Oireachtas Joint and Select Committees
Tuesday, 21 January 2014
Select Committee on Jobs, Enterprise and Innovation
Estimates for Public Services 2014
Vote 32 - Department of Jobs, Enterprise and Innovation (Revised)
The purpose of this meeting is to consider the Revised Estimate for Vote 32 - Jobs, Enterprise and Innovation for the year ending 31 December 2014. When the select committee has considered the Estimate that will be reported to the Dáil. The select committee does not formally approve the Estimates and, therefore, it cannot divide on the issue or cast a vote.
I welcome the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, Minister of State with responsibility for research and innovation, Deputy Sean Sherlock, and Minister of State with responsibility for small business, Deputy John Perry. I welcome also the officials. I am sure we will hear from them at some stage.
As members will have seen, the 2014 Revised Estimate was presented to the Dáil in the new programme-based format. This means that the Estimate, as presented, contains the following information for each programme - how the money allocated to that programme is proposed to be spent and the previous year's outturn in each case; the numbers of staff assigned to work connected with the programme and how this compares with the previous year; performance related information such as the departmental outputs, again with corresponding information for previous year; and what are termed performance and impact indicators with previous years information also. Administrative expenditure for the Vote as a whole is summarised in more detail than previously.
The Revised Estimate gives us an opportunity to review whether targets set out and the distribution of moneys across the Vote are appropriate in all the circumstances and demonstrate best use of resources. It also gives us an opportunity to explore issues facing the Minister in terms of the 2014 allocation for his Department.
A timetable for today's meeting has been circulated in advance and agreed. It allows for a brief opening statement by the Minister and a discussion on the 2014 Revised Estimate with questions on each programme listed in the Estimate. I invite the Minister, Deputy Richard Bruton, to make a brief opening statement.
With the permission of the Vice Chairman, the Minister of State, Deputy Sean Sherlock, might make a brief opening statement on the innovation issue when we come to it. I think it is the second of the programmes.
I thank the Vice Chairman and the committee for holding this hearing. Overall our budget for the coming year is €732 million, a reduction of 4% on the 2013 provision. The capital provision is €440 million, the current provision is €291.5 million. Adding in the capital carryover of €23 million, which we have secured, will allow us to maintain capital spending at the same level as the outcome of last year.
On the jobs, enterprise and exports area, we can look back on a very good year in terms of employment performance. Not only does the CSO data show growth of almost 62,000 in private sector employment but IDA and Enterprise Ireland had record job performances. Enterprise Ireland has reached record levels on its exports and sector strategies are making good progress. We are encouraged that the Action Plan for Jobs process which achieves cross-Government support for the enterprise and jobs agenda is adding value. That is not to say that everything we are doing is perfect. There will obviously be comments on the success of our new access to finance measures. They have definitely added value but our ambition would be to see them grow further.
In the small business area for which the Minister of State, Deputy John Perry, has responsibility we will shortly publish an entrepreneurship forum which was a piece of independent work conducted by Mr. Sean O'Sullivan with a group of practical entrepreneurs. We will follow that up with our own enterprise strategy. In the course of the year we will seek to make entrepreneurship and small business a very central focus of what we are about. We are rolling out the local enterprise offices this year and we want to see them help provide a first-stop shop for business in order that anyone who is seeking access to any of the State programmes can have an easy and understandable location from which to get that support.
The Minister of State, Deputy Perry, has been instrumental in driving this need for a good front-of-house point of sale, POS, to use the professional term. That is clearly a very important element.
My ministerial colleague, Deputy Sean Sherlock will deal later with innovation, but I will make a brief comment. We have adopted the new approach to research funding. We have in place a central technology transfer office. We have delivered the new IP protocol and Deputy Sherlock has been instrumental in delivering Horizon 2020. I think we are set fair to sweat the asset of our investment in research and science more effectively in the years to come. That has been the central ambition that he has held in this brief.
Regulation is the third part of our responsibilities. We are making very strong progress. The committee very generously accommodated the passage of the Committee Stage of the Companies Bill 2012. The Companies (Miscellaneous Provisions) Act 2013 allows businesses to apply to the Circuit Court for examinership. We will shortly introduce legislative reforms in the area of work permits. We are progressing the reforms in the workplace relations commission, which is simplifying the whole issue of workers' rights, and issues of dispute. We have pushed ahead and successfully negotiated the opening of negotiations with the US for a trade agreement over time. We see many of our agencies rolling out better compliance methods for businesses to keep high standards and be compliant in a way that does not represent a high cost. The big uptake of BeSMART under the Health and Safety Authority is a good example. Members will also see in the Companies Registration Office the adaptation to online reporting, e-filing and so on. Our agencies, despite the declining resources available to them, are delivering strong service to the clients. That is the key challenge.
I will deal specifically with some of the areas before taking questions. The integration of Forfás in the Department has made a substantial change in the presentation of our Estimates. Members will see a very substantial increase in consultancy budgets. The actual consultancy budgets are not up, but this reflects the integration of the type of work that Forfás does, which is largely policy evaluation and value for money exercises, some of which it does not have the in-house capability to deliver and which it traditionally outsourced. While it may appear there are significant increases in the administrative and consultancy budgets, the situation reflects the integration of Forfás which was one of the rationalisation measures. Let me explain at the outset the thinking behind the integration of Forfás. I have been a strong advocate for the integration of Forfás even when I was on the benches opposite, since the time Culliton reported on the need to strengthen our industrial strategy. Culliton was of the view that we needed a strong policy capability in the Department. In the event, the policy capability was outsourced from the Department to Forfás. I think bringing the policy capability within the Department, which is reflected in these numbers, gives the Department greater capability to shape policy and to oversee the performance of our agencies in a more effective way. That integration of Forfás will help over the longer term.
Chairman, rather than have a long statement we will deal with the issues as they arise.
Thank you Minister. As suggested when we get to programme B, the Minister of State, Deputy Seán Sherlock can make a brief statement.
We will consider the Estimate and the performance and expenditure proposals for 2014 programme by programme, commencing with programme A which is jobs and enterprise development. I remind members to identify the subheading of the programme to which they are referring when asking a question.
We will discuss the general position in relation to savings measures that were to be introduced from 2013 and then move on to consider performance and expenditure proposals for 2014, programme by programme. We will start with subhead A3 Forfás.
I welcome the Minister, the Ministers of State and their officials. I notice a certain ministerial nervousness around consultancy fees, which is welcome, but Forfás spent €11.3 million on research in 2012. Will that level of expenditure on research be maintained in the Department? Most important, will the academic independence that Forfás brought to various arguments be maintained in the Department?
That consultancy budget will be down somewhat in the year but it will be largely maintained. I can provide the Deputy with details but Forfás spent €900,000, just under €1 million, on consultancy and that will be down by about €80 million.
My query, never mind the consultancy, is that in 2012, Forfás had a budget of €51.4 million and about €11.3 million was spent on research with the remainder spent on other activities. Will that level of expenditure on research be maintained when the research function of Forfás goes under the Department's roof?
The Forfás expenditure on research refers to its research policy staff who will continue to operate. In line with employment control framework, ECF, generally there is some reduction in staff right across the Department but the capability is being maintained and that is what that element refers to.
We have maintained that the research policy staff will have the right to publish their findings independently of the view of the Minister. We have also strengthened the National Competitiveness Council with the addition of six industrial partners. The Forfás resource services the National Competitiveness Council which is entirely independent in the publication of its work. Forfás will have independence in publishing its research independently of me as Minister, but in addition, it will have through the National Competitiveness Council a forum of outside interest which it serves to ensure an independent critique of how we are faring in terms of competitiveness across the spectrum.
The target of subhead A5 is to deliver 13,000 new jobs and 155 investment projects for 2014. In 2013, the IDA delivered 13,367 new jobs and 164 new investment projects. Why are the figures being downgraded at a time when we expect some expansion? I have a series of questions on subhead A5. Will I put them all together?
It is proposed to maintain the target to deliver 50% of IDA investment to centres outside Dublin and Cork. In 2013, it was 30% and the IDA states in its end of year report that it is a challenge to reach that 50% figure. In 2013, 64% of the visits by incoming client companies were to Dublin and to Cork. Will we reach the 50% target figure in 2014 or is it just a notional figure?
In 2012, the last year for which we have figures, €89.9 million was paid out to client companies.
Is the Minister satisfied with the audit procedures associated with that level of expenditure? Are there difficulties with how that money is spent by any of the client companies to which it is paid? When I studied the documentation, I could not find out how much was paid to client companies of the county enterprise boards in 2012. That figure might be in the documentation somewhere. I have seen the Enterprise Ireland figure, but I want to get a figure for the county enterprise boards.
I have two final questions on subhead A5. How much did IDA Ireland pay in consultancy fees in 2012 and 2013? What is IDA Ireland's active presence or footprint, in terms of staffing, in the BRIC countries? I refer particularly to China and India, where a considerable level of industrial expansion is under way at present. Is the Minister satisfied with that presence? He mentioned that he has identified 155 investment projects for 2014. How many of them will come from the BRIC countries, as opposed to the traditional inward investment markets? Has a target been set in that regard?
I note that there has been an increase in the valuation of IDA Ireland's property. Does this take account of the proposal to increase the number of start-up properties that IDA Ireland has around the country? I understand that three such developments have been announced. Does the Minister envisage that IDA Ireland will develop its own industrial parks to improve the employment prospects of counties other than the three that were named earlier?
I would like to pick up on Deputy Calleary's comments about IDA Ireland's locations. As a representative of Galway, I am aware of the importance of regional balance, which has been much commented on. Obviously, there is a critical mass in Dublin and Cork as the largest cities. Are there other issues that attract companies primarily to those locations? Can more be done to attract inward investment into Galway? While Galway has done quite well, in fairness, one would never refuse new business. I am always pushing these areas. The Minister might comment on that.
When I visited the consulate general in Boston during the summer, I noted that the Enterprise Ireland offices were located in the same complex and I was informed that efforts were being made to bring IDA Ireland in there as well. It seems like a good idea for consular diplomats to be accommodated alongside the staff of IDA Ireland and Enterprise Ireland. Is that being replicated in other parts of the world? Are there plans to do so? I am aware that the opening of new embassies and consulates has been announced today. Will the Minister consider this approach in that context? For example, would consideration be given to operating in this way in Austin, Texas, where a new consulate is to be opened? What kind of presence will this country have in those locations?
Indeed. I will take them in order. I can inform Deputy Calleary that the targets are based on an original five-year strategy. We do not tend to change them suddenly on the basis of something like a record year. We will not take last year's figures as the new baseline. IDA Ireland is a long-term operation. Its remit is to build strength in certain sectors. It operates in a long-term planning environment. I do not think it should suddenly change. Last year was certainly an exceptionally strong year. Even though 13,300 new jobs were delivered last year, it will still be a stretch to achieve this year's target of 13,000.
The Deputy also mentioned the 50% target. It is true that over a number of years, IDA Ireland has consistently found it difficult to achieve this target. Last year's figure actually represents a significant improvement on the previous year's figure, which was less than 25%. Last year, 35% of new jobs were created outside Dublin and Cork. This was a substantial step forward. There is no doubt that this target presents difficulties. The sort of mobile investment we are now seeing is different from the sort of investment we saw a number of years ago. As a result, this activity has become more focused on cities. As part of our efforts to counteract that, we have developed new initiatives like ConnectIreland, which has a better spread and offers regions the capacity to use their own resources to try to assist the foreign investment effort. As part of the review of foreign direct investment that is being undertaken, IDA Ireland is looking at the challenges that lie ahead and how we can best capitalise on them. That review will definitely look at the regional challenge. As the Deputy said, it has not been possible to deliver on the targets that have been set in that regard.
I am anxious to develop a more broad-based discussion on how a region can achieve competitive advantage for itself. In many regions, foreign direct investment has not been the backbone of the local economy - it accounts for a small percentage of that economy. There are areas in which there can be a legitimate expectation of building foreign investment. There has to be a strategy around that in the region. I think that needs to involve more stakeholders. It should not simply be a question of asking why IDA Ireland is not bringing more visits to the area. In the case of each region, a strategy needs to be developed that assesses the competitive advantage of that region and focuses on the elements of foreign direct investment which can build into that. Similarly, there is a need to look across the region. Enterprise Ireland, which is strong in many regions, has a much better regional spread.
In this context, there is a need to look more strongly at the existing base of companies. IDA Ireland has been doing this in the last 12 months, in particular. Perhaps that is reflected in its numbers. Approximately 70% of new jobs come from the existing base of companies. We need to work on the base of companies that we have at regional level. We should look at how we can build services in each region to meet the needs of companies that are already in the region. I accept that there is a need for a broader regional enterprise strategy. The sole focus should not be on IDA Ireland visits or IDA Ireland jobs, as if that represents the entire sum of what a regional strategy is about. The short answer to the Deputy's question is to assure him that a review has been commissioned. In addition, we must start to look at how we can shape a better regional strategy across all of our agencies and embrace stakeholders that are outside of our agencies.
The Deputy asked whether there are difficulties with the way IDA Ireland spends its money. I have no reason to believe there are difficulties in that regard. IDA Ireland has a strong system of evaluating the added value that companies bring. I have seen that in the past as well as in more recent times. IDA Ireland builds into its grants a requirement to surrender funds if targets are not delivered.
Yes. With regard to the county enterprise boards, the outturn was €18.18 million. That is the capital budget going to firms. The estimate for 2014 is an increase on that.
It is almost €18.2 million. Consultancy spending by IDA Ireland came to €740,000, out of a total of €17 million in its non-pay budget. I can assure the committee that IDA Ireland oversees offices in the BRIC countries. It has 17 staff between the Asia-Pacific region and its growth markets overall. It has a target of getting 20% of its greenfield investments from those growth markets. Those staff go beyond the BRIC countries. They work across a range of countries, including Singapore, Korea, Japan and Australia. They are moving closer to the long-term target of 20%.
The IDA announced a number of property solutions for Waterford, Athlone and Letterkenny. Waterford and Athlone are important regions for the pharmaceuticals sector. During the period when the property sector was strong, there was significant willingness to build without IDA involvement. The agency views the property issue from the perspective of need and intervenes where it considers a region's offering needs to be fortified to continue to win investment. It will act if there is tightness in the property market and an opportunity arises on which the market is unlikely to deliver. I expect it will continue to pursue this type of strategy, rather than one based on the old concept of "build it and they will come", in other words, advance factory building. This approach will no longer work because companies must consider a much wider range of factors than was the case previously when the type of employment involved was largely lower skilled, assembly type operations. At that time, advance factories were obviously a critical success factor but property is no longer as much of a success factor as companies must consider a wider range of issues before locating here. Although it no longer has quite the same allure, property is still important in certain sectors.
There is a particular tightness in the office market at present, especially in Dublin. The IDA is working with the National Asset Management Agency and Dublin City Council which is developing a special development zone in the docklands. There are areas where a requirement for property needs to be met. The IDA will also weigh need against the potential of the market to deliver in cities such as Cork and Galway. The agency's property manager will assess what is likely to emerge in each of the various cities relative to the pipeline of investment and try to ensure it remains one step ahead. That is the basic approach.
Deputy Kyne also asked about the Ireland House concept. This approach has proved effective and is used wherever it can be developed. It is under constant review to identify where we can obtain greater added value. Enterprise Ireland has successfully co-located with Irish embassies in 16 of its overseas locations. In six of its remaining 13 overseas locations, it is co-located with one or other of the remaining State agencies. We seek to achieve co-location and moving towards a form of Ireland House arrangement. As the Deputy is probably aware, the ambassador in each country chairs a cross-agency group to ensure an integrated approach is taken by the Irish presence in the relevant market. This means Bord Bia, Tourism Ireland, Enterprise Ireland, the IDA and so forth operate as an integrated team under the ambassador. This approach has proved to be a successful instrument, even in cases where there is no physical co-location.
As the Minister indicated, the dissolution of Shannon Development is a major target for the Department this year. What is the current asset value of Shannon Development? Will these assets transfer from the parent Department to the new Shannon Airport Authority? What precisely is envisaged in this regard? What is the annual rent roll of Shannon Development? How much of the company's rental income and assets will transfer to the Shannon Airport Authority? Where will assets and liabilities that are transferred find a home? Which Department will be responsible for Shannon Development's pension liabilities when the dissolution has been completed?
I will have to revert to Deputy Calleary with precise figures on asset values. The approximate value is €70 million and the company's rent roll is approximately €9 million. Most assets will transfer to the Shannon Airport Authority although the IDA, whose property management role also extends to Enterprise Ireland, will acquire some assets that are core to the industrial development strategy. I will revert to the Deputy with details.
The pension liabilities will transfer to the Department and will, therefore, reside with the Exchequer, although they will form part of my Department's Vote.
An internal audit review was done on the pilot competitive feasibility fund for the south east region in June 2012. The subsequent report picked up some relatively minor issues about the fund, noting, for example, that some companies that received a grant under the fund were not eligible for funding as they were not based in the region. Have the issues raised in the report been addressed? I submitted a parliamentary question to the Minister on this matter. Will he confirm that the issues raised and findings of the report were addressed?
How much did Enterprise Ireland pay out to client companies in the most recent year for which figures are available? How much does it anticipate paying out to client companies in 2014? Will the Minister outline what presence IDA Ireland has in the BRIC countries - Brazil, Russia, India and China - including in respect of staff numbers?
On the services available to entrepreneurs and start-up companies, I learned this morning of a new scheme that is linked into the universities. Perhaps Enterprise Ireland should examine this scheme.
What is Enterprise Ireland's capacity for sourcing funding under Horizon 2020? We have set a target of securing €1.25 billion under the strategy over the next seven years. Does Enterprise Ireland have the capacity to deliver on that target?
It is vital that the funding allocated to local enterprise offices is not only maintained but increased because the LEOs have a central role both in mentoring and job creation by small companies.
What will be the precise financial relationship between Enterprise Ireland and the local enterprise offices? Has Enterprise Ireland's budget been increased while funding for traditional enterprise boards is being decreased? Will the Department of the Environment, Community and Local Government have a role in funding local enterprise offices?
Are details available on what funding is available from Enterprise Ireland for venture capital investment in different funds?
May we have a breakdown of what funds are available in Enterprise Ireland? I am aware of a female entrepreneurship programme, investments for growth and a whole range of funds in Enterprise Ireland and, perhaps, we could have a breakdown of what funding is available for 2014 for those programmes.
I have always had a concern about the LEOs and what will be different about them as we move from the present structure to the new structure. One of the issues I would like considered is the possibility, as opposed to having an office in a particular area, having more engagement in the region to stimulate activity and get more feedback into the system.
In the country regions. Currently they are more in the urban areas and I am trying to get them out to areas where there are more activities in, perhaps, smaller towns. If there was a sub-office which was manned during a particular time per month where local businesses could come to get information and create activity perhaps that would feed back into the system. My colleague has mentioned mentoring, which I have been championing for some time. As Forfás has carried out a report may we have an update on where we are with that?
Starting with the south east, Enterprise Ireland identified two companies which had received approval for grant aid without fulfilling the conditions laid out in the scope of the scheme. Company A's stated intention was to sell off the company after phase 2 clinical trials, company B's application did not make any forecast of jobs to be achieved and the said forecast did not meet the scheme requirements. It found that the valuation documentation was inadequate. This was a pilot scheme launched in the south east. The object was to assist new start-up companies and individual entrepreneurs. Some 14 companies were approved for funding under the scheme, five fully completed the study while a further five are in the process of completion. In both cases the evaluation team deemed the application to be of sufficiently high quality to be awarded the funding, particularly as regards their development and employment potential. While the applications in question did not fully meet all the relevant criteria they did meet all legal-based eligibility criteria with regard to the awarding of funding by Enterprise Ireland. To date one of the companies has drawn funding of €10,000.
Enterprise Ireland acknowledged that there were shortcomings in the pilot scheme. These have been addressed in a subsequent roll-out of the programme, specifically via clearly defined terms of reference which details eligibility criteria, evaluation criteria and the involvement of external evaluators. Enterprise Ireland has subsequently rolled out the competitive feasibility funds to the north west, north east and midlands. The lessons learned from the pilot scheme and the audit report have fully informed the more robust procedures and strengthened criteria that are now in place for these schemes.
The internal audit did its job in terms of the way it worked. The value of Enterprise Ireland payments and the capital was €36 million outturn. The allocation for 2014 is €49 million. There are issues, obviously, around timing of grant or draw-downs and there is a €3 million carryover.
Enterprise Ireland's presence in the BRIC countries includes 33 personnel in the Asia-Pacific region. While south Paulo is included I will have to find out the staff numbers there. Some 33 are spread across Shanghai, Beijing, Hong Kong, Singapore, Tokyo, Sydney, Seoul and New Delhi.
I presume Shanghai, Beijing and Hong Kong are to an extent. We do not have a number but I will get it. Deputy Anthony Lawlor makes a good point. We have tried to have a compendium of what is available across our agencies but the point is well made that Enterprise Ireland could have a simpler source document for the uninitiated as to what is available. Many of these schemes have developed names which are great if one knows them and they mean something if one knows them. If one does not know them and sees the name they do not mean anything. One of the things we are doing this year, not just across my Department but across the wider Government, is to have a communications strategy to make it easier for people to access. The creation of the local enterprise offices will be a part of that. I will invite the Minister of State, Deputy John Perry, in on that issue.
The local enterprise office is innovative in trying to start a first-stop-shop for everyone and local government will bring in its business service units. Therefore, there will be integration of the business service units of the local authority with the local enterprise offices. We are protecting the resource of the enterprise offices and adding the resources of the local authority. We hope it will be a bigger resource as well as doing new things. LEOs funding, which I supplied already, comes directly from the Department's Vote.
In 2012, venture capital provided €80 million in funding across 140 companies. That has been a significant improvement on previous years and it is performing better. I would hope that the 2013 figures, when they become available, will show a continuation of that trend. They will not be available until later in the year.
It is a fund. We put up so much money and we get matching finance. It paid €100 million, effectively, to a number of venture funds. What happens is that they have to raise the matching finance. They put up the right funding from that fund over a period of years. Therefore, a fund is available, for which I will be able to give the amount, which, generally speaking, is about four times the amount we put in. It is a fairly significant fund but its draw-down is only reported annually at present. I think we should increase the frequency of reporting of that in order that we get a better handle on it. Once the fund is available it then depends on the project flow. It is privately managed. It is managed at arm's length from Enterprise Ireland and that is true of the other funds. Of course, Enterprise Ireland manages its own investment as well. The Minister of State, Deputy Perry, will deal with the LEOs' involvement in the regions because he has been intimately involved with that initiative.
To complement what the Minister has said, I visited several counties, including Mayo, where I got a very good reception. On the issue of what the local authority would bring to the table I take Mayo as an example. The development and implementation of the local enterprise plan will be formulated by the Minister for the Environment, Community and Local Government, Deputy Phil Hogan, through the local government input into the county development plan and the development of a partnership with the relevant agencies North and South. I met the chairman of InterTradeIreland and it is anxious to work closely with the local authorities. The promotion and marketing of local areas as a location for investment, as the Minister has said, is done in conjunction with the appropriate national body, IDA, We have a very effective service level agreement with Enterprise Ireland. With the concept of a regional plan, a county plan can feed into the IDA plan and identify and develop projects and programmes, leveraging resources to implement these programmes and funded from non-core resources.
There will be other non-core funding as well, such as the management of the local authority enterprise infrastructure, enterprise parks. I had the occasion this week of launching a report entitled The Impacts of Community Owned Enterprise Centres. There are over 120 of these centres, spread through every county. They set up in locations where the IDA will not set up. I have distributed a copy of the report to every Member of the Oireachtas. It indicates that there are 3,500 jobs in community-owned enterprise parks. They will have a critical role in this as well.
While they will be based in the first-stop-shop for business they will incorporate the county. This is a county development plan. From next June there will be significant autonomy at local level and local authorities will have an input into assisting in the development of the county economic strategies, as proposed in the local government reform programme. Local authorities will engage directly with businesses in difficulty to develop payment plans, for example for commercial rates. They will have the possibility of giving a derogation for vacant properties. I am very impressed by the meetings that I have had around the country with county managers and the county enterprise board directors.
I know that mentoring is close to Deputy Collins’ heart. There were 1,473 training courses; 4,824 clients were mentored and there were 89 management development and growth programmes. As the Minister said, we have got an increase on the capital allowance which the Department will ring-fence. Local government will bring in staffing and expertise.
I had a very good day in Mayo where I met all the agencies. As Deputy Calleary is aware, they are up to the game. We are at a very advanced stage. The Minister will announce the kick-off date for this work but we are pushing at every possible level to get these enterprise offices open. The first first-stop-shop will open very shortly.
I am very optimistic because I believe in the role of local government in business, and integration of this Department, with start-up companies, community enterprise parks and formulating a plan for the IDA and Enterprise Ireland. I will send a copy of the service level agreement to every Member when it comes into the Chamber. It covers general business advice, information on rates, planning and licensing. The Taoiseach has been pushing very effectively for the integration of licensing on business. We have carried out a review of all licences operating in business. In the retail trade alone there are 15 different authorities and 28 licences. From the third quarter of this year there will be a single portal where one can get all one’s licences. Much of that has been worked out. People will deal with SOLAS, the Companies Registration Office, the Credit Review Office and other services, including Údarás na Gaeltachta, the Western Development Commission and Fáilte Ireland, and get advice and information for local business on assessing public procurement, which is a big issue – I hear it all the time – advice on energy efficiency, sustainable development and alternative renewable energy. The service level agreement agreed by the Minister with Enterprise Ireland is a very good document and Julie Sinnamon is determined to ensure that it will be a working document. Eugene Forde of the enterprise development unit in the Department is here with us. We look forward to the opportunities that the roll-out of this service will bring in 2014.
Where is the money in the service level agreement? Does it come from Enterprise Ireland or from the local authorities to Enterprise Ireland? The budget for the old county enterprise boards was within the Department for Jobs, Enterprise and Innovation. Will that money be in Enterprise Ireland, or in the Department of the Environment, Community and Local Government?
I acknowledge the work that the Minister of State is doing around the country. We are always up to the game in Mayo, especially when a man from Sligo comes with money.
From this Department’s Vote. We expect the grants in 2014 to be €18.5 million. We spent €18.18 million in 2013. It is totally ring-fenced within this budget and the service level agreement. We hope to complement enterprise promotional activities by local government. There are many other schemes that will complement it. We hope that the activation of the micro-finance fund, about which the Minister will speak, will be far greater through the local enterprise offices. One will not need a refusal from the bank to apply. I have spoken to several county enterprise boards and they welcome this additional source of funding, joint funding by the State to start a business.
There will always be continuing issues in the integration. The approach we will take is to set them up in phases so that those in the strongest position can hit the ground. There are problems to be ironed out. Our Department is working intensively with Enterprise Ireland and the local authorities to iron those out so that we get a good start-up.
Deputy Lawlor raised a question about Horizon 2020. The Minister of State, Deputy Sherlock, negotiated a higher SME proportion in Horizon 2020. The recent flow of companies within Enterprise Ireland taking up research and development is somewhat short of where it might be but that resulted in a delay in the capital management process in 2010, which has been reflected in a slower draw-down. The opportunities are there and Deputy Sherlock will deal with that when he makes his presentation on the innovation side.
That would be great, thank you.
I am conscious that our proposed timetable has pretty much gone out the window at this stage. I hope everyone is happy with that.
We will now consider subhead A8, county enterprise development.
The Minister of State, Deputy Perry, has answered many of our questions on that section. As the county enterprise boards come to the end of their existence I acknowledge the great work they have done. I am still not convinced and am concerned about moving Enterprise Ireland into that space because, while it is an excellent organisation, its interest is firmly in companies that want to export. I know the Minister of State is working hard on this but I am concerned that we have a home for companies that want to get on with being in business. They are not sexy. They are not high-potential start-ups, HPSUs. They just want to open their doors, employ people, provide a service in a community and get whatever support they can. As we come to launch the LEOs that should be to the fore of people’s thinking, companies that have no export potential should have a home and support within the State organisations.
We are very clear on this. The centre of excellence will lead, develop and manage. We know only too well that 98% of the economy is driven by 200,000 small companies. They are the backbone of the economy. While we all welcome foreign direct investment, the enhancement of the support service generates innovative small and micro-enterprises. That is why Enterprise Ireland is very committed to promoting innovation in its approach to supporting start-ups, entrepreneurship, developing the capability of the LEO network to set best-in-class standards and a lead role within Enterprise Ireland for the development and review of the service level agreement. This will not be just a change of name. The emphasis will be on the economy and small start-up companies. I have seen them. When I was in Enniscorthy last weekend I saw extraordinary companies employing two and three people which have immense opportunity with the development and oversight of metrics, the quality of local business development and the development of a common approach to mentoring and mentor management.
Enterprise Ireland has taken Deputy Collins's document on board and I have spoken to Julie Sinnamon. Considerable consideration has been given to the service-level agreement. The first-stop shops will promote interaction with local government. I refer to companies with the potential to be start-up companies as manufacturing or service companies. We are encouraging start-up companies and we are working with third level institutions such as GMIT, Castlebar, for example. Mayo will be one of the first out of the traps and we hope to have more counties in the following weeks. I am very optimistic. I have seen the service-level agreement and I know the commitment of local authorities and the staff in the enterprise centres. The purpose of this Government is business in local communities, villages and towns. A sense of enterprise is needed in smaller towns in every county. I assure the Deputy that Enterprise Ireland will make this a priority and action will be taken.
Enterprise Ireland has restructured and changed its local-level operations and it will provide training and a customer charter. The focus will be on delivery on-site. New instruments are being developed such as microfinance which is available for both the export and non-export sectors. Mentoring will be provided. We will maintain control of the policy to ensure that the policy intentions are delivered.
We will consider subhead A9, monitoring and evaluation of EU programmes; subhead A10, INTERREG enterprise development; subhead A11, National Standards Authority of Ireland; and subhead A12, temporary partial credit guarantee scheme.
What is the target for lending in 2014? The temporary guarantee scheme has provided €10.3 million in 15 months which is way lower than was presumed. The Minister undertook a review of the credit guarantee scheme. Is the target still €150 million? What is the target for 2014? The microfinance targets are way below expectations. Microfinance Ireland came before the committee a few weeks ago and its representatives were very impressive and focused on improving the target result. The Minister for Finance announced on budget day that an information campaign would be in place in 2014 to publicise the supports available for business yet the Department's promotional budget has been cut by 17%. This scheme needs to be publicised more effectively because people are either unsure of it or they do not know enough about it. Is the target of €150 million still a possibility?
I commend and welcome these initiatives by the Leader programmes and by Enterprise Ireland in the small business sector. However, there seems to be an issue in getting people to draw down funding from Microfinance Ireland, although I acknowledge it takes time to become familiar with such initiatives. This is the case with the temporary partial credit guarantee scheme. The message does seem to be getting across to potential enterprises that it is all right to try and to fail and to try again. I refer to the Cork Foundation which has raised funds and it is not as bureaucratic as some Government initiatives. People who want to start up a business tell us they find it difficult to access help. It seems we are all so involved that we do not see that the information is not getting out to those who need it. On a recent visit to Brussels we were complimented about the great work of this Department and its civil servants. It is important to acknowledge the good work which is being done. Ireland draws down more EU funding than any other EU member state.
I acknowledge this is a new area. It takes more work when one is starting from scratch. We are trying new methods. We have had a series of meetings with the banks to seek to ensure that microfinance and our loan guarantee are considered immediately by an applicant who has been refused a bank loan. We have removed the requirement for a paper refusal. We have worked with the banks to see if a better response rate could be achieved if the banks were to highlight the alternatives to customers. In tandem with Microfinance Ireland we are working to achieve a better take-up. The local enterprise office system will be part of this scheme as will better protocols with the banks. While Microfinance Ireland has changed its view of what will be the size of the potential market, it is still very ambitious for it.
Deputy Calleary makes a valid point about the importance of promotion. The Department is considering ways to promote the scheme more effectively. The target for the loan guarantee was not changed but we hope to make changes this year in the terms of the scheme. This will require primary legislation and the Oireachtas has the right to oversee any guarantee we offer. We will be returning to the Oireachtas looking to make changes in light of experience so that it can be more effective.
I continue to meet regularly with the Credit Review Office in order to understand its experience. There is no doubt that this type of scheme can play a role in finding solutions to viable companies which the banks for one reason or another will not fund. My Department and the Department for Finance and the other stakeholders in the finance group are looking at a set of initiatives to be in place for 2014.
In light of Deputy Collins's observations, the Credit Review Office is still hopelessly underutilised. It has a current limit of €3 million and only 3% of cases of refusal are being appealed in any shape or form. Only a subset of those cases come to the Credit Review Office yet it is turning over nearly 60% of the cases that come its way. There is a case for the Credit Review Office being more utilised by people who believe they are being treated unfairly.
On the positive side, the latest survey by RED C in replacement for Mazars, shows that the rate of refusal by banks is falling, which means there is an improvement in the rate of approvals. Approval is much more difficult in the non-pillar banks and this continues to be a problem. My staff in the Department and everyone else, including myself as Minister, are working hard to sweat this area, so to speak. We are hoping to get the most from the schemes and to improve them. It is a work in progress.
I agree with the Minister. However, by the time people are refused by the bank they baulk at the thought of going to the Credit Review Office. They seem to give up. I ask if the system can be activated at an earlier stage. We had a conversation in Brussels about this problem.
On the one hand, we are telling the banks to lend money and, on the other, telling them they must submit to tighter regulation and be more risk averse. Is there scope for new, more innovative methods of financing?
One of the innovations I would like to see is an arrangement whereby businesses could include in their application for finance an agreement that their case could be reviewed independently by the Credit Review Office. This would allow us to examine at least a subset of the applications that are being refused without the appeals process being triggered, to see whether a significant number of good applications are being rejected. That would give us a better insight into the potential that is there. We are willing to consider any way in which we can achieve better insight and tools that will allow us to respond more effectively to the demand that exists.
It is possible if certain changes are made, otherwise one gets into data protection issues. If applicants were to indicate their willingness to participate at the outset, it could be done. We are considering that as a potential action for 2014.
We will move on to subhead A13, subscriptions to international organisations. Are there any issues in regard to this subhead? No. Do members have any issues to raise in regard to subhead A14, commissions, committees and special inquiries? No. Do any issues arise in respect of subhead A15, legal costs and other services? No. Is subhead A16, export credit insurance and refunds to the Exchequer, agreed? Agreed. That concludes our consideration of programme A.
We now move on to programme B, innovation. I ask the Minister of State, Deputy Sherlock, to make a brief introductory statement.
The Government remains committed to the vision of using research and innovation to generate jobs and growth. That is the fundamental philosophy underscoring our efforts in this area. The 2014 science and technology programme budgets have been maintained at the 2013 levels, which will support this goal. Within the constraints of our economic circumstances, we are maximising the funding available for research, development and innovation and, critically, seeking to maximise the impact of this investment on jobs and the economy. Evidence from both the EU and internationally shows that the Government's strategy of accelerating the economic and societal return on our science, technology and innovation investment is paying off.
We are first in Europe for jobs created in research and development and tenth out of 142 countries under the global innovation index for 2013. Ireland is in 13th position for university-industry collaboration on research and development. We are in the top 20 in global international scientific rankings, first in molecular genetics, second in probiotics, third in immunology, sixth in nanotechnology, eighth in material science and tenth in computer science. We are ranked third in the EU on the new indicator of innovation output, which measures the extent to which ideas from innovative sectors are able to reach the market, thereby making Europe more competitive and helping to create jobs.
The provisional figures indicate that the target to support 100 high-potential start-up businesses in 2013 has been exceeded. These businesses have committed to creating a total of 2,100 new jobs and will generate annual sales of €300 million by 2015. The seven new Science Foundation Ireland research centres established in 2013 will directly support 800 jobs and are a key attractant for foreign direct investment. In 2013, Science Foundation Ireland had links to 65% of the 3,085 jobs announced by IDA Ireland in the fields covered by SFI's legal remit. We will continue the implementation of research prioritisation as well as a range of other initiatives to deliver on our strategy, ensure a more targeted investment of science, technology and innovation, and further enhance the effectiveness and impact of our research investment, with the aim of sustaining and creating jobs across the sectors to which I referred.
This year, Science Foundation Ireland will establish two to three new large-scale research centres, which will support between 200 and 300 jobs in sectors of national strategic importance, such as medical devices, software, diagnostics, telecommunications, smart grids, and sustainable food production and processing. SFI will also fund 3,000 researchers and more than 20 world-class research centres in 2014. These are a key magnet for foreign direct investment and will help to ensure Ireland becomes one of the most attractive locations in Europe and globally in this regard.
Enterprise Ireland will support 95 high-potential start-up businesses in 2014 which, as I said, will yield 2,100 jobs across a range of sectors. We are also working hard on driving greater industrial and academic collaboration. Enterprise Ireland and Science Foundation Ireland will continue to promote and drive effective collaboration between the two. The main driving force for this is the translational impact from research into economic activity.
Does the Vice Chairman wish me to address the individual subheads?
If I understood the question correctly, it related to the various programmes that exist across the institutes of technology, through Enterprise Ireland and so on. There is significant potential under Horizon 2020. The negotiations on the €80 billion package were concluded during the Irish Presidency, an effort to which the team that is behind me today was integral. Through Enterprise Ireland we have set up a national support network which will includes most of the State funders of research, including the Environmental Protection Agency, Sustainable Energy Authority of Ireland, Health Research Board, Irish Research Council, Enterprise Ireland and Science Foundation Ireland. What we have here is a set of national contact points which will liaise with the institutes of technology and with individual entities within the universities. These are the go-to contacts for industry and academics.
We are targeting an increase in regard to the number of small and medium-sized enterprises that are engaged with programmes like Horizon 2020. We have raised the bar up to 20% engagement in terms of a drawdown of funding. The funding target is some €1.25 billion, which should present significant opportunities for the SME sector.
We will now deal with the individual subheads. Are there any issues in regard to subhead B3, Irish Patents Office? No. Do members have any questions in regard to subhead B4, science and technology development programme? No. Do any issues arise in respect of subhead B5, programme for research in third level institutions? No. Are there any questions in regard to subhead B6, subscriptions to international organisations? No. Are there any questions regarding subhead B7, commissions, committees and special inquiries? No. Do members wish to comment on subhead B8, legal costs and other services?
This subhead is critical. As I understand it, only research moneys can be put through the third level institutions. There are issues arising in regard to intellectual property rights and so on. In the United States, it is much more a case of get the research done, turn it over to the market and create the jobs. In this country, there are different concerns on the part of different colleges.
We have put in place a technology transfer strengthening initiative, TTSI programme, which is funded through Enterprise Ireland, and there are technology transfer offices within the individual organisations. The national intellectual property protocol deals with how industry engages with academia in terms of collaborations and how it mines that intellectual property. There should not, therefore, be any ambiguity for anybody who wants to talk to an institute of technology or university in regard to mining those types of opportunities.
There are clear protocols in that regard.
The major challenge, which Deputy Lawlor touched on, relates to how we encourage those in the SME sector, particularly those who own small and, quite possibly, intergenerational businesses, to engage with the institutes of technology in the context of innovation partnerships or innovation vouchers. There may be a job of work to be done in the context of improving the profile of innovation vouchers among small businesses, particularly in the context of their value. The LEOs may be the means by which that could be done. I do not wish to be parochial but I am aware of the intimate workings of the system in Cork and I know there is quite an advanced, if informal, network in place which allows businesses to interact with Cork Institute of Technology, CIT. However, I am not sure whether this is replicated throughout the country and there may be a need for work to also be done in this regard.
The net point is that larger corporations will have relationships through the Science Foundation Ireland, SFI, research centres and the technology gateway centres. The relationship in this regard is quite formalised and deep. We want to encourage the participation of more businesses which would not have interacted on this level. Such businesses could, for example, be operating in the light engineering sector and could be intergenerational in nature. Those involved with firms of this nature may be extremely intelligent people who may not have gone through the formal system of third level education, but they are still running great businesses and they possess major skill sets. These individuals may not be thinking about growing their operations in a particular way or about moving in a direction which will facilitate new innovations. There is an opportunity for Ireland to improve its position in the context of this sector.
We must ensure there is a greater knowledge among people with regard to the potential of innovation vouchers. There are those who may argue about whether the level of take-up in respect of the innovation partnerships has been sufficiently high. The position with regard to take-up may relate to people aiming for the top end, maximum amount of €250,000 rather than for the minimum amount of €50,000. The latter amount could, of course, have as much of an impact as the former in the context of the industry or SME academic partnerships which are driven by Enterprise Ireland.
A very good meeting took place this morning involving people from NUI Maynooth and the prospects regarding the commercialisation of research. NUI Maynooth is linking with technical colleges in Athlone, Waterford and Carlow to create a hub. The aim of those involved is to source funding through Horizon 2020. The greatest difficulty they are encountering relates to the matter to which the Minister of State refers, namely, SMEs and universities becoming involved in research together. Perhaps it might be possible to examine that matter.
It costs nothing for the owner of a business to contact his or her local institute of technology or technology gateway centre. I have with me the Technology Centre Expo 2013 booklet, which acts as a very good guide to the technology centres that exist within the institutes of technology, for example. Those centres are natural gateways for industries involved in a range of sectors, from the production of food right through to medical devices, to come on board. The key point is that the system relating to more well-established or technology-driven companies is quite advanced. What we are concerned with here is trying to get those who operate small or medium-sized businesses to start considering how they might obtain access to the information that is available. As stated, it costs nothing to get involved in a conversation. It could be argued that the walls are impenetrable. However, I am of the view that those walls are being broken down quite quickly. The Deputy would be surprised by the number of people who attended the launch of Horizon 2020. I met a man from my region who is a painter and decorator by trade and who was present at that launch to examine a business opportunity. There is a new confidence among people but we need to do more to drive business forward.
I absolutely agree with the Minister of State with regard to trying to encourage smaller businesses and, perhaps, start-ups to move into the area of innovation. He is aware that I live in an area which is similar to that in which he resides. In that context, he will also be aware that the value of innovation vouchers for universities, in terms of processing them and so on, is quite limited, particularly when the level of research involved is taken into account. Perhaps that matter might be examined in terms of making the position with regard to vouchers more flexible. For example, would it be possible for the colleges to receive the money directly? I am not familiar with the entire process but it seems to be somewhat cumbersome, especially for those with small businesses. I accept that €5,000 is a great deal of money and that there is a need to manage the system properly. However, perhaps a more flexible approach might be taken.
People's experience with regard to innovation vouchers will be different. If a voucher is not working in a way that suits a particular company that is trying to drive innovation and if it is agreed, in principle, that there is scope for new innovation, then one would argue that Enterprise Ireland's suite of supports should be bought to bear in respect of that company in any event. I accept the point and it is important that Enterprise Ireland should analyse the output relating to innovation vouchers. That is certainly something which can be done.
The Commission is proceeding with the establishment of approximately 35 intergovernmental research hubs throughout Europe. A number have been set up, one of which can be located in northern Italy. These hubs are focusing on various topics within the field of research. I just want to discover whether Ireland has actively pursued the establishment of such a hub here. The one that was highlighted to members is in the area of the marine.
The Government, through Science Foundation Ireland, has effectively done a deal with industry whereby it will provide €100 million in funding and the taxpayer will provide €200 million to facilitate the roll-out of research centres. The work at one of those centres specifically relates to marine renewable energy. This will be a world-class research facility.
If we were to attract one of the hubs to which I refer, then Ireland could be the pan-European centre for marine research. The funding for it would come from the Commission rather than from the Irish taxpayer. As stated, it is proposed to put 35 such hubs in place throughout Europe. The strong hint we got at our meeting is that there is huge potential in the context of research into marine renewable energy. It would not just be Ireland that would be involved either. The hub would be operated on an intergovernmental basis. We reached the conclusion that a hub of this nature could be a source of job creation, particularly in view of the fact that it would attract researchers from across Europe.
We are also involved in the European Commission's Atlantic strategy, which was launched by Commissioner Geoghegan-Quinn and the Taoiseach. This strategy relates to evaluating the Atlantic's potential in the context of renewable energy and would involve countries collaborating with each other.
I take the point that has been made. There are knowledge and innovation communities and various themes that have been negotiated through Horizon 2020, in particular one in which we had a specific interest that related to food and that will be rolled out soon. Countries will have to collaborate with each other along those themes anyway. In respect of Horizon 2020, those research centres will be rolled out with the idea of leveraging greater funding from the EU because of their size. By creating those economies of scale and forcing more academic institutions to collaborate with each other along thematic lines, large entities are being created that will be able to leverage opportunities from Horizon 2020 from an €80 billion fund along those themes to which the Deputy referred. In view of the two jurisdictions, we are working very closely with Northern Ireland and InterTrade Ireland to enable those concerned pitch for that kind of funding as well. There are opportunities there. I would like to know to whom the Deputy spoke.
Is it possible for companies in Ireland to come together and set up their own institute or does it have to go through a university or institute of technology to draw down funding for research? My understanding is that it is not possible and that we are one of the only countries in Europe that has that scheme. In other countries, companies can collaborate and set up a research institute.
The system in Ireland is based on academic institutions. There are other models like the Fraunhofer model in Germany which act as stand-alone entities. We have the Tyndall National Institute but it is aligned to an academic institution. I am not sure how to answer the Deputy's question other than to say that if a company is innovative and arguably has a relationship with a State agency, the chances are that if it is going to look for funding, it will already have a relationship with one of the State agencies and will find its way to one of the Enterprise Ireland or national contact points to seek those opportunities to draw down funding as per the SME targets about which I spoke earlier. The company will already be alive to those opportunities so we do not think there is any need to change the model in that sense.
I have documents that I can send to the Minister of State. We are the only country in Europe that has this model. Perhaps we could explore it and look at where people want to come together and set up their own research hub or institute - they are not even in the same sectors. They are existing but the problem is that they must be aligned to universities to draw down the money.
If one looks at Food Health Ireland, one will see there is an alignment to a number of academic institutions. The reason why it works here is because we have cross-collaboration between different academic institutions. There can be more than one academic institution mapped on to a theme, which is normally the case. If one looks at Teagasc in Moorpark or Alimentary Pharmabiotic Centre in University College Cork, one can see that a number of State entities and a number of different and competing industrial partners are involved in that. There is a mechanism to allow them to share knowledge, which is arguably a better model because it results in greater economic activity for Ireland at the end of the day. Most companies will already have research arms with their parent companies. The model we have in Ireland is one of Government collaborating with industry and it works.
We will move on to programme C. Does anybody have any questions to ask or points to make in respect of any of the subheads in programme C? I will not call each of them out this time. Could members call out the subhead before they ask the particular question so that the Minister can respond to that?
This is a priority for drafting and we are working very closely with the Office of the Parliamentary Counsel. We have a legal resource on board to help us accelerate it. It is substantial legislation so I do not want tie myself to a particular date. We are focused on it as one of our top priorities and it is on the A list. We have brought in resources to speed it along. In my experience, there has always been difficulty getting from the legislative concept to the produced Bill but I assure the Deputy that we are working as rapidly as possible on that Bill.
Apparently, it is funded by a levy the industry pays. When a lump sum of this nature occurs, it comes from the Department. That is where the lump sum arises from. It is a small provision of €55,000 but when an amount of this nature comes to be paid, it appears this way. I can get a note on it for the Deputy.
Are there any final comments or questions on programme C?
We can now move on to appropriations-in-aid. Are there any comments, questions or statements? Finally, we will go back and review the provisions being made for administration under each of the programmes - jobs, enterprise development and innovation and regulation. They were items Nos. 1 and 2 in programmes A, B and C.
We have made up a lot of time. Does the Minister have any closing remarks to make before we conclude?
I thank the Chairman for his support on this. The committee is always very constructive in its input. We have picked up a lot of good ideas from the committee and based on the committee's understanding of the enterprise sector, an understanding of where the boot is pinching. We find these engagements very useful and I express our appreciation to the committee for its work.
I thank the Minister. Do any of the members have any final comments or statements to make?
I again thank the Minister, Deputy Bruton, and the Ministers of State, Deputies Sherlock and Perry, and their officials for attending today's meeting of the select committee.