John Halligan (Waterford, Independent)
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Question 5: To ask the Minister for Jobs; Enterprise and Innovation his views on whether it would be beneficial to the State to sponsor struggling small and medium businesses with a view to encouraging employment; his plans to liaise the Department of Social Protection in relation to this matter; and if he will make a statement on the matter. [11744/12]

Seán Sherlock (Cork East, Labour)
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Supports to business by successive Governments over many years have focused on supporting viable businesses in the manufacturing and internationally traded services sectors, where the benefits to the economy of such supports significantly exceed their cost. In continuing that approach, this Government's objective is to facilitate the creation and maintenance of the maximum number of sustainable jobs in the economy by improving the operating environment for business and focusing on companies that demonstrate growth potential.

The Action Plan for Jobs 2012, which was published on 13 February, sets out a range of measures which are designed to support new business start-ups, improve enterprise competitiveness and help firms to grow. Small and medium enterprises will benefit in particular from measures in the action plan. These include the establishment of a new one–stop–shop structure for micro-enterprise support. Also included is the roll-out of the micro-finance fund for small new start-ups. The fund will go live following the finalisation of its delivery structures and the scheme's approval by the European Investment Fund.

Another measure is the introduction of a new temporary partial credit guarantee scheme, which will address the problem of access to finance for viable SMEs that do not meet the normal lending criteria of the banks. This scheme will go live as soon as possible following the enactment of primary legislation in Quarter 2 of 2012. Other measures include the expansion of mentoring schemes, particularly between multinational companies and SMEs, and measures to improve access to public procurement opportunities for SMEs.

In addition, the south east action plan, which was launched by the Minister, Deputy Bruton, on 2 December last, contains specific actions to address the unemployment problems affecting the south east. The plan identifies many actions that can help deliver on that ambition of having a stronger local enterprise base. There are challenges for all agencies in the region to help build up the region's competitive advantage and then to promote it in a co-ordinated manner.

Additional information not given on the floor of the House.

The Action Plan for Jobs 2012 is part of a wider, whole-of-Government response to the jobs crisis, which includes the recently published plan for labour market activation, Pathways to Work. Both documents are fundamentally linked and recognise the need to reform our policies and structures to secure long-term and lasting results for our enterprise base and for job-seekers.

The action plan sets out over 270 measures to be implemented this year to support job creation. Pathways to Work will reform the public employment services and the further education and training services to facilitate people to access the job opportunities that become available. Under the Pathways to Work approach, over 85,000 job experience and work placements will be made available by the Department of Social Protection this year, with a further 457,000 training and education places available through the Department of Education and Skills. These initiatives will impact positively on all regions of the country.

John Halligan (Waterford, Independent)
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Statistics show that over 1,400 businesses, medium to small in size, went bust over the past two years. According to the Central Bank, 30% of all loans to SMEs are in trouble. Those who could obtain loans are in trouble. In the business section of The Irish Times during the week, it was stated a leading Irish supplier and installer of small-scale renewable energy systems has turned to the United Kingdom to expand his business. His reason is the lack of a feed-in tariff or Government support for the industry. He states, "In many cases, UK producers who availed of a feed-in tariff and fixed their costs have taken their market share, in contrast to their Irish counterparts". He states the number of mushroom growers in Ireland two years ago, 400, has dropped to 60.

The job creation programme states specifically:

Job creation is central to any recovery strategy. Every person who leaves the dole and goes back to work reduces the deficit by an estimated €20,000, spends on average an additional €15,000.

If it costs between €22,000 and €35,000 to keep somebody on social welfare, surely innovative thinking outside the box is required. I refer to the sponsoring of small businesses, which are not paying reduced rates or rent, as is evident in my constituency. Would it not make sense to sponsor a business at a reasonable rate with the amount required to keep somebody on social welfare? We could immediately take 10,000 to 20,000 people off social welfare.

Seán Sherlock (Cork East, Labour)
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I take the point the Deputy is raising. We are being imaginative in ensuring there is a micro-finance fund for small businesses. The new partial credit guarantee scheme is designed to help the SME sector. If one talks about the direct subsidisation of a business - I take the point made by the Deputy on the encouragement or retention of employment within existing businesses - one must be mindful of the consequences. Where there are two companies trading in the same sector, one thriving and the other not, and one supports directly the one that is not thriving, one must realise there are permutations regarding State aid rules on direct subsidisation. We are, therefore, seeking to create the types of programmes to which all businesses will be able to subscribe, such that we can try to retain employment.

In the two types of businesses to which the Deputy alludes, the phenomenon he described could be seen a consequence of a direct drop in consumer demand, which is having a major impact. We must also factor that into the equation. The Deputy's point is well made but we are trying to address the problem through programme supports and direct-credit supports for companies that are thriving and will survive.

John Halligan (Waterford, Independent)
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I am not critical of the jobs initiative in its entirety, as the Minister of State knows and as I have said publicly. In Pathways to Work, there is an initiative to pay private companies thousands of euro in taxpayers' money for each person taken off the dole. Why do we not turn that on its head? When small businesses' incomes begin to decline, their first step is to let part-time people go. I have dealt with a small business in the south east in which a husband and wife work 70 or 80 hours per week for a very small wage. They would be better off on social welfare. They say they must work these hours because they had to let somebody go, the paying of whom represented a considerable cost. I urge the Minister of State to think outside the box and sponsor employees with the money paid to social welfare recipients.

Seán Sherlock (Cork East, Labour)
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To be fair and objective about this, we are thinking outside the box. Research and development tax credits will encourage greater business growth.

John Halligan (Waterford, Independent)
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Yes, I accept that.

Seán Sherlock (Cork East, Labour)
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The Revenue job assist scheme will also help, while PRSI programmes entice employers to retain employees and there is a tax break for that purpose. On the demand and supply side we are trying to encourage companies to retain people in jobs. It is an extremely difficult thing to do because one must adhere to State-aid rules in doing so. We have been imaginative in trying to get people back into the work force through labour market activation measures, including the pathways to work scheme. We will stay on that course. The essential point in the Deputy's question concerned a direct subsidy to individual businesses. We are trying to take a more imaginative view on that by putting in place the temporary credit guarantee scheme and the micro-finance fund. In addition, we are encouraging employers through tax breaks and PRSI credits. That is the way to stimulate growth.