Wednesday, 28 September 2022
Financial Resolutions 2022 - Financial Resolution No. 6: General: Financial Resolution (Resumed)
With respect to the justice Vote, I welcome the measures introduced. Everyone will welcome additional gardaí on the beat and new recruits passing through Templemore. I wish to make a point about my constituency of Waterford. It may be an issue for the Office of Public Works, OPW, but we are waiting for upgrades to the Garda station there, which is now the headquarters south east Garda division. There are additional civilian staff coming in and there is nowhere for them to be accommodated within the station. I ask for that matter to be raised with the Minister. We need funding and the development of that station if it is to have any chance of actively trying to fulfil its remit.
Yesterday's budget of €11 billion was of a scope before never seen in the country. Certainly, the economic and social challenges facing the country, because of the energy crisis and the resulting inflation, are also of an extraordinary magnitude. Whatever our politics, we hope that this budget will have a significant impact in the context of reducing the chronic pressures facing households and businesses. There has been must talk in the House, yesterday and today, of the need to support households, but I would like to focus for a few moments on the SMEs that are facing catastrophic energy costs and extremely difficult trading environments. The SME sector is constituted by micro, small and medium enterprises. Between them, they employ over 1 million people. The SME sector has for many years been the bedrock of national revenue generation, long before the money tree of foreign direct investment arrived, with the associated corporation tax it has brought, which is most welcome. The SME community has heretofore, and largely on its on, generated the taxes that have put gardaí on the beat, teachers into classrooms, nurses at bedsides, and secured Department of Social Protection payments.
What is happening in this sector? I will provide the Minister and Minister of State with an idea of where things stand. I wrote to the Ministers for Finance and Public Expenditure and Reform in respect of this issue recently. I highlighted the case of a manufacturing business in the south east that currently employs more than 40 people. Its monthly utility costs rose from €9,000 in January to €21,000 in April and to €42,400 in August. The company makes a range of components for sale through trade and retail outlets. It uses electricity predominantly in heating and cooling processes as part of its production. It has no way of mitigating its electricity usage without reducing its output, and thereby reducing revenue. Under the proposed Government SME support scheme, the firm would be able to claim 40% of its increased electricity costs from its average base where 150% of the annual cost increases have occurred. It well qualifies for the scheme. A rough calculation delivers a support of €13,300 per month. However, that is capped at €10,000, which means that this company can see support extended which would reduce the firm's present energy bill from €46,000 to €36,000. The revised annual energy cost would be €432,000 per annum versus €108,000 for the previous year. That is a net 300% increase year on year. In euro terms, it is an additional operating cost of €324,000 annually, or a whopping €27,000 per month.
I know the business very well. It is operating in a challenging and competitive sector and has tight margins. I can promise the Minister and the Minister of State that there is not a spare €320,000 lying around anywhere for the business to plug the gap. It is a business that would have been severely impacted during Covid, and it is only getting back on its feet. It is also extremely sensitive to consumer demand activity at retail level. Reducing energy bills for this business means reducing activity, and thereby reducing turnover. It is not possible for this business to scale down in order to save costs. It will not improve its profitability and it will not make the business viable at present to support the levels on offer. It is a rural business that employs 45 skilled and semi-skilled operatives. If it stops manufacturing, the products it makes will most likely be replaced by cheaper imports. The employees working in the business will struggle to find jobs to which they are suited, and a number of them who are middle-aged will quite likely end up in long-term unemployment. My question for the Minister and Minister of State is as follows. How does it advance our national interest to support crisis cost-of-living measures for families while not supporting adequately the businesses which keep many of these family breadwinners in employment?
The SME support package that Government has unveiled will not do enough to keep these businesses viable, which they were up to some months ago. If we do not make significant efforts to keep these businesses operational to some degree, we will have very little on which to build an economic recovery into the future, which we obviously want to see following this crisis. Yesterday, the Government announced contributions to a rainy day fund. How much water will be bail before we take a significant look at how we can meaningfully support SMEs over the next 12 months? I urge the Government to examine this issue. I also ask the Minister and the Minister of State to engage with officials in the Department of Enterprise, Trade and Employment in particular to ensure that they stay close to business groupings to understand the pressures that are coming down the line. What is going to happen here is that a number of business promoters are going to try to keep trading in the hope of reducing their costs. They will then start to fail to meet supplier payments and return their VAT payments. Ultimately, their businesses will become insolvent, at which point they will fail and go into liquidation. We are going to see people who spent 50 years of their lives developing intergenerational businesses basically becoming insolvent. Those people will ultimately become liable for loans and possibly debts. That is not fair to anybody. As I said, these were all very viable businesses before we arrived where we are now. What I am saying very clearly is that the Government support of 40% is not adequate. It is not enough to address what is happening. We need to get major actors to sit down and work out at what point a support is viable, at what point it is better to keep companies trading and to keep employees employed, and what support moneys should be directed to that point. I can say that we had, and have had, a very vibrant SME business sector in this country for years. We have been slightly overtaken of late with the windfall taxes that are coming from the FDI sector. However, as has been said by both the Ministers for Finance and Public Expenditure and Reform, that revenue may well be transient and may be gone in 12, 18 or 24 months. We do not know where it will finish, but we need to sustain our SME bedrock in this country. That means we need to support them. I call on the Minister, the Minister of State and those in Government to ensure that we do not have a catastrophic failure in the SME sector before we try to step in and provide adequate support.