we must go to get the message out there.

I would make one other comment, on what Deputy Kyne stated about the troika. I happen to believe at this stage that the troika is wallpapered to the Irish people, particularly since Mr. Chopra left in a visible way. I think the people have turned off to that completely. I do not believe the fact that the guys will not be visible anymore will have any impact whatsoever. That is merely an anecdotal observation.

Mr. Fergal O'Brien:

I will work through some of Deputy Lawlor's other comments. On the issue of sticking to the adjustment and using what might be spare for investment, I can see the merit in that. We need investment in the economy, but there are other ways we can get that investment outside of the Exchequer. Given what households have gone through over the past number of years, I am not sure it is right to tax people more so that we can pick investment projects. Because we have done the hard yards on the public finances, we have options for investment. Companies have money to invest if we give them the right incentives. We can look at public-private partnerships in the public capital investment projects.

I very much agree with Deputy Lawlor on trying to generate activity for the small contractors. We have a specific proposal for a home improvement scheme. We have looked at half a dozen schemes internationally. They all work and pay for themselves, and the cost-benefit analysis is all there. We will provide that to the committee in the full submission. From our point of view, one of the great benefits of such a scheme would be one gets a great regional distribution of the activity. At present, the Dublin economy is doing okay. Outside of Dublin is not so good. It is a case of whether we could get something that would really get around the country and get at the unemployment problem, particularly among the former construction workers. Home improvement has the potential to do that. We have seen half a dozen schemes that have worked really well and we have a sense of frustration that we have not been able to gain traction on this domestically. We would be happy to engage with the Deputy on the detail of that. We have a good deal of detail and analysis on that in a separate paper.

Ms Reetta Suonperä:

If I may comment on the investment piece, in terms of avoiding a repeat of the 1980s, where there was a pull-back on capital investment which left bottlenecks that were not unwound until I arrived in Ireland in 2000, and the results of which catch-up I have seen, we need to think of it strategically and to look at what bottlenecks might emerge. However, that also means that one might not have that investment in place next year or the year after, whereas easing back on the austerity and on the tax hikes has an immediate pay-off in terms of the economy.

Mr. Fergal O'Brien:

We will get the benefit by Christmas.

On the employment incentives, the tidying up of the schemes we had into the jobs plus scheme will make a difference. It also is taking a little time to gain traction. Previously, we probably had too many employment support schemes. Ms Fitzpatrick would be aware of the work we did on awareness and the awareness of the available schemes was poor. The tidying up into that single jobs plus scheme will help.

In response to Deputy Kyne on the points about the timing of the budget, obviously, there are issues around so much of that tax coming in in the key month of November. I suppose our main reflection is on the potential for giving certainty in the domestic economy. Having the budget two weeks before Christmas always killed the retail sector over the past couple of years. We would see significant benefit in bringing the budget back to October and trying to provide certainty. If, in particular, there was a budget with less or no tax increases, we could have a great Christmas out of it. Moving it out of the Christmas shopping period is a real positive.

We must wait and see whether we will have to go back to look at the timing of some of the tax payments. Overall, what we would like to see long term is that budget day becomes less of a big issue, that we do not see as many surprises, that we operate more on genuine multi-year budgeting activity and that consumers are not getting surprises or shocks when it comes to budget day. In the short term, there probably still are some risks.

The sick certificates issue has come up with many employers, particularly with all the debate about sick pay over the past couple of years. It seems particularly easy in Ireland to get sick certificates. It is commented on by those who have international experience. We also see it showing up in terms of the numbers of recipients on illness benefit. When one compares those numbers internationally, they are high. That is part of the challenge.

In terms of the United Kingdom attractiveness for investment, I suppose I am unclear whether it will be an advantage or a disadvantage. Business does not like uncertainty. I could see why some deciding on big investment in the United Kingdom, particularly if it is a big infrastructure investment, such as energy, might ask over the coming years where the United Kingdom will be in terms of EU energy policy. One could see such concerns. However, it could give them more flexibility. They have been very aggressive on mobile investment. They are now a real competitor for us and we need to watch them. On a regular basis, we see professional services companies from the United Kingdom over here pitching the attractiveness of companies moving to the United Kingdom. These will not only be foreign companies. We will see Irish companies potentially move their operations to the United Kingdom as there is a more attractive offering over there.

I thank Deputy Áine Collins for her comments. On the seed capital scheme, if one asks, not only those out on the street but small business persons and entrepreneurs, what is the EIIS or the seed capital scheme, they just do not know. It is a shame. On the EIIS, we have a couple of specific proposals looking at what they have done in other countries within the state-aid rules. The issue one runs up against here when the Government is providing tax relief to invest in business is always whether it is within state-aid rules. We have looked in detail at those state-aid rules and we think there is more we could do on potential risk sharing. One of the key challenges is that, traditionally, it was a small cohort who invested in BES and we need to widen the net. We need to get the more typical household investor. They will have a different risk profile and we need to change the scheme to reflect their risk profile. There is significant untapped potential in terms of those who might invest in Irish business and jobs, if they were given the rightly packaged and promoted scheme. I will not give up on it yet. It is something we can turn around, but it needs to be changed, re-branded and better promoted.

Áine Collins (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is interesting that crowd-financing, where small people invest small amounts of money, is taking off. That seems to have significant potential worldwide.

If I may, I will ask a question about credit. One of the initiatives on which we are working in Cork is looking at putting philanthropic donations into a fund to try to fill the gap where people can encounter difficulty in getting funding for entrepreneurship. Often, where they get a certain amount from the bank or a certain amount from Enterprise Ireland or whatever source from which they get a grant, there is a gap for which they need either bridging finance or matching funding of 50% or 25%. It is the first time this has been done in Ireland and we are trying to create a philanthropic fund, work on the diaspora, etc. This is huge in Israel. I wonder whether IBEC has any thoughts on that or any comments to make on it. Many have been saying we need far more different types of financing, as opposed to bank financing, for entrepreneurship.

Ms Reetta Suonperä:

On the EIIS, a definite re-brand is called for. Even though I am an economist who is familiar with the scheme, if I do not think about it for a day I forget what it stands for.

It does not convey that it is about investing in Irish SMEs.

On the sick certificates and sickness pay, it is quite important to note that introducing a sick pay scheme is not an incentive for the private sector to bring down its absenteeism levels. Our research shows that absenteeism levels in business are already quite low. Employers find different ways of managing it, through perhaps not giving sick pay for the first couple of days of sick leave where they have a sick pay scheme. That is to give a little context for the sick certificates debate.

Mr. Fergal O'Brien:

On the specific suggestion regarding philanthropic investment, it is an interesting idea and I would be happy to discuss it separately. The fact that Irish business is 95% reliant on bank funding for financing is something that simply must change. We must look at every possible stream. Ireland has the unique potential of the diaspora. Very often it is branding, packaging and promoting, and people will support these things and buy into them. Again, we would be happy to follow up on whatever proposal is being worked on.

Damien English (Meath West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank Ms Fitzpatrick, Ms Suonperä and Mr. O'Brien for coming to the meeting today. I appreciate the discussion. It was important that they came. Last year they had a very significant influence regarding the area of additional voluntary contributions, AVCs, and that was an IBEC proposal. It was two years old at that stage but they made a presentation to the committee and many members took it on and tried to get the message across, as I am sure the Committee on Finance, Public Expenditure and Reform did as well. The Jobs Plus scheme also came through from the witnesses and the Small Firms Association as regards trying to target those schemes. It is worth our while to invite them to appear before the committee to discuss initiatives that we can try to take on and drive.

The issue of trying to get all the information together for business people is something we have discussed a few times at the committee, including with the witnesses. The Department of Jobs, Enterprise and Innovation is working on that document and I understand the Taoiseach's office is trying to finish putting it together. We believe it will be very presentable and will show all the different services across government to help people in business and in employment. The local enterprise offices, LEOs, will help. If they are implemented correctly, they should be one-stop-shops to provide that type of service and advice.

I believe we need to sell our schemes. Until the day we have someone going into a business to sell the various initiatives, they will not work fully. We have to believe in them. Sometimes we might be afraid there will be too much take-up and we do not talk about them in case people go for them. However, we need to believe in them and push them because they will create jobs. There are many good initiatives available if we push them. Working with the witnesses, it is to be hoped we can do more on that.

I have two or three questions. I welcome the witnesses' key messages and I hope they are all implemented in terms of domestic demand and keeping the cost of business down, even in the area of research and development. Must we do more to help businesses in exporting? Can we do more as regards information and networking? I attended a good event recently when Consulting Ireland launched its cluster initiative in Enterprise Ireland. It is a programme that will run for the next nine or ten months and it aims to help businesses win contracts abroad. Every day, there are 200,000 contracts to be won and Ireland does not get its fair share of them. It appears we are not chasing them. I realise many of them are through consulting as well, but many of them are public sector contracts. We are ideally situated for them and they could lead on to more business. Do we need to do more to encourage that type of work and to encourage network building? If the witnesses cannot respond to that today, perhaps they could respond to us later. Last year's budget tried to help people exporting into new markets, but we probably need to do more. We can never do enough, I suppose, so perhaps the witnesses would give us their thoughts on that.

In the same area of business, export credit insurance still seems to be an issue. The committee has been told it is not, but I believe it is. Businesses are telling us they have problems and concerns trading abroad. There are different initiatives in that regard aside from straightforward export credit insurance. Irish companies do not use invoice discounting or factoring of debts. There is a very low take-up of that service in this country as well. Is there a reason for that?

To follow up on that, the witnesses might be familiar with the single euro payments area, SEPA, and the area of business to business, B2B. Irish banks are not keen on implementing that. Next February there is a commitment to do it for the ordinary domestic customer but not business to business. Is that something that should concern us? Is there a reason for it? I am concerned about it and certain businesses have raised it with me and told me it will leave them at a disadvantage. What are the witnesses' thoughts on that? If they cannot deal with it today, perhaps they would refer back to the committee at another time. It is something the committee might have to take on as well.

Mr. Fergal O'Brien:

I will ask Ms Suonperä to comment on SEPA. She is working very closely with the Central Bank on its implementation.

Ms Reetta Suonperä:

We are well aware of the problems it will cause businesses. At this stage we are communicating with our banking sector members, the Central Bank and the members affected by the changes. We are trying to work towards a solution on it. It is a European regulation coming down the tracks and, unfortunately, there will not be a B2B scheme in place by 1 February next year no matter what, so at this point it is a case of trying to work with the concerned parties to try to find a solution. It is something of which we are well aware.

Damien English (Meath West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Is there a reason for it? Is there a major cost involved in the banks or is an IT issue? What is their concern?

Ms Reetta Suonperä:

I understand it would require a significant investment on the IT side into building a separate direct debit scheme for businesses. There are some proposed solutions coming down the line and the Central Bank is working on that, but it remains to be seen how this can be resolved.

Damien English (Meath West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

So it is not a problem for individuals, it is just a problem for businesses. That does not make sense. If it will be available for individuals, one would imagine it is possible for business to business as well. The banks are committed to doing it for individuals next year, but not for business to business, or am I not understanding it correctly?

Ms Reetta Suonperä:

There will be direct debit payments for businesses. The issue is that under the SEPA rules, there is a core scheme that is being implemented in all the euro area countries and there is a separate business to business scheme that has different rules and regulations, which is an optional scheme. Effectively, the banks here would have to implement two different schemes and because of the financial constraints they are operating under, they are only doing one scheme at present.

Damien English (Meath West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Is it something the committee should pursue? I have heard from a couple of businesses that this is something that would concern them. Is it an issue IBEC members would raise?

Mr. Fergal O'Brien:

It is an issue for a large number of businesses. The particular concern in Ireland at present is that we continue to have very fragile credit conditions and this is potentially something that could further stress the credit conditions of businesses involved in a business to business supply chain. That is the nub of the problem. It would be useful for the committee to look at it in detail. It is very much accentuated in Ireland by the difficult credit conditions we continue to have.

Damien English (Meath West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is adding stress.

Mr. Fergal O'Brien:

On the Chairman's questions about the exporting sector, the credit insurance issue still arises with companies. Again, it is a function of the challenging banking conditions we have here and there are also some issues specific to Ireland in that respect. On the wider system of supports for exporters, we increasingly see more demand for the softer supports. While Enterprise Ireland does much great work in helping exporting companies, there are obviously only so many clients it can help. Those wider networks, wider supports and the information schemes are all incredibly important. We see many companies that were previously solely reliant on the domestic market successfully making that transition, but for many of the small companies with limited management resources it is a big challenge. The focus in particular should be on those softer supports or on helping the exporters. A great deal more could be done.

Damien English (Meath West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the witnesses for their attendance. No doubt we will hear more from them on the budget and thank them for the submission that is due to arrive tomorrow.