Peadar Tóibín (Meath West, Sinn Fein)
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Question 20: To ask the Minister for Jobs; Enterprise and Innovation the cost to businesses in view of the recent gas and electricity price increases; the number of jobs he expects that will be lost as a result of the price rise; his strategy to off set these costs; and the expected job losses. [21435/11]

Peadar Tóibín (Meath West, Sinn Fein)
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Question 23: To ask the Minister for Jobs; Enterprise and Innovation the cost to Irish businesses of the recent and proposed increase in interest rates; the number of jobs he expects that will be lost in the economy; and his strategy to off set these costs and job losses. [21436/11]

Richard Bruton (Dublin North Central, Fine Gael)
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I propose to take Questions Nos. 20 and 23 together.

As the Minister for Jobs, Enterprise and Innovation, I am keen to ensure that the cost base for business is competitive to enable enterprises to grow and to support job creation. While there has been a welcome improvement in cost competitiveness in the past two years, including in the energy field, any reversal of these trends would be most unwelcome. However, the Government has no role in setting electricity prices and only certain segments of the market are regulated by the Commission for Energy Regulation, CER. I recently met the CER and asked that there be a clear distinction made between the elements of energy pricing within our control and those that lie outside it.

Last week, Bord Gáis Energy announced that it is to increase its residential electricity prices by 12% from 1 August due to the significant increase in the cost of commodities on the wholesale markets. As this increase relates to residential customers only, it does not require the CER's approval.

The Sustainable Energy Authority of Ireland, SEAI, published a report earlier this week on electricity and gas prices in Ireland based on EUROSTAT data. This report includes an analysis of the most recent trends in energy costs for businesses. While the report is detailed, the main findings are that, following reductions in electricity costs for businesses in 2009 and the first half of 2010, there was upward pressure on prices during the second half of 2010, with prices rising slightly faster than in the EU in general. Notwithstanding the increases, Ireland's electricity costs remained below the EU average for medium to large business consumers, but above the average for small business consumers. Gas price increases for businesses also increased in the second half of 2010, but remained below the EU average for all business customer levels.

I do not have data on the specific impact of increases in gas and electricity prices on business. The impact will vary depending on the size of the company and the nature of its activities. However, indicative data published in the National Competitiveness Council's "Costs of Doing Business in Ireland" report would suggest that, in the manufacturing and services sectors, utility costs, including water and waste as well as energy charges, account for less than 5% of companies' total costs.

It is important to point out that business and domestic customers can avail of competitive offerings from a number of electricity and gas suppliers and should seek the best value on offer in the marketplace to suit their circumstances. Competition helps to put downward pressure on energy prices, but businesses can also focus on mitigating energy costs through energy efficiency measures. The SEAI can provide advice and, subject to available resources, financial assistance in this respect. In addition, extensive tax relief is available to businesses under the accelerated capital allowances scheme for energy efficient technologies. Enterprise Ireland also works with its client companies on improving productivity and efficiency and offers a range of programmes in this regard. The home page of my Department's website includes links to the main supports available to businesses for job creation and productivity, including supports available from the SEAI and Enterprise Ireland.

The Government will do all it can to reduce the cost of doing business. We have been working on several elements, including rents, wages, commercial rates and other charges. The European Central Bank, ECB, announced an increase in interest rates on 7 July. An independent organisation, the ECB has sole responsibility for monetary policy decisions in the euro area and the Government has no control over setting interest rates. However, we have taken many steps to improve access for SMEs to credit, including restructuring the banks, a partial loan guarantee that is in development in my Department and other measures.

Peadar Tóibín (Meath West, Sinn Fein)
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Cost competitiveness is a major issue for small businesses throughout the State. It is often the case that the Government parties focus intently on the cost of labour when considering various costs. One reason for asking this question was to try to open the Government's mind to the fact that other costs affect small businesses. High inflation is doing significant damage to the ability of such businesses to function.

Michael Kitt (Galway East, Fianna Fail)
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Could we have a question, please?

Peadar Tóibín (Meath West, Sinn Fein)
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Most of this inflation is because of increasing utility costs, not demand. The Government has control over many of these costs, but the Minister stated that it has no control over the pricing of electricity for small businesses. Can the Government start to effect such control? What mitigating activities is the Government taking to address the increasing price of oil, which is due to the weakness of the dollar? Given Germany's focus on ridding itself of the nuclear aspect of its energy resources, there will be major pressure on gas. It is important that the Government focus on a proper competitiveness policy in respect of utilities for the near future. I would like to discuss interest rates shortly.

Richard Bruton (Dublin North Central, Fine Gael)
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I agree with the Deputy. Cost competitiveness is an issue across the range. For example, the Government is committed to tackling rents, to which end the Department of Justice and Equality proposes legislation to address the issue of upward-only rent reviews. While the cost of professional services has been decreasing, the National Competitiveness Council, NCC, has highlighted the fact that legal services are bucking the trend and their cost is increasing. The Government is committed to addressing this issue. The Government is also examining the potential for a reduction in the cost of rates, a matter I remember the Deputy being concerned with during my last Question Time.

The Government does not regulate any of the energy sector. That is the responsibility of the CER. Most of the sector, including the entirety of the electricity market, has been deregulated and the commission no longer sanctions individual increases. The only segments that remain subject to sanction by the CER are domestic gas users and, until October, small business gas users.

The policy of this and the previous Government has been to foster competitiveness in these sectors. However, costs such as the world prices of gas and oil are not within the control of the regulator or the providers. I asked the regulator to make distinctions between the elements of the cost structure that can be controlled within the State and those that cannot. As the Deputy suggested, perhaps greater attention can be applied to the elements of the energy mix that are controllable within the State. Some of these are long-term in nature, for example, the development of alternative sources.

Peadar Tóibín (Meath West, Sinn Fein)
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The Government is a capable one and I understand that it will not be able to control international oil prices, but certain measures, such as creating an interconnector between Ireland and Britain and improving the grid on this island, would make the liquidity of energy more competitive and cheaper for local businesses.

The interest rates issue is a massive one for Ireland. Individual businesses are encumbered, meaning they are suffering as a result. Small businesses are not receiving loans, with 79% finding it difficult to get them. With rising interest rates, businesses consider the future will be worse; therefore, expectations are holding them back from getting loans. The ECB is providing a pro-cyclical policy through its interest rate rises. It is bad enough that the Government is standing back and stating it cannot do anything about it; if this is such a key element of the economy, it should go to the ECB and state the economy must be taken into consideration, not just the German economy, when considering interest rates in the future.

Richard Bruton (Dublin North Central, Fine Gael)
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The ECB, under statute from the European Union, decides its interest rates policy with an eye on inflation across the eurozone.

Peadar Tóibín (Meath West, Sinn Fein)
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With an eye on inflation in Germany.

Richard Bruton (Dublin North Central, Fine Gael)
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Politicians may express their views that current interest rate policy is inappropriate for Irish circumstances - there is no doubt that rising interest rates do not suit us - but, on the other hand, the ECB is clearly established under legislation.

We can look at the issue the Deputy raised of the difficulty for Irish SMEs in getting loans. That is why the Government restructured the banks and we now have two pillar banks which are well capitalised and have low loan to deposit ratios. They are capable of advancing €20 billion in loans to SMEs in the next three years. It is important that the Government ride shotgun on the delivery by Irish banks of these loans to SMEs. We must focus on the things we can control, and that has been the focus of the Government. We recognise there has been a market failure, which is why the partial loan credit guarantee scheme will be developed later in the year.