Oireachtas Joint and Select Committees
Wednesday, 3 November 2021
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
Challenges to Ireland's Competitiveness: Discussion
Mr. Oliver Gilvarry:
On the question relating to the three policy changes, the first concerns productivity research. The council’s mandate and name were changed in 2018 but, from a State or Government perspective, we need to consider more how we are promoting productivity and what changes need to be made. This relates to other questions asked on the high levels of productivity in our multinational sector and the position in the other sectors. Along with examining how we can promote productivity, we must examine how the climate agenda will have an impact on productivity and competitiveness. This relates to the Deputy’s last point. We must ask how we can use the climate agenda to boost productivity. With regard to the focus on the climate internationally, a country can be a climate tech importer or exporter. Climate change is happening. As we can see with COP26 over recent days, the carbon agenda exists, it is not going away and we have to reduce emissions, but doing so will require technology. Countries may have to import it. Ireland needs to consider how it can be an exporter, be it through linking in on the manufacturing side with wind turbines, tidal power technology or other new ways of doing things. It all feeds into the productivity side, and we need to focus on that more in Ireland.
Another point that comes across to me, from Government and Civil Service perspectives, concerns the use of data and how we are using our information and data to make policy decisions. It is a matter of trying to utilise the information across Departments.
This is linked to the third area of change. We are still seeing very high levels of Covid infection but we introduced many measures very quickly as we shut down the economy in March 2020. We adjusted them and had measures for both employees and businesses, but we need to learn the lessons from them and stand back to see what worked well and what did not. In the context of the challenge we highlighted regarding schemes such as the Covid restrictions support scheme and others helping businesses with fixed costs, we ultimately ended up with about six or seven schemes supporting different types of businesses with fixed costs, different pay-out levels and different criteria. We need to see what we can learn from this in designing such schemes to avoid replication. That is my initial view on the three policy areas.
On the issue of credit, we have highlighted that the exit of two institutions – KBC and Ulster Bank, one of which is relatively large – presents a challenge of concern on the competition side. Whereas Ulster Bank has a significant SME book, KBC does not. It is still a matter of concern that a small business starting off in the first stage must often rely on an overdraft from its retail bank. The loss of two players is an issue for smaller businesses starting off. I am referring not only to businesses of medium size but also to small businesses and microbusinesses. It is another loss for the latter.
The question of what the competitive banking environment in Ireland will look like with the exit of Ulster Bank and KBC is an issue. We were speaking about insurance earlier. Deputy Bruton mentioned that we do not have new entrants in the banking sector. The one positive is that we have seen several non-bank lenders come into the market. These are relatively small, but they are growing. They are seeking to provide credit to the Irish economy in various areas. When Ulster Bank and KBC leave, it will be important to have the non-bank lenders. We are seeing that the credit union movement is more involved in a few the loan guarantee schemes that have been launched by the Department of Enterprise, Trade and Employment and other Departments. This is an issue. It is a one that the Department of Finance’s announced review on banking needs to take into consideration. Whatever emerges from the review on the competition side will need to be acted upon quickly so we will not have quite high costs or high interest rates, or circumstances in which people cannot avail of credit to start their businesses. This does not apply only to standard SME loans. Somebody seeking to set up a coffee shop or start a new manufacturing business will often have to work from a personal overdraft.