Oireachtas Joint and Select Committees
Wednesday, 17 November 2021
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
Impact of the Withdrawal of Covid-19 Measures on Business: Discussion
I welcome members. In line with the exceptional circumstances, we are taking measures to deal with the Covid-19 pandemic. Members and all in attendance are asked to exercise personal responsibility in protecting themselves and others from the risk of contracting Covid-19. They are strongly advised to practise good hand hygiene and will notice that every second seat has been removed to facilitate social distancing. I urge them not to move any chair from its current position. Attendees should maintain an appropriate level of social distancing during and after the meeting. Masks should be worn at all times during the meeting, except when speaking. I ask for full co-operation in this matter. Any member participating remotely is required to do so from within the Leinster House complex. We have received no apologies from members.
The purpose of today's meetings is to discuss the impact of the withdrawal of incentives from enterprise. The committee is mindful of the range of incentives put in place over the past 18 months or so relating to the Covid-19 pandemic. These incentives have been instrumental in keeping many businesses operating during the pandemic with the prospect that they could recover following it. Budget 2022 contained a number of measures that involve the setting or altering of expiry dates for incentives to tie in with the lifting of most of the pandemic-related restrictions. However, the termination of these incentives will be a cause of concern for many businesses.
To discuss this issue with the committee, I welcome, from ISME, Mr. Neil McDonnell, who joins remotely, and from the Department of Enterprise, Trade and Employment, Mr. Declan Hughes, who is in the chamber.
I will explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. Witnesses are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. If a witness's statements are potentially defamatory in relation to an identifiable person or entity, that witness will be directed to discontinue his or her remarks. It is imperative witnesses comply with any such directions.
The opening statements from ISME and the Department have been circulated to members. To commence consideration of our matter, I invite Mr. McDonnell to make opening remarks on behalf of ISME.
Mr. Neil McDonnell:
I apologise for my absence from the committee room. I had indicated I would attend but I would be afraid I would pass on something nasty. ISME thanks members of the committee for the opportunity to discuss the impact of changes to Covid-19 and other incentives for business.
We wish to state how helpful the main employment supports have been in preserving the relationship between employer and employee during the pandemic. Despite the size of the schemes, we understand abuse of the pandemic unemployment payment, PUP, and employment wage subsidy scheme, EWSS, to have been relatively small. However, we are aware of reported cases of abuse of PUP by a small number of employers paying workers for services on a cash basis when those workers were availing of PUP.
The commercial rates waiver and the warehousing of VAT and PAYE liabilities, which are not normally counted among the enterprise supports, have also provided a substantial boost to the liquidity of businesses which are starved of turnover. We are aware of some members who have already started to discharge their liability as trading improves rather than leaving reconciliation out to the start of 2023. The local authority restart grant, restart plus grant and small business assistance scheme for Covid were well received and highly successful in assisting businesses which remained closed. After a poor start, the credit guarantee scheme has now made approvals of around €500 million or 25% of the funds available. The future growth loan scheme, which provides longer dated debt, has proven far more successful and been oversubscribed. We are glad to see a revised version of this on offer.
We see some problems on the horizon as we exit the pandemic. In terms of recruitment, general operatives for production seem to be very hard to recruit. One member reports no applicants for two months. They would previously have been processing approximately 20 applications per month. Businesses are looking for guidance on recruiting directly from abroad. We have directed them to the EU recruitment portal and are looking into other routes. This has always been an issue for employers such as nursing homes, in particular.
Engineers are proving very difficult to recruit. Employers are looking for guidance on the visa process for recruitment of persons from outside the EU, including processing times, appeal processes and so on. It is likely that employers will press for more occupations to be taken off the ineligible occupations list. Queries to date have been on issues including sourcing welders and metal workers, who are currently ineligible for visas.
There are ongoing issues with workers in the night-time economy, who remain concerned at the possibility of further lockdowns or restrictions. Of course, this submission was sent to the committee before the restrictions announced by the Taoiseach, so this problem is likely to exacerbate.
Recruitment difficulties appear to be a widespread phenomenon in Europe and the US. We believe it is a multifactor problem. Factors include a general reluctance to return to workplace settings during the pandemic; a liquidity-induced consumer spending boom that has stretched supply chains everywhere; Brexit-induced administration that has increased back-office demands in import and export; improving economic prospects in eastern Europe that are attracting their emigrants, who have been a traditional source of labour here, home and driving wage growth in those economies; significant amounts of state and private sector capital expenditures drawing human resources; and the cost and scarcity of accommodation making even highly paid employment in Ireland, especially in the cities, more unattractive.
From a return to work perspective, some employers are reporting employees who are reluctant to return to a workplace setting.
In other cases, employees want to return to work but offices are not yet properly set up to accommodate them from a health and safety point of view. We are also getting a lot of queries on the redundancy process, fair selection criteria, standard redundancy templates, levels of redundancy payments and so on. We see this as indicative of the scarring effects of the pandemic which are going to hit us after Christmas.
We are also receiving queries on changing terms and conditions of employment to reflect reduced working hours or working from home. We have ongoing reports of difficulties with unvaccinated workers and issues around the redesigning of work, objections from colleagues and so on. Substantial numbers of personnel working from home on a semi-permanent basis will have implications for employers’ liability insurance and for capital expenditure where companies need to purchase laptops instead of desktops and to adequately equip employees for a working from home environment.
While we are grateful to the Oireachtas for the speedy enactment of the Companies (Rescue Process for Small and Micro Companies) Act 2021, it has yet to be commenced. Since we are likely to see a significant number of SMEs becoming insolvent post pandemic in the first quarter of 2022, we would like to see the Act commenced as soon as possible.
Although this is slightly off-topic, I must register our concern at the rapid rate of inflation in wage and input costs, most especially energy costs. This input inflation is running at rates not seen for more than a decade and will have to be passed on by SMEs to the end customer or to business. It is also clear that insurance reform has stalled or, indeed, regressed. The ink is barely dry on the revised awards levels set by the personal injuries guidance committee of the Judicial Council in March but they are already being ignored by some members of the Judiciary. Thus, despite the fact that awards levels in the round are seen to be declining, employers’ liability and public liability insurance are increasingly difficult to secure and, in some sectors, quotations are not being provided for certain activities. These sectors typically include businesses involving physical or sporting activity, especially for children. The liability attached to operators is effectively strict liability and underwriters do not see them as an insurable risk at any price. We can no longer kick the can of insurance reform down the road and this must be an area of urgent focus for 2022.
Mr. Declan Hughes:
I welcome the opportunity to appear before the committee this morning to help with its discussions on the impact of Covid-19 and incentives for business. As we have discussed previously with the committee, the pandemic has represented a dramatic and unprecedented social and economic shock for Ireland and has required an immediate and swift response to help impacted businesses and workers. The Department of Enterprise, Trade and Employment has played, and continues to play, an integral role in the whole-of-government response to these generational challenges.
I will talk about Covid-19 specifically first. The financial assistance provided to businesses and workers affected by the pandemic through the Department of Enterprise, Trade and Employment and other Departments is unprecedented, as the committee is aware. We have worked closely with business representatives and worker stakeholders throughout the course of the pandemic to ensure that we have had the right range of advisory and funding initiatives at the right time and that these have been targeted and impactful.
We continue to see strong take-up of the range of Department of Enterprise, Trade and Employment-backed schemes available to businesses through the Department, the Strategic Banking Corporation of Ireland, Microfinance Ireland, the credit guarantee scheme and our various agencies. Many of these were approved as part of the EU temporary aid framework for Covid, which we worked on with the Commission in the early part of last year. We expect that temporary aid framework to be extended into next year. We stand ready to extend the various schemes should that be confirmed by the Commission.
I will recall some of the measures that have been introduced. Mr. McDonnell of ISME has referred to some of them. Some €633 million was administered for us by the local authorities. This was in the form of restart grants to almost 109,000 applicants and was a significant fillip to businesses last year. There was €200 million in grants and loans under an Enterprise Ireland-Industrial Development Authority strategic enterprise fund. This is helping 1,600 businesses that are significant employers providing somewhere between 30,000 and 40,000 jobs right across the country. These businesses will also have received supports. Some €20 million has been allocated to 5,500 businesses under the small business assistance scheme for Covid. As Mr. McDonnell mentioned, more than €550 million has so far been sanctioned and drawn down by 8,000 businesses under the Government’s credit guarantee scheme. As I mentioned, we envisage this being extended into next year should we get approval from the Commission. Under the future growth loan scheme, €733 million has been allocated so far. This is long-term low-cost funding for businesses. Microfinance Ireland continues to work with businesses that cannot get access to finance from the banks. It has approved almost €34 million for 1,500 businesses.
In addition, the local enterprise offices were very quick off the mark, as members will recall, in working with businesses right across the country. They have awarded over 17,000 trading online vouchers to a value of nearly €40 million to businesses to help them to pivot, to change their business models and to respond. They have also provided €25 million in business continuity vouchers. These are vouchers worth €2,500 to €5,000 to help businesses to reposition themselves. They have been very successful. In addition, we have worked with a range of businesses in the sectors that were specifically impacted, such as the retail sector. More than 500 online retail awards of up to €40,000 have been allocated to such businesses to help them to introduce new services and maintain employment, which is the key objective.
Throughout the pandemic, we have seen enterprise innovation right across the enterprise base in terms of changing business models and maintaining employment. I will highlight the Covid products scheme in particular. More than 15 projects were supported with funding to the value of €16.8 million to develop Covid-related products and services. An additional €100 million was allocated to the Department under budget 2022 for once-off funding for businesses impacted by Covid-19. This will maintain many of the schemes I have just mentioned.
For many businesses, budget 2022 provided clarity and certainty on the range of schemes and funding assistance which is to continue across government. It is worth recalling that, to date, over €17.5 billion has been provided to individuals and businesses through the PUP, the EWSS and the Covid restrictions support scheme, CRSS. I will recall some of those schemes, which were administered by other Departments and by Revenue.
The number of employees on the EWSS is steadily reducing as the economy reopens. This figure is down from 345,000 in June to 288,400 last month. Significant numbers of employees are still benefiting from the EWSS as businesses return to full capacity and as markets recover. Over 40% of those on the EWSS are in the accommodation and food services sectors while some 9% are in wholesale and retail - a sector we work very closely with - and 6% are in transport.
CRSS, which was the successor to the restart scheme we initiated last year, has benefited more than 25,500 business premises with funding to the value of €700 million. The latest figures from Revenue indicate that approximately 110 businesses remain on that scheme.
The business resumption support scheme, BRSS, was launched in September. To date, over 1,400 businesses have been approved for the scheme through Revenue with approved funding totalling €5.2 million. Approximately one third of these beneficiaries are wet pubs while another 26% are bars, restaurants and hotels. Over 55% of BRSS applicants to date have been businesses in the accommodation and pubs sector. That scheme is open for new applicants until the end of the year.
I will also mention the debt warehousing facilities Revenue has made available. Over 98,000 businesses have benefited from this facility. While the number of PUP claimants continues to reduce, it is worth recalling that the self-employed still have the option to earn up to €960 over a period of eight weeks. The €1,000 enterprise support grant is also still available for businesses, even if they claimed it last year.
Mr. McDonnell mentioned the small companies administrative rescue process, SCARP. We are in the process of completing the preparatory work with a view to commencing the Act at the end of November. That is still very much on track, should it be needed in the first or second quarter of next year as some of these measures are unwound.
I will now cover some of the broader supports available and reiterate that we are dealing with a number of elements in respect of Covid and the challenges we face in terms of Brexit and in preparing for big future challenges.
The Department's budget for next year is €898 million, which is an increase of 13% or €103 million on our 2021 core allocation.
Brexit will remain a key focus over the coming weeks and months. As we discussed with the committee, we have just launched the Brexit impact loan scheme to a value of €330 million. We will have funding from that for next year. We will also be funding a €70 million capital investment scheme for the agricultural sector.
On digitalisation, climate and the circular economy, we will be launching a number of new schemes next year. We will have an extra €10 million for digital industries and €10 million for climate industries. That money will be rolled out. I am happy to talk about those transition schemes later in the meeting.
We have also increased the funding for the enterprise agencies, IDA Ireland and Enterprise Ireland. An additional €26.5 million will be available to the IDA and there will also be additional funding for Enterprise Ireland across a range of areas, including regional development. There will also be an additional €2 million for the local enterprise offices. Additional funding will be available for InterTradeIreland to support cross-Border trade and collaboration, in addition to significant additional funding for innovation. Committee members will be aware of the €90 million enterprise innovation fund, which we will be launching with the Ireland Strategic Investment Fund and the European Investment Fund in the early part of next year.
There is more detail in the Department's submissions to the committee, but that is a quick overview of how we will maintain the existing supports and measures in response to Covid-19 and how we will keep focus on the challenges of Brexit, digitalisation and climate. Remote working is also referred to in the paper. We are focused on building capacity around the country. Some of the fiscal measures in that regard are very supportive. We will continue to engage with stakeholders and the committee on ensuring we have the right measures available at the right time.
I thank Mr. Hughes and Mr. McDonnell for their contributions and presentations this morning. Following yesterday's announcement, could Mr. Hughes advise what consideration the Department is giving to further supports for the hospitality sector? I appreciate that both gentlemen outlined the supports that have been available over the past 18 months. Those supports have been welcome but there are anomalies and issues in that area. I am on the ground and have a fair bit of experience of the sector.
Under the current criteria, someone who took a restart grant was ineligible for further supports under the CRSS. Many businesses impacted by yesterday's announcement will have received restart grants but are now being closed once more. One of the issues for the hospitality sector is that it is losing experienced and qualified staff. That is the biggest fear. I was talking to business owners this morning and their biggest fear is that if further restrictions and measures are imposed, irreplaceable staff will leave the sector. Qualified and experienced staff will not continue to work in this industry with such uncertainty. The restoration of certain PUP rates needs to be looked at. Yesterday's announcement has put a totally different perspective on the hospitality sector. It is totally unacceptable for senior Ministers to be encouraging people to leave the hospitality sector and get another job. I will be making that point again later. It is not good enough. Is the Department examining these issues? Is there a change in mindset after yesterday's announcement? I will wait for Mr. Hughes to respond.
Mr. Declan Hughes:
I thank the Senator. Yesterday's announcement came very quickly on the back of advice and modelling from the National Public Health Emergency Team, NPHET, the previous day and discussions at Cabinet. One of the features of recent months has been that the hospitality sector has recovered to some extent and we have seen an increase in employment and consumer spending on overnight accommodation and in the hospitality sector. Credit is due to the sector for all the measures that were taken to implement Covid passes and check identification, etc. We have been very involved with the sector in that regard through the work of the Health and Safety Authority, HSA, and that work continues. However, I take the Senator's point about qualified staff. There have seen staff shortages. We are working with the sector through the work permit system, which is administered by the Department of Enterprise, Trade and Employment.
The supports and various measures which are available through the Department will continue. Once we get temporary framework clearance from the European Commission, it is our intention to extend those supports and make them available. There has been quite strong take-up from the accommodation and hospitality sectors. We know those supports are attractive to those sectors.
The most recent advice we have from Revenue is from 21 or 22 October. It has not yet updated its advice on the CRSS and we will wait and see what the outcome of that will be. It is clear that businesses must be considered significantly restricted from operating for the purposes of the CRSS from 22 October onwards. Yesterday's measures will have an impact on businesses and I am sure that is something Revenue will be considering.
While many businesses may have gained from the restart grant and come off the CRSS, others have yet to do that. They may want to engage directly with Revenue about their own particular circumstances. Revenue has supports available, including the EWSS, which is being extended to next year and will be available to businesses. Our colleagues in the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media are working directly with the representative bodies across the sector. Many of these venues provide outlets and employment opportunities, particularly for the live entertainment sector. The live entertainment sector and night-time economy may be particularly impacted by the new restrictions. The Minister, Deputy Catherine Martin, had €50 million for a range of schemes this year and will have an additional €25 million for next year. I understand that was announced in budget 2022. I am sure we will be working with our colleagues in that Department on the range of measures which might be needed or rolled out.
The key thing is to try to maintain the sector as open as possible through the coming weeks and months. That may require some flattening in terms of activity and capacity, etc. That is certainly some of the feedback we have been getting from operators in the business who have told us that bookings have reduced over the past week or two. Some of those have been deferred until January or February. What we faced earlier this year was a significant shock to the economy with 480,000 people availing of the PUP. That is not a situation to which we want to return. It is in all our interests to manage during the coming weeks by implementing the public health guidance, keeping businesses open in a safe way, and helping people to engage in the economy and to spend money. That will be our common purpose.
I welcome Mr. Hughes's comments. I am a little confused because the Department has told us there is a significant shortage of experienced and qualified staff in the hospitality sector and yet Ministers came out yesterday and told that staff to move sectors and get another job. It is not good enough. I have one or two questions to ask about-----
I would like to discuss a few of those short-term issues. The work permits and visas seem to be a pinch point. I am hearing stories of it being impossible to get appointments for renewing visas. There are an awful lot of sectors visibly struggling with recruitment. Mr. McDonnell explained that a number of complex issues are coming to bear on this. Is there scope for easing work permit terms to respond to some of these shortages, particularly those that look to be long term, such as in construction and retrofitting? There seem to be definite long-term issues we need to address.
I welcome that SCARP will go live in November. Is there any risk that it will not hit its start date? This will be time-sensitive. What are the sorts of things that are provoking companies that might go down? Obviously there are some businesses that have had structural shifts and they will probably not go back to where they were. Others may be struggling with landlords or banking issues. Do we now have protocols for how SCARP will deal with some of these big institutional sources?
My next question relates to long-term structural shifts. It seems that apprenticeships are going to be a crucial part of the long-term future. To what extent is the Department building into its support schemes some conditionality, or at least an audit, around the extent to which the sectors it supports are taking up these apprenticeship opportunities that now carry grant support? That has to be part of it. I would say the same of the circular economy and climate issues. The early moving companies that moved to get their houses in order will be the more competitive ones in five years' time. To what extent does the Department build into its support audit an anticipation of those changes?
When the National Competitiveness and Productivity Council, NCPC, was before the committee, it highlighted the continuing issue of high legal and insurance costs, as has Mr. McDonnell. Can the Department start to survey the experience of the client companies it supports so we can name and shame? I know people are frustrated with the reform initiatives that are going on but they are happening. There is the work of the Personal Injuries Assessment Board, PIAB, the change in the book of quantum and so on but these initiatives are not yet having the desired impact on premiums. Can the Department do that?
Are the witnesses looking at the changing nature of town and city centres as a result of these structural shifts? The Department always spoke about place-making. To what extent is it putting its money behind that concept of rebuilding town and city centres to be more liveable and having new activities in them?
Mr. Declan Hughes:
On the work permits, in the last 18 months we have given huge priority to health sector workers. We have prioritised them since March 2020 and have issued over 9,000 employment permits for medical personnel, including 4,700 for doctors, 4,000 for nurses and 168 for radiographers. However, while this was not necessarily an issue in the first six months of the year, since reopening we have been trying to synchronise employers taking their employees off the PUP and taking on new employees and so on. These things do not always work perfectly and there is quite a dynamic there.
Up to the end of October this year we had nearly 20,000 applications for work permits. That is a 50% increase over 2020, when we had 13,000 applications, and a 30% increase on 2019 when we had 15,000. It is a very significant increase. As the committee will be aware, the Minister of State, Deputy English, who has responsibility for retail and business, recently issued the latest review on this matter. Every couple of months or two or three times a year we look at where the shortages are and where there are needs. He issued the latest review on 27 October. Most construction sector jobs are now eligible for the general employment permit. We have also removed the quota for HGV driver work permits and 350 general employment permits are being provided for hospitality managers, bringing skills and expertise into the sector. Social workers are now eligible for the critical skills permit and dispensing opticians were removed from the ineligible occupations list. We have also increased the quotas for horticultural operatives by 1,000, meat deboners by 500, meat processing operatives by 1,500 and dairy farm assistants by 100. We are working with the Department of Agriculture, Food and the Marine on that. The team dealing with work permits is actively engaged in working both with trusted partners and general applicants to try to speed up the approval process. There is a range of initiatives to which the Department and the Secretary General have agreed in order to clear the backlog quickly and we would expect to see progress over the coming weeks on that.
We do not handle visa appointments but we would be happy to follow up on that matter with the Deputy if we can.
A huge amount of work is going on to ensure that SCARP can be commenced at the end of November. I again thank the committee for its own work on this issue. As the committee will be aware, the small company administrative process is aimed at helping companies that are undergoing temporary difficulties. ISME used to call it "examinership light". It will be based on the existing rescue framework and mirrors many of those key elements but there is limited court involvement where creditors are engaged in the process. It is intended to be simplified and effective. As to making sure it can commence and will be easy to use, a lot of work is going on at the moment on finalising the types of forms that will be used, dealing with the Companies Registration Office, CRO, online forms, court rules, the draft commencement orders and the forms and fees. We will also have a comprehensive information leaflet for businesses, online information content and a communications campaign. We would hope to have all three elements, that is, policy, management and communications, on track for the end of November.
On the long-term structural shifts, we are very seized with those as regards climate action and digitalisation. I mentioned in the brief the significant progress that has been made around digitalisation over the last 18 months in particular, with most businesses now having an online presence and 20% doing click and collect over the pandemic. They are claiming back some market share in online retail and so on. There have been significant increases in the number of businesses using cloud services, artificial intelligence, etc. That is very much part of a similar approach we will be taking on climate and the circular economy.
It is great that we have the climate action plan. The commitment to a reduction in carbon emissions has been set by the Government. There are three big areas there for our Department. The first is around cement and construction sites, the second is alumina and the third is the broad enterprise base. There is a particular focus on the food and drinks sector, pharmaceutical engineering and electronics but also across the full base of business. That will be a key element. To the Deputy's specific point on the award of funding, I know from being on the board of Enterprise Ireland that our support from the enterprise agencies as regards assessment of climate impact and investment is about supporting environmental credentials and carbon reduction. On the point around assessment and planning by businesses, one of the specific initiatives we will be rolling out shortly is a climate toolkit for businesses. That will allow them to assess their current climate compliance and carbon footprint and identify measures they can take, as well as the range of supports or grants that might be available from Enterprise Ireland, the local enterprise offices or the Sustainable Energy Authority of Ireland, SEAI.
We are also working across our agencies, including National Standards Authority of Ireland, NSAI, around energy efficiency standards, carbon reduction and carbon labelling. There are proposals before the Oireachtas on that. Audit and anticipation are very much a key part of our focus in that area. We have €55 million under the recovery and resilience plan and will roll that out from January through the agencies.
On insurance costs, we have continued to see reductions in premiums, as recorded by the Central Statistics Office, CSO, and the Central Bank. There are other issues around legal costs etc. and I would be very interested in the proposal the Deputy mentioned around benchmarking or further analysis of legal costs over and above. PIAB removes many of those elements but there is a broader issue there around the costs of business. It is something the NCPCl has focused on. The Competition Authority focused on it some years ago and made significant recommendations.
On the changing towns and villages, we get feedback directly from businesses as well as local enterprise offices, LEOs, and in the past 18 months we have seen a resurgence and regeneration of many of our towns and villages. As the Deputy said himself, Dublin is a collection of villages. We have seen it throughout the country. The local enterprise officers are working with businesses in the towns and with chambers of commerce and other stakeholders try to develop those plans. We have a town centre audit tool and we are also part of the town centre first strategy, which is particularly timely in its bottom-up approach to identifying the strengths and experience and the experience economy for towns and villages.
That will also be part of the work of the regional enterprise plans we are developing and completing. It has a key focus on both. Many of our regions are city regions and we need to ensure the cities themselves are attractive places in which to live, work and play but ensuring as well they are well connected with their hinterlands and towns. It is something we will continue to work on with our LEOs and Enterprise Ireland and with other Departments, including Rural and Community Development, which runs its own schemes for rural funding and the urban development funds. We are on both of those committees that are run by other Departments.
There is a lot of complementarity between what we do. For example, with our regional enterprise development funds, we have allocated nearly €117 million to developing digital hubs in towns and villages which create a centre and ecosystem. We have had complementary funding from the urban and rural funds. We anticipate that in future more of our money will probably go into the programmatic side in terms of helping small businesses to start, grow and prosper in those towns and to make best use of the infrastructure being developed by other bodies. We hope to see that as part of the enterprise plans when they are launched in the coming weeks and that there might be additional funding to underpin that investment.
Mr. Neil McDonnell:
To generalise, with the great recession the proximate cause of issue was banks moving on creditors, whether business or consumer. In the interim our laws have changed. Personal insolvency has changed, as has bankruptcy, and we have Solvency II. Therefore our banks are in a far better position to handle poor debtors. This time, the biggest creditors of SMEs are other SMEs. Typically, after bank debt, SME balance sheets will have between €50,000 and €75,000 of debts to other SMEs. As the supports taper and we emerge from this-----
Mr. Neil McDonnell:
An awful lot of small landlords own the small businesses and shops that you see on the main street. The losses that have inevitably arisen during the pandemic have to land on someone's balance sheet, unfortunately. That is why we see some urgency in getting SCARP over the line because those issues will have to be resolved post pandemic. In short, other SMEs will move to recover debt.
I thank the officials for their presentations. I will turn first to Mr. Hughes. He spoke of how business supports are still available until the end of the year. Businesses can apply for those supports until the end of December. What explains the contrast between that and the PUP? It is obviously fair enough that a nightclub owner is not expected to do something else if he or she cannot run a nightclub, but why is that different in the case of, say, a DJ or someone else who works in a nightclub? Why is it expected that they should just go and work in a café or whatever? Why has the PUP been closed to them? Despite, say, nightclubs or taxi drivers and other sectors being affected by the latest actions, and there may be more actions coming, those who were on the PUP previously and came off it are now unable to go back on it. What accounts for the very different approach to the supports for business and those for workers?
Mr. Declan Hughes:
I would make a couple of points on the PUP which was introduced at very short order last year and has been very successful in helping to support incomes. We have seen very good transitions from the PUP back to employment. We know that 60% of those who have come off the PUP have returned to their previous employer. Some 12% have stayed in the same sector and 20% have gone on to other areas.
The point worth bearing in mind, particularly for taxi drivers and others, is that many of those, and there are 74,000 who are still on the PUP and may not have come off in recent weeks, can continue to earn up to €960 over an eight-week period. Many of those in the sectors mentioned by the Deputy may not have come off the PUP and they can continue to earn. We may well see that the numbers may not decrease as quickly as in the previous period.
For anyone operating a small business, the measures we have for self-employed, such as Microfinance Ireland, MFI, loans and short-term liquidity, are available to sole traders or individuals who may have a small business and are impacted. There is zero-interest finance there. We would encourage them to engage directly with the local enterprise offices of the Department that operate in every region. Many in the entertainment sector have done so. We have made available a range of measures and, as I said earlier, the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media has schemes for live performers and others. I do not know the detail of those but I envisage there are measures there which may be helpful. The policy issues might be more appropriate for the Minister and colleagues from the Department of Social Protection.
Bluntly, to return to the question, what is the rationale for PUP being closed off whereas the business supports continue? To be clear, I am not arguing against the business supports. I am suggesting there is a contradiction, particularly at a time when sectors of the economy are beginning to be closed down. Fair enough, the Department says some taxi drivers have never come off the PUP but some of them have. They cannot go back on it now. This is the case. The PUP has been closed off. It is being significantly reduced. It is now down to €203 or €250. People simply cannot go on it because the scheme has been closed whereas other schemes continue. This seems to be a contradiction.
Mr. Declan Hughes:
Some of the schemes, such as the EWSS, have glide paths set out. It will always be difficult to synchronise them in a situation where there are job openings and opportunities. We see this in the retail and wholesale sector, for example, where employment is now above 2019 levels and we have shortages in that sector. We know there will probably be demand over the Christmas period for between 5,000 and 10,000 people. However, we still have significant numbers on the PUP. As of 2 November, there were 12,000 in the wholesale and retail sector who remained on the PUP.
As I mentioned, there are options. We need to work with businesses to ensure they can take back the people who were previous employees, and a total of 60% are going back to their previous employer. A total of 12% have stayed in the sector. People can also move to other sectors where there are other opportunities. There are different glide paths and closure dates. The EWSS, which is an employment support, will continue to the end of March. There were 288,000 people in this scheme in October. It is a key support for employers and individuals with regard to getting back to work.
With regard to people who have come off the PUP in recent weeks, the key point is to maintain what has been opened up and the jobs that were restored. People went back to work in August, September, October and November and there was a particular level of activity. It is about trying to sustain these jobs over the coming weeks and months. We may not get the uplift that might have occurred in 2017, 2018 or 2019 in the Christmas period. Many operators seem to be talking about trying to level it out so there is continued business into January and February. I mentioned the prospect of going back to having 488,000 people in the scheme, which we had last spring. It is something weighing heavily on us all. We want to ensure we can keep the economy open and have job opportunities. Certainly there are significant job openings and opportunities throughout the economy.
I thank our witnesses. It is a bit like Groundhog Day, other than that, unfortunately, the business environment will probably get a lot more challenging for some sectors, especially smaller SMEs. Like Deputy Bruton and others, I welcome SCARP. Mr. McDonnell has outlined it very well. Many businesses will be carrying debt, particularly those that have availed of warehousing. It is interesting that local authorities were very fast off the mark in issuing rates bills to many companies that reopened in the past month. They had been opened only two weeks when the rates bills came flooding back in the door. There is a significant problem of indebtedness in the SME sector. I speak to many businesses that are finding their cost base has increased, including for energy, and their service charges have increased. Their turnover has dropped. They may be charging a bit more than they were, and people are seeing this with regard to walking in the door and the cost being paid over the counter, but unfortunately there is no profit in the business.
At present, many businesses are very dependent on the Government supports that are there. We will see a lot of real difficulty as they are unwound. Mr. Hughes outlined quite a lot of the supports that have been given. They have all been very welcome. A couple of things have been mentioned. With regard to the hospitality sector, is there any opportunity to make changes? There is no discrimination between somebody employed for a couple of months and somebody employed for three or four years with regard to access to the PUP. For staff retained by an employer for a number of years, the PUP is declining. They will probably look for other jobs. Those businesses will have no chance to retain them. Is there any hope we might be able to give some kind of the tail end on the PUP for longer-term employees who are furloughed at present? It is the same with the EWSS and those seeking supports.
With regard to the Government's planned capital spending, we have been speaking about retrofitting, solar and wind energy. We are doing almost nothing in the economy that I can see to try to create training or work placement for people. We are missing out quite a bit. I ask Mr. McDonnell to comment on what he thinks are the two or three key challenges for the SME sector. Foreign direct investment is doing well, as are manufacturing and construction. For everybody else in the SME sector, especially services, what does Mr. McDonnell believe are the key challenges, particularly with a reduced Christmas in light of potential reductions or imminent lockdowns?
Mr. Neil McDonnell:
I thank the Deputy. With regard to the recent lockdowns, what we saw last year in the lead-up to Christmas was that many town and city centre businesses did especially badly. Ironically, this was mirrored by some suburban and outside town businesses doing extraordinarily well. I have to acknowledge this. If we have a second Christmas of very bad trading, it will exacerbate the situation.
The cost issues the Deputy referred to are significant. It is not just an Irish issue. European energy prices have increased on average by 20% this year. This is on reduced trading in many areas. Without taking over the meeting with a sundry list of problems, if we look at the big numbers for Ireland, our GDP is expanding at a rate that is not seen in any of the other developed economies. Our GDP is on fire. Last year, our GNI contracted but it is moving ahead this year. It is forecast to move by 5%. What we see is a continuing divergence between our multinational and domestic economies. We are not satisfied there is sufficient political and economic focus on our SME sector. To put it in simple terms, Israel has a population just about twice the size of ours and has 440 listed companies on its stock exchange. I know we cannot make a direct comparison with Dublin because we have big stock exchanges nearby but we have 22 or 23 listed companies for a population of 5 million. Our domestic economy is not in the health our foreign multinational economy is in. This is where we would like to see the political focus.
I thank Mr. McDonnell. I will come back to Mr. Hughes. What is the Department considering to try to mirror where the capital spending programme is going? We are putting €10 billion this year into capital projects. Does the Department have any plan to try to align worker recruitment activity and training to these areas?
Mr. Declan Hughes:
I thank the Deputy. We are very involved in the crafting of the national development plan because we have significant issues with priorities for infrastructure with regard to indigenous enterprise as well as the foreign direct investment sector. Significant investment is needed in water services, energy infrastructure and road infrastructure. All of these are significant issues for productivity, not just for multinationals but for all sectors of the economy.
We are very involved in that prioritisation process, as well as funding various parts of the capacity within the enterprise base, as I mentioned, whether that is hubs for remote working, regional centres or the capital investment programmes. I mentioned some of the investments we are funding in, for example, the food and agricultural sectors so we can move to higher productivity activities, which means higher output using the same number of people by using automation, artificial intelligence etc.
The Department is also at the centre of the Housing for All strategy. The Secretary General is represented on the overall steering committee as well as a number of subcommittees. We realise that the broader SME base is key to delivering on the objectives and targets set out there, whether that is off-site or on-site construction. Underpinning all of that, we have been doing significant work with the expert group on future skill needs, SOLAS and others to assess the skill needs for the sector as it evolves to deliver on the targets for housing, commercial and industrial building in the short term and the longer term. That goes back to the point the Deputy made about energy efficiency and retrofitting on the residential and industrial sides. Those are significant opportunities for us. We have strong supply chains in those areas for materials, insulation and the technologies that will be needed for the future. As I mentioned, as part of the most recent work permit review, we have increased the eligible areas on the construction side so we can fill some of those gaps. We are also working with other Departments to attract back skills from abroad. We have many graduates and apprentices who have gained experience internationally. The key message to them is that we have a long-term capital investment plan. There is certainty now as to what the investments, job opportunities and job openings will be.
Coupled with that, we still need the apprenticeship system to be attuned with the existing trades and new trades. Such apprenticeships are coming through, especially in the areas of energy efficiency and climate technologies etc. We are continually promoting those and, indeed, the Minister for Further and Higher Education, Research, Innovation and Science put a strong focus on apprenticeships as an option for the most recent cohort of leaving certificate students. That will be a continuing focus for us and the expert group on future skill needs into the future.
I will come back to the work of the local enterprise offices and Enterprise Ireland later.
I thank our guests. I apologise for missing the first half hour or so of the meeting. I was addressing a Topical Issue matter in the Dáil Chamber. I have read the submissions and I am catching up now. I will ask Mr. Hughes a question about a story that was carried in the The Business Postover the weekend. It relates somewhat to the point Mr. McDonnell was making when he referred to the difference between the state of health of multinationals and foreign direct investment companies versus indigenous industry. Is it common for a request to be made that notes are not taken at important meetings? Was that a bit of a once-off or would that be par for the course? Would Mr. Hughes, in the normal course of his work, be in receipt of such requests? I found it quite unusual but perhaps I am a bit naive and that is, in fact, normal procedure and practice. Will Mr. Hughes outline that for us?
Mr. Declan Hughes:
If I have a minute, I will mention the strength of the SME sector. We may come back to it again. The management board had a significant discussion yesterday with our local enterprise offices about the pace and rate of entrepreneurship and the growth of the SME sector. That has been particularly in evidence over the past year. It has been phenomenal. Credit is due to businesses across the country for their innovation and job creation. We are looking at 400,000 additional jobs this year and next year, if we can keep the economy open. Most of those jobs will be in SMEs and small businesses throughout the country. Some 92% of businesses in the country are microenterprises that employ fewer than ten people. While-----
Mr. Declan Hughes:
I wanted to put that on the record. The other point I would make is that we employ nearly as many people in Irish companies in the US as US companies employ here. Those are the points I wanted to make.
In response to the question the Deputy asked, that practice is not something I have come across or of which I am aware. That is my experience. I was not involved in that particular meeting. It is not something that would happen regularly. Commercial negotiations happen on an ongoing basis in respect of particular projects and investments, etc. That is part of the cut and thrust-----
Mr. Declan Hughes:
I was not aware of that particular request and it is not something that would be usual. There are ongoing engagements with a range of stakeholders. The key thing about that is that multiple stakeholders were, as I understand it, involved. We have a range of forums, whether the retail sector or enterprise forums, where there would be open exchanges and engagement across a whole range of stakeholders, including the foreign and indigenous sector.
Notes would be taken at those meetings. I take it that would be the norm. I have to say I find it quite disturbing that a junior or senior Minister would accede to requests from big companies not to take notes at meetings. The article in the newspaper specifically referenced that the purpose was to avoid freedom of information requests. I cannot think of any other reason, to be fair, a person would seek to ensure notes were not taken at important meetings. I thank Mr. Hughes for his clarification. It is a relief this is not the norm but it is regrettable that the practice happens at all. We all must be grateful to the journalists who pursue these issues and shine a light into dark rooms where no notes are taken.
I have a couple of other questions. I will raise the issues of Brexit and trade flows. Has the Department conducted research into the trade voids in the Single Market, places where British companies would have been providing goods and which may now be open for competition? Is the Department working with the enterprise agencies to help Irish companies to connect with these opportunities? Could our guests give us an update on where that is at? Mr. McDonnell might also comment on whether he sees a role in expanding out businesses.
Mr. Declan Hughes:
I thank the Deputy and will be sure to leave time for Mr. McDonnell to respond. I assure the Deputy that, as we have discussed previously, the Department has been working since the vote on the referendum and through 2017 and 2018 to try to build resilience into the supply chains, addressing, in particular, areas where there might be vulnerabilities and a reliance on UK suppliers. Our evidence so far is that Irish businesses and supply chains have remained relatively robust over the past ten or 11 months. There have certainly been challenges over the level of preparedness of businesses based in Great Britain relating to their compliance with various requirements. There have also been haulage and logistics challenges. To a large extent, Irish businesses have worked through those challenges.
We did a lot of work on preparedness that related to the shifting of supply chains to allow for more options for local suppliers in Ireland. I am aware, as I am sure the Deputy is, of many engineering businesses that have had to respond to requirements under free trade agreements and rules of origin, and have sourced materials within the EU. They were shifting supplies to the Irish market, continental Europe and the rest of the eurozone. Our focus is in sourcing from the eurozone and the EU, not only in the manufacturing and industrial sectors but also in the retail sector. That was a key focus last year through our retail forum. That resilience was also a focus of the early part of this year.
We have seen changes with some of the larger retailers. They tried to maintain that continuity of supply from Great Britain, but it proved particularly difficult for them. They are working on increasing their sourcing domestically. Bord Bia is working with the retail multiples that are bringing products into the country, and with many others, on the availability of shipping directly into Rosslare from France and on the increase in services there. The fact that continuity of supply has been sustained indicates the extent to which businesses have diverted and changed their supply chains. In some cases, they have rerouted to avoid the UK land bridge where there may be risks. We will continue that into the future. As a result of campaigns such as Enterprise Ireland’s The Irish Advantage, we are seeing an increased level of sourcing from the Irish market to European counterparts and European businesses. There is a strong focus on supply chain resilience, given all the disruptions with shipping and the strategic autonomy discussions at EU level. We will continue to focus on that through the enterprise agencies and by working across government.
Mr. Neil McDonnell:
That is a tricky question to answer. Part of the problem is that at the start of Brexit there was a huge focus on the export business, particularly in the food sector. Many small businesses in Ireland are exposed to the UK from the import side. Realistically, we are a small market. Small businesses have been reliant on big UK distributors to take smaller imports. While there was a huge focus on what tariffs would apply, in reality the vast majority of tariffs in sectors other than the food sector top out at about 8%. Other issues such as standards and certification are much more intrusive. A simple example is the warning, which Mr. Hughes will have seen, from the Department of Justice around Christmas crackers for this Christmas. We buy most of those from the UK. They are classified as fireworks and have to carry a CE mark. However, British suppliers can no longer put a CE mark on Christmas crackers. A huge number of our wholesalers and importers rely on British suppliers to do that for products like Christmas crackers and toys for small children. Our people are not necessarily big enough to import them yet. They have not yet identified a big French or German importer who will take over that certification function and then distribute here. That work is yet to be done, unfortunately.
I am conscious that my time is tight, but I want to ask Mr. McDonnell to give us an estimation of how remote working is working for the people he represents. How is blended working working out? Has he noticed a benefit in the smaller towns where people do not have to come into the city centre? Where one is losing, is one picking up? Have his members spoken to him about the potential benefits of blended working, not just for them but also for their workers?
Mr. Neil McDonnell:
This is definitely an employment trend. When job inquiries are being made at the point of recruitment, the manner in which the work will be carried out is now up there with the remuneration discussion. It is definitely an issue. What we are looking to see settle down in particular is updated guidance from the Revenue Commissioners. As the Deputy will know from her other job, what classifies a worker’s contractual place of work is a significant issue. If a contract of work specifies the home as a place of work, that has all sorts of implications. Following on from that, we want to see a great deal more clarity from the HSA on how it is going to look at the workstation. I am working from home at a workstation with a job-provided laptop and a job-provided chair. That is all hunky-dory, but it is not necessarily like that for everyone. Following on from that is the question of employer’s liability insurance. How big a circle insurers are going to draw around that employee is to be confirmed. We would like a bit more comfort on that. I appreciate that not all of this is legislative. The courts and PIAB will have their say on some of this issue, but we need to see some of it settle down.
I have a final question. Mr. McDonnell meets regularly with Ministers and Ministers of State. When he is meeting with them, does he routinely or otherwise request that no notes be taken? Would he be happy that notes are taken? Does he understand that the taking of notes is the norm? Certainly, in my previous role whenever I met with Ministers we always understood that notes would be taken. I am curious to know the circumstances under which this would happen.
Mr. Neil McDonnell:
There is fairly active interaction with the Department of Enterprise, Trade and Employment on the retail forum and the SME forum. It is specified at those briefings, especially when we get sensitive briefings on Brexit, that we operate under Chatham House rules. Otherwise, people take notes. There is quite a degree of clarity regarding what is on and off the record.
I have three points to which I would like Mr. Hughes to respond. The first of them relates to the skilled staff shortages - for example, the shortage of chefs - that have been spoken about in the hospitality sector. The two issues in this respect are the red tape for the employees themselves and the costs to the employer. What is the Department doing to process this more quickly? What help is the Department giving to both employees and employers?
As we are all aware, most European countries are using a 9% VAT rate in the hospitality sector. Our rate is due to go back up to 13.5%. I am conscious that this in the remit of the Department of Finance, but I would still appreciate comments from Mr. Hughes from the Department of Enterprise, Trade and Employment. Such an increase would put us at a serious disadvantage by comparison with our competitors in these markets.
Finally, an increase of €103 million has been provided for the budget for 2022. What is the Department’s intention in relation to the prioritisation of this significant increase in funding?
Mr. Declan Hughes:
We have a range of skills areas on the list of eligible skills and chefs are certainly included on that list. As I mentioned, we are working on a range of initiatives to try to accelerate the assessment and approval of applications. We have had a 50% increase on the 2020 applications. This is 30% up on 2019. That is requiring additional resources and additional productivity, etc., but we are making progress on those applications. Many people in the hospitality sector, in restaurants and bars etc., may not be trusted partners because of low volumes. They may not be on the trusted partner list, which is a way for employers to go through a pre-approval process. If particular businesses they think they will have issues or difficulties over the coming period - they may have expansion plans, etc. - I recommend that they should go through that process, which would enable them to go into a different pile rather than into one-off applications.
Similarly, in terms of apprenticeships, a balance must be struck between having a very quick response and brining in additional staff from EU and non-EU countries, and ensuring we have a pipeline of skilled and trained staff for the sectors of the future.
That is where the work of experts in future skills needs is very important. We must use SOLAS working with the education providers, etc. and get the messages out about where the job openings are going to be over the period to 2030 and 2040. The population will increase by about 1 million between now and 2040 so another 600,000 people will be at work and there will be job openings. Therefore, we need to consider what jobs and occupations will be required in the future. Certainly we will work with employers across the sectors where there are work permits and, indeed, Deputy Bruton referred to those. We have done this previously with the meat and processing sectors. Where there are short-term work permits there must also be a commitment to programmes of training, apprenticeship and upskilling. I refer to the work of other agencies that are involved on the training side, particularly SOLAS in that regard.
The costs limits are at a reasonable level. I do not have the details but the application costs would not be significant and compare favourably.
As the Senator mentioned, the VAT rate is an issue for the Minister for Finance. The 9% rate will last until the autumn of next year. We have had feedback that, for various reasons, many other countries and cities have local taxes that add to the bill. While there are demands for the 9% rate to be maintained, in terms of the international market, the glide path is clear for the coming period.
We will have additional funding for next year and part of that is to sustain the current scheme in terms of Microfinance Ireland and the sustaining enterprise fund. These are on Covid in addition to funding for Brexit. We will launch under the climate transition fund and the digital transition fund. These are broad-based funds to encourage businesses to go on or accelerate their digitalisation journey. As many as 17,000 businesses have gone through the step up with the local enterprise offices. Indeed, Enterprise Ireland now has a €9,000 voucher to help businesses either to get started or to increase their sophistication of digitalisation. We will step that up next year to build on such progress. It is no longer about just getting businesses to have a website and do transactions. It is now about sophistication and a substantial amount of that will concern the adoption of, for example, advanced manufacturing industry 4.0 at firm level, which requires training and investment.
On the climate side, we are a little bit further behind. This year, we launched a green for micro initiative through the local enterprise offices and Enterprise Ireland. A lot of that work is at the planning stage in terms of businesses having to develop their climate and circular economy strategies. Then they must work out the step up that is needed regarding their own capabilities and business mode, and then make capital investments. We would see that capital investment starting and commencing significantly next year.
The accelerated capital allowance is in the budget. It is a help because it will incentivise investment in more energy efficient equipment etc. There are also measures for the use of alternative energies. They include green hydrogen, which we will see become significant for decarbonising the transport sector, and in parts of the cement and aluminous cement sector.
I mentioned in the brief the additional money - €2 million - that will go to local enterprise offices. There is also additional money for InterTradeIreland, IDA Ireland and Enterprise Ireland for their broad base of schemes to increase productivity and innovation.
I welcome our two guests and thank them for their presentation, especially Mr. McDonnell who said at the beginning that he felt a bit unwell. I hope he will recover. It is wise of him to work from home and it is good advice for people who feel unwell that they should not go to their office or place of work.
As many as 6,000 children tested positive in the first week of November. Some of the parents of those children have contacted me to let me know they had to stay home to mind their children. Will Mr. McDonnell tell me whether that situation has had an impact on small businesses? One parent who contacted me told me she would not get paid while she stayed home to care for her child. How do we deal with these situations, especially as the number of children becoming ill is increasing?
Mr. Neil McDonnell:
That is one interesting part of the measures that were announced the other night that I believe will have an impact. That fully vaccinated close contacts will have to restrict their movements is probably going to impact certain areas like child care, the medical sector and so on, and in ways we have not yet seen. The new provision kicks in on Friday, but it has to have a non-negligible impact, assuming people do what they have been told to do and restrict their movements. It has to have an impact.
Mr. Neil McDonnell:
It is very likely where a parent has to restrict his or her movements there are going to be people in nursing homes and child care facilities, teachers, gardaí and nurses who are not going to go to work because, even if they are fully vaccinated, they are close contacts and they will be out of work for five days.
The Deputy mentioned a person who will not be paid. Typically, anyone who works in the public service is paid for his or her time off. An awful lot of people in the private sector are not so you have both a service absence issue and a pay issue for those who have to restrict because they are a close contact. I do not suggest there is an easy answer to the problem and I appreciate there must be a public health response but we cannot assume there will not be a service impact on the economy. It looks like we are going to have a significant number of close contacts among the people who are in the fully vaccinated community.
The situation would put pressure on families as they may lose an income for a period. One of the things that repeatedly arises when I deal with small businesses is that the State supports are vital in keeping some of these companies and businesses in existence, and the supports have been really welcomed.
My next question is for Mr. Hughes. The employment wage subsidy scheme depends on a 30% reduction in turnover. Could that act as a disincentive for some companies to grow? In other words, if the 30% reduction is maintained, the employment wage subsidy scheme will continue. Should we consider ensuring the scheme tapers off? Was tapering ever examined rather than having a cliff edge of 30%?
Mr. Declan Hughes:
There are some changes proposed for the EWSS, which will come into effect between now and the end of April. That aspect was certainly a concern. It can be seen why, from a business perspective, you might try to bed down the existing business, solidify positions and consolidate your balance sheet. Certainly that may have been a position. What we are seeing now is that the economy is recovering and opening up. We have seen significant recruitment. We have also seen a reduction in the number of employers who are in receipt of the EWSS. Employers are coming off the scheme at a fairly healthy rate. It has decreased from 35,000 down to 25,000 and the number is steadily reducing. It is right for businesses to take a pragmatic approach.
As Mr. McDonnell has mentioned, it is acknowledged the scheme is a strong support. However, businesses are in the business of doing business. Once they can see there is sight of new contracts and certainty about reopening, they are getting on with additional recruitment. Right across the board, with the exception of a small number of sectors, they are now ahead of their employment in 2019. It is a key priority we maintain businesses and they remain open so that they can trade and trade internationally. From the first part of this year, we have seen very strong results from both Enterprise Ireland clients exporting and the foreign companies that are here restoring markets. There are businesses in education, aviation and other sectors that are not back to their 2019 levels and, indeed, recovery may take a little bit longer.
That is where supports such as the sustaining enterprise fund is important in terms of providing a fillip to their balance sheets and to help them to readjust. Many of those businesses are looking at new markets or new ways of providing online services.
I thank Mr. Hughes. He might keep us informed on the changes that are being planned in the employment wage subsidy scheme as they come in, because a lot of people would be interested in them.
I note that approximately one fifth of apprentices across the board leave before their training is completed. Has any research been done on why that is the case? Mr. McDonnell or Mr. Hughes might like to comment on that. The number of apprentices giving up the job, as it were, is quite worrying. I accept there might be many reasons for it, but I would like to hear what they are and if any research has been done on it.
Mr. Declan Hughes:
I do not have anything to hand on it so I would just be speculating. The key focus in a range of sectors, whether it is apprenticeships or traineeships, was that it was difficult during the recession. Due to social distancing and other restrictions, some in the personal care areas, like hairdressing and others, might have let some of their trainees or apprentices go and the issue then was taking them back on and providing an attractive opportunity for them. The Department of Further and Higher Education, Research, Innovation and Science did extend some of the supplements which were available. It is something that is continuously managed to ensure that those who are on apprenticeships are being well looked after and are getting their protected time and their various other entitlements. That is something we have to follow up on.
I would appreciate that, as it has come up in the Dáil on Question Time on a few occasions. It concerns me when I see the number involved. Several employers have corresponded with me who say the schemes need to be tweaked and also that before apprentices go into a job, they must have a realistic understanding of what is involved and what it entails.
I will move on to the regional enterprise support fund, digital hubs and working from home. Am I correct in saying that most of the fund-----
I thank Mr. McDonnell and Mr. Hughes for their presentations. I wish Mr. McDonnell well. He is showing good leadership in terms of staying at home. I hope he gets better soon.
My first question is for Mr. Hughes. A number of people raised employment permits. A number of businesses and companies in Tipperary in particular in the agricultural and steel sectors are struggling to get approvals for employment permits. Does he find that different sectors are being refused more than others? We heard the news last week or the previous week about more permits being available and more groups being brought into the system, in particular for jockeys and other such positions. Given that the demand has increased so much, has the number of staff dealing with the permits increased? Is the percentage of refusals higher than it was previously? As other speakers have said, there is a huge cost involved to the employer. At the moment, it seems that although more permits are being sanctioned, more people are also being refused permits. Do the refusals relate to different sectors or are they across the board?
Mr. Declan Hughes:
I do not have the details across the sectors, and I am not aware generally of whether the refusal rate is higher or lower. The key point is that there is a schedule of eligible occupations. In October, the Minister of State, Deputy English, launched a revised list. This was based on the third biannual review that was undertaken since the onset of Covid-19. The increases were to address some of the areas Senator Ahearn mentioned, in particular on the agricultural side. A total of 1,000 extra horticultural operatives were sanctioned, 500 meat deboners, 1,500 meat processing operatives, and 100 dairy farm assistants. Those areas are very much linked to what we hear and get from the Department of Agriculture, Food and the Marine. There is a seasonality element to it but it is also due to changes in work practices and activity.
I will make a couple of points that might be helpful. First, there is the trusted partner scheme which I mentioned. Businesses that might be seasonal, for example, rely on short-term key skills coming in from abroad. They should really go through the process ex anteand be on the list of trusted partners. It means then that when the applications come in they are essentially pre-approved. If the business has done its market tests, etc, that helps with the approval process.
More generally, some of the feedback I heard is that when applications are being made that they are not always complete and fully assessed in terms ofex antecompliance with the schedule of occupations and that the full detail is filled in. I can come back to the Senator with data on that. I am aware that the level of completeness of the application forms themselves is an issue. If any advice is needed, we can provide it to employers. There are various information sources. We have a very good website, which gets thousands of hits every week, but incomplete applications still come in and they are sent back. There may also be applications that do not fit with the list. First, is the job on the list and, second, if the application is complete, accurate and contains all the detail and that the applicant has gone through the various processes in terms of the market test, etc.?
If Mr. Hughes could send on a breakdown that would be very helpful. It seems to me that some people struggle with the paperwork. One or two other speakers referred to this earlier. It is frustrating for some, especially in the agricultural sector, who find the level of paperwork quite demanding.
My next question is for Mr. McDonnell. When I speak to businesses, especially in Tipperary, but also small businesses across the country, they are all very positive about the supports they have been given in the past 18 months to keep them afloat, but there is also a fear about what will happen when the supports end. What is his sense about the long-term challenges businesses will have? He referred in his contribution to the fact that the money will have to be repaid and some businesses will not have anything to fall back on. Following the Government's announcement yesterday that the restrictions were changing, there is a sense in the hospitality sector in particular that it is starting to re-adjust up to Christmas time because there is a real fear that the sector might be going back to somewhere it does not want to go, but its members seem to be making decisions based on the possibility that they could be in trouble in a couple of weeks. Does he sense from small businesses that there is a fear about where they will be in the coming weeks and that they are making strategic decisions based on that without knowing the facts?
Mr. Neil McDonnell:
That is an important point. Deputy Paul Murphy brought up something similar earlier. The general comment I would make on that is that we understand that all the supports must taper – we are as keen for that to happen as anyone else – but when the rules on the ground change, as they did the other day, then the rules on the supports must change as well. We have been on the record as saying that the PUP in some ways discouraged people from coming back into the workplace. People were reluctant to give it up because the rule said they could not re-engage with it. Having seen what has happened the night-time economy, we cannot blame some people who are on the PUP, who are breathing a sigh of relief and saying they are glad they did not come off it and that they are still in receipt of it.
We are going to have to show flexibility on qualification for the PUP, for example. Perhaps that would include allowing workers to avail of some of the flexibilities that are there for the self-employed. If we are going to face a prolonged period of uncertainty, we will need to be flexible on the rules.
On flexibility, and bearing in mind that currently if you come off the PUP you cannot get back on it, is Mr. McDonnell thinking that we might have a period of four to six weeks or something like that which gives people the option to come back to work? If things work out well and there are no changes in circumstances in that sector, then things continue. It would encourage people to come back at the start so they do not lose out.
Okay. On another point, over the last year or so many businesses in hospitality, shops and people who do takeaway sandwiches and so on are now struggling to source simple things like packaging, spoons and forks. Is ISME finding that to be the case? These are things that cash-and-carry outlets like Musgrave would normally have, but they do not seem to have them in the same bulk anymore. I have been speaking to numerous shops, cafés and places like that even this week.
I had missed that Mr. McDonnell is not well. I wish him a quick recovery. I join with others in saying he is doing the right thing and leading by example. As the adverts on the radio and television say, I thank him for not leaving the house today.
My question relates to the global corporation tax changes the Government has signed up to. This is a reversal of the previous industrial strategy predicated on a low corporation tax rate. We heard in the last month from the NCPC about the challenges we face, especially the cost of housing and the lack of supply, the lack of transport and so on. These are all challenges. Given the Government is now changing tack by signing up to a higher rate of corporation tax that indicates a change will be required to our previous industrial strategy, will Mr. Hughes outline what our current such strategy is to replace that and attract FDI, etc.?
Mr. Declan Hughes:
As the Deputy knows, at one level the changes to the corporation tax rate mean it is a level playing field right across the world. The Minister for Finance, Deputy Donohoe, has been very engaged at OECD level to ensure there is certainty for businesses on what the future regime will be with respect to the move to a 15% rate for all businesses. That was a critical argument we made very strongly about how that would impact on our indigenous enterprise base. Sustaining the rate at 12.5% for all but the very largest businesses, namely those with a turnover above €750 million, is significant. At one level we get absolute certainty on what the regime might be. Obviously, there is a bit of a way to go with working through the detail and having that implemented. Businesses in general look at locations around the world. Ireland will continue to be attractive not because of the tax rate but because of a wide range of measures and the business environment we have. When we look at the uncertainty around the world, the IDA would say there are a number of key elements to that. The first is Ireland is a stable and certain business environment whether it is across the tax environment, the availability of skills and talent or the operating environment we have here in terms of the infrastructure and the access to the EU market, which is obviously a key advantage and something we fought very hard to sustain and which is indeed very much part of our offer.
The Deputy will have seen the IDA had a very good first half of the year in terms of new announcements of jobs etc. Many of those companies are coming here because they have existing businesses or because of the ecosystem we provide in some of those key new sectors for the future. Whether it is in financial services, medical technologies, pharmaceuticals, advanced manufacturing, ICT, or Internet services, we have a cluster and an ecosystem that is very attractive and very conducive to innovation, talent and getting access to international markets. I am struck by the figures for even the first half of the year. The IDA reported that of the projects in the first half of the year I think there were something like 62 names new to Ireland. They are companies that are coming here for the first time. Of the 142 investments won up to the end of the second quarter of the year, 62 were new-name investments. That is a great achievement given the IDA was trying to convince these businesses to come to Ireland and come to Europe. This is investment not just for Ireland but for Europe for the first time in a context where the authority was working with them remotely and digitally, so it is a great credit to it. Businesses scan around the world and ask where they should be locating and Ireland is one of those locations. You might want to be in the US or you might want to be in Asia but if you are coming to Europe, Ireland is the place to come, particularly in those frontier technology areas.
The other piece which is really impressive is the strong regional performance and indeed we had another announcement this morning of significant jobs for Waterford. On the strong regional performance, our cities are now competing with other cities and our regions are competing with other regions around Europe for locations. In the first half of the year, of the 142 investments, 68 were going to regional locations. Regarding the future, I point in particular to how quickly we have adopted and adapted to blended and remote working. That is something that will be an advantage in terms of winning new investments. Over the years we have had companies that have come, and I can think of some that are expanding through remote working and blended working, to get access to skills. The fact we now have a remote working policy and strategy and we have just done a consultation will further enhance our attractiveness for investment coming in. Indeed, I have seen some recent analysis which would indicate that up to a third of investment will be in that space around remote working and connecting teams. Overall, notwithstanding the uncertainty internationally, if we continue to focus on skills, innovation, developing our research system, the infrastructure, the ecosystems, the talent base and the policy environment, we are well positioned to attract the next waves of investment. As I mentioned in the brief, we have stepped up investment for next year in our disruptive technologies innovation fund, in digital hubs and also in terms of our investment into enterprise innovation in climate and in other areas. That will come both from FDI and also from Irish companies. I point in particular to the significant recent investment by ICON.
That refers back to our earlier point on the strength of the indigenous enterprise base that has invested both in Dublin and in Limerick. It is part of the development of the clinical trials infrastructure in Limerick, with Cook Medical and many other companies there. There is that synergy and complementarity between our indigenous and overseas base.
I thank Mr. Hughes. I have one question for Mr. McDonnell. As we know, the IDA has rolled out a welcome mat for Amazon. What I hear about Amazon is the undermining of local businesses, bogus self-employment and mistreatment of workers, and these are things associated with these types of companies. Does Mr. McDonnell think the IDA should be rolling out the welcome mat for these companies? My last question related to a fundamental shift that is required in industrial policy that people just do not seem to be talking about. In terms of where the focus is going to be, what is sustainable and how we build a strong domestic economy, does Mr. McDonnell see the advent of Amazon on these shores as contributing positively or negatively to that?
Mr. Neil McDonnell:
We know that, for all Deputies and Ministers, the cutting of a tape for a big new facility is always an attractive thing to do. It might be the opening of a big factory with 1,000 people, and while smaller companies do that every day, it is just for two or three employees.
To segue backwards into what the Deputy was just saying with Mr. Hughes, on the one hand, we would have a view that Ireland was absolutely correct to take a stand on the issue of BEPS and corporation tax because that is an issue of national sovereignty. Other countries could be deciding what our tax policy should be on something but I do not think they would like it if we decided what their VAT rates were, or whatever it might be. It is an important issue. We accept where we have gone on BEPS and pillar 2, which arrived very late in the day.
We spend an awful lot of time worrying about what rate some of these big companies pay in taxation without realising that some of these businesses are now larger in market valuation than a significant number of countries in the world, and they are exerting market power, political power and communications power that people really do not appreciate. I think states need to be in the headspace that the US Government was in at the back of the last century, when it had to break up certain oil companies. I am not picking on any particular one, but I think we are in a position now that some of these companies are so big that their impact and their mass of gravity in economies is something that legislators should be very worried about.
One of the things that is coming across my desk more and more in recent times is queries in respect of work permits. Although it has been discussed already, I ask the Department to consider putting in place a dedicated phone line for Oireachtas Members to deal with work permits only. I know colleagues would find it very useful. We have an email contact but it can be very hard to explain what the issue is. The Department might consider that option.
Second, I want to ask Mr. Hughes about the regional enterprise development fund in the context of remote working hubs. Am I correct that this can only be accessed by not-for-profits in regard to putting in place remote working hubs? Has consideration been given to businesses getting support to set up remote working hubs? We spoke about working from home. What seems to be happening is that, for people living in a regional town, working from home is not as attractive as going to a hub and working there rather than driving a long distance into a city. We also have the environmental issue, which is a positive as people do not have to travel a long distance, in addition to the issues of time saved, quality of life and so on. The remote working hub is a good concept but it seems to be ad hocand driven by the not-for-profit sector. Has consideration been given to encouraging businesses to set up these facilities?
My third question, which is on insurance, is for Mr. Hughes but Mr. McDonnell might like to comment. Has consideration been given to establishing a regulator for the insurance sector? We have one in energy, one in transport and one in communications and so forth, but there is a need to regulate the insurance sector so it is allowed a certain amount of profit but, after that, the charges are controlled. This pertains in some other jurisdictions. It would mean that when outgoings and claims are reduced, the premiums should reduce as well for business.
Mr. McDonnell mentioned concerns about unvaccinated people coming to work.
I have two other questions for Mr. Hughes. With regard to the pandemic unemployment payment, PUP, many businesses are telling us they are finding it very difficult to get staff and they are blaming the PUP for it. Mr. Hughes might comment on whether thought has been given to that.
Deputy O'Reilly referred to bogus self-employment. We recently discussed legislation on introducing sick pay for workers. It has been put to me that such supports cannot be accessed because there is a lot of bogus self-employment out there. What has been done to combat that?
Mr. Declan Hughes:
I will try to leave some time in case Mr. McDonnell comes back. On work permits, the email contact is there and I know there is a prioritisation process. I can certainly consult colleagues and come back to the Deputy on that. I was not aware there were particular issues with it as it was working well as a fast track. I am certainly happy to come back to the Deputy on that.
With regard to not-for-profits, there are probably about 1,000 regional hubs around the country in various shapes and forms. There are 117 community enterprise centres the Department of Enterprise, Trade and Employment has funded, and many of those have developed into digital hubs, although some have not. We have also funded a wide range of bottom-up and collaborative initiatives, and that is a very good model in the sense we get buy-in at a local level from business groups and from leaders who can serve on the board, drive that and provide advice. From our perspective, we are very much focused not just on the physical infrastructure but also on the business development. These are hubs where entrepreneurs can come in, mingle with other entrepreneurs or businesses and get advice, contacts and develop. In general, that model has served us extremely well. There are others which, for their own reasons, set up commercial activity, and that is absolutely right. There are good rental models and we see those springing up, particularly in the past year.
I am aware there are various funding schemes. The Department of Rural and Community Development recently had a call for its hubs and, although I stand to be corrected, I understand some €8 million was awarded to nearly 100 different businesses. That was open to not-for-profits in local communities but also to others which might have been more commercial. Again, I can follow up with the detail on that for the Deputy.
In regard to insurance reform, the Deputy may have seen the Central Bank's most recent report which was published in the past day or two. The Central Bank is continually monitoring and developing its oversight, data and engagement with the insurance sector. As the Deputy knows, the programme for government has a very strong commitment on insurance reform. It is being led by the Cabinet committee on economic recovery and investment, chaired by the Tánaiste. We have the action plan for insurance reform, which was launched last year. As of the middle of the year, 34 of the 66 actions had been delivered in the first six months of the year and 97% of the actions are scheduled for completion in 2021.
One of those actions refers particularly to the Deputy’s point on the level of competition in the market, the level of profitability and the level of service, a point that was mentioned earlier in terms of the range of providers.
There is a specific item in the action plan to attract additional operators into Ireland. Some might argue that where profitability is seen to increase there is a dynamic, and new operators are attracted in. It is important for us to have certainty in the licensing regime, strong oversight and strong governance of the sector from the Central Bank along with a clear policy framework from the Government and the Department of Finance. The Minister for Enterprise, Trade and Employment is very involved in that. A key message to the industry is that there is a significant Government commitment to reforms of PIAB, the book of quantum etc. We are currently developing the general scheme to enhance and reform PIAB.
Regarding the PUP, it can be hard to get staff but the Intreo offices throughout the country and the Department of Social Protection are very engaged on the activation side, working with individuals to provide them with employment opportunities, hopefully for sustainable jobs.
I ask Mr. McDonnell to elaborate on what he said about insurance access. We know that several underwriters have left the market, soft play outdoor adventure centres cannot get insurance and point-to-point racing is now out of insurance. Mr. McDonnell mentioned that judges are walking away from the recently revised book of quantum. Is there any opportunity for self-insurance? Could Government help sectors in setting up self-insurance?
Mr. Hughes mentioned hydrogen. Is he saying that Government will hopefully invest in that facility? It is a large amount of money. We have only one biomass facility in the country and that was mostly privately paid for. Does the Department have any plans in that area?
I am sure Mr. Hughes is aware the forestry sector is in trouble. Is the Department of Enterprise, Trade and Employment engaged with the Department of Agriculture, Food and Marine? The dairy industry has the potential to immediately reduce emissions by 30%. However, farmers will not go there until a benchmark is set for the actual carbon displacement. This might be something to be taken up with those involved in climate action.
Mr. Neil McDonnell:
Notwithstanding the movement on some awards that we have seen - we are not contradicting that - the issue here is that motor insurance is a volume play. Drivers who tax their cars online will see approximately 100 companies offering motor insurance here. A small business with a play centre or an adventure centre which is renting bikes will potentially be down to one insurance supplier. On Monday, I went through an insurance policy with one of our members who is in a sporting business. The terms and conditions being applied by the one remaining insurer to his business are extremely burdensome. This is his only means to stay alive as a business. He is basically operating on a take-it-or-leave-it basis.
Our duty of care is effectively strict. If something happens on business premises, essentially our system of law does not care about the degree of care taken by the plaintiff. If it happened on a business's premises, the owner is goosed; it is deemed to be the owner's fault and they will pay.
Despite what we understood would happen under the Judicial Council Act, we have seen some very impactful decisions where the judicial guidelines were not even referenced. We have had one or two awards which not alone were higher than the judicial guidelines but were higher than the old book of quantum without any justification. We have written to the Minister on that to ask what contingency plans the Department of Justice is making if the direction we have taken proves to be the wrong direction, as we have said for more than two years.
The Deputy asked about self-insurance. Self-insurance is not a solution to the cost of insurance. Self-insurance or mutual insurance is potentially a way around the take-it-or-leave it, gun-to-the-head insurance available from British companies at the moment. A mutual or self-insurance contract will typically be more expensive in the first three years because the mutual insurer needs to build up adequate reserves. It is not the answer that some people think it will be.
Mr. Declan Hughes:
The Deputy asked about a range of what might be called natural resource issues. I certainly welcome his questions because it is an area we are extremely focused on as we look to 2030 and 2050. There are significant drivers on the regulatory and the policy side relating to climate change and the technologies in the market have developed quite markedly. There has been aggressive investment across Europe and internationally in the area of hydrogen and green hydrogen. Some of our main trading partners are looking at the opportunities for energy security and carbon reduction there.
We see the potential for an additional 5 GW of offshore wind energy by 2030. We will probably be able to export some of that through interconnectors. The significant opportunity for us is generating green hydrogen from electrolysers. In the future, possibly by the end of this decade, this will present a significant opportunity to the transport sectors, replacing or as a supplement to fossil fuel and gas. It also has potential for electricity generation and as a heat source. Some of that is a little bit in the future and there are some technical challenges. Certainly, where significant heat is needed, for example in cement and construction, there may be opportunities as well.
Obviously, the key is getting the regulatory authority in place and the legislation through. The Maritime Area Planning Bill is going through the Oireachtas at the moment. When that is complete, we can open up for further applications particularly on the west coast. New technologies, such as offshore floating wind, may have potential in the Shannon Estuary, the south east etc. Other parts of the country will also be well positioned for those. We have a supply chain in offshore wind and the renewables area which can pivot and develop into the hydrogen space in addition to early adoption. In budget 2022, the Minister for Finance signalled the Government's willingness to get behind the use of hydrogen in transport. We also see an all-island opportunity. As the Deputy will know, a significant number of hydrogen buses are produced on the island and that presents us with further opportunities.
There are also opportunities with biomass and anaerobic digestion, as well as in the forestry sector and agriculture. The climate action plan will be an area for a cross-Government collaboration, particularly on the emissions side. Our most recent €70 million investment under the Brexit Adjustment Reserve is very much focused on carbon reduction throughout the supply chain, not just the production and processing at plant level but how we push that back to farm level.
The last point I made to Mr. Hughes regarding the ability of farmers to immediately implement a reduction in carbon emissions is something the Department needs to take up with the Department of Agriculture, Food and the Marine. It could be done for the next growing season if energy was put behind that proposal.
I thank the Deputy for that comment.
As nobody else has indicated, that concludes our consideration of the matter before us. I thank Mr. McDonnell and wish him a speedy recovery. Hopefully, we will see him in person soon. I thank Mr. Hughes for assisting the committee in its consideration of this matter. He made the comment that cities are now competing with other cities. I remind him that Limerick has done very well in the past, is doing well at present and will, hopefully, do very well in the future. Our city is a great place in which to invest. We will probably return to the matter we have discussed this morning in due course. I thank everybody who participated in the discussion.
I propose we go into private session to consider other business. Is that agreed? Agreed.