Dáil debates

Wednesday, 24 October 2012

Statutory Sick Pay: Motion (Resumed) [Private Members]

 

The following motion was moved by Deputy Dara Calleary on Tuesday, 23 October 2012:That Dáil Éireann:recognises:- the fact that there are 200,000 small businesses in this country that employ more than 655,000 people; - the ongoing credit and cash flow problems being endured by small businesses; - that in 2010, employers paid €5 billion or 75 per cent of the total contributions to the Social Insurance Fund; - that cost competitiveness is one of the key determinants of every firm’s success; and - that if the cost of doing business is reduced, firms in Ireland will become more competitive; agrees that: - the plans of the Minister for Social Protection, to impose what would amount to an additional €89 million in taxation on struggling businesses with the introduction of a new sick pay scheme, should not proceed; - the Minister is using flawed and misleading international comparisons in justifying her plans; - an additional taxation burden on employers will drive many small and medium enterprises out of business, damaging the economy and generating more unemployment; and - the Government has failed to tackle rising costs for businesses; and calls on the Government not to proceed with the job-destroying Statutory Sick Pay Scheme.

Debate resumed on amendment No. 1:To delete all words after “Dáil Éireann” and substitute the following:“recognises the fact that there are 200,000 small businesses in this country, and acknowledges the vital role they play in the economy and the fact that they employ 655,000 people; notes the range of measures in place to support business, in particular the small and medium business sector, including the seed capital scheme, the three year corporate tax exemption for new start-ups, the back to work enterprise allowance scheme (self-employed), the employment and investment incentives scheme, the research and development tax credit scheme, the accelerated capital allowance scheme, the Revenue job assist scheme and the employer job (PRSI) incentive scheme; notes the Government’s actions to improve access to finance for small and medium enterprises, including through the temporary partial loan guarantee scheme and the microfinance scheme; notes the commitment to reducing the administrative burden on business across seven key Departments and the Revenue Commissioners, with a view to achieving a 25% reduction by the end of the year, and that administrative burdens within the responsibility of the Department of Jobs, Enterprise and Innovation have been reduced by over 24% so far, yielding potential savings of €206 million per annum for business; notes the Government’s continued commitment to reducing the cost of Government-imposed red tape on business, including through the audit of business licence requirements which is currently under way; notes the Government’s actions in improving competitiveness, and creating and maintaining jobs by reforming the statutory wage setting mechanism and making it more appropriate to our modern economy through the Industrial Relations (Amendment) Act 2012; welcomes the fact that all but one local authority have frozen or reduced their annual rate of valuation for commercial rates this year; notes that the Government has simplified and extended the employer’s job PRSI incentive scheme, making it easier for employers to hire someone from the live register and reduce their payroll costs, and that the Government is actively promoting this, and other schemes, that provide financial supports for business; notes the Government’s progress in improving Ireland’s competitiveness, which is reflected in the International Institute for Management Development’s World Competitiveness Yearbook 2012, which was published last May, and saw Ireland improving four places in the overall rankings to 20th place; notes that expenditure on illness benefit in 2012 will be an estimated €847 million and that overall expenditure on disability related schemes by the Department of Social Protection will be in excess of €3 billion; notes that over the last ten years, the number of people in receipt of a disability-related payment has increased by over 100,000 to just under 300,000, representing 16% of the working age population, and that expenditure on disability-related payments has increased by €2.2 billion to €3.4 billion; recognises that the deficit in the social insurance fund (from which illness benefit is paid) is projected to be €1.82 billion in 2012; recognises that in the current economic circumstances, the Department is required to secure further savings on its programmes of expenditure in budget 2013 and subsequent budgets; and conscious of the Government’s wish to maintain, as far as possible, vital income supports to the most vulnerable sectors in society, it is necessary for the Government to examine all aspects of departmental expenditure; notes that the Minister for Social Protection has been engaged in a consultation process with key stakeholders to examine the issues arising from the potential introduction of a statutory sick pay scheme in Ireland; and notes that this process of consultation and consideration is not yet complete and that no formal proposals in this regard have yet been brought to the Government."- (Minister of State at the Department of Jobs, Enterprise and Innovation, Deputy John Perry).

6:45 pm

Photo of Catherine ByrneCatherine Byrne (Dublin South Central, Fine Gael)
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Deputies Mick Wallace, Seamus Healy and Tom Fleming are sharing time.

Photo of Mick WallaceMick Wallace (Wexford, Independent)
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The Minister of State, Deputy Sean Sherlock, will not be surprised to hear I believe it is not a good idea to impose these sick pay conditions on employers now. If it had been ten years ago, I would probably not have objected. However, in the current economic climate it is not a good idea. Conditions are already difficult for small and medium-sized businesses. While the Government is keen to talk up export figures, which is fair enough as they are important, the manner in which the domestic economy has been abandoned is disappointing.

Austerity is having a direct impact on most small and medium-sized businesses, whereas the multinationals are independent enough to deal with these pressures and difficulties. We are all familiar with most of the issues relating to the domestic economy, including local authority rates. During the general election campaign everyone was going to tackle them, given that they were not going down, while everything else was. They have still not gone down and it remains a significant problem. It is directly linked with local government - more the lack of it – and its dependence on rates.

Despite rumours to the contrary and reports in the newspapers, I still employ 50 people in the restaurant sector. Rising energy costs, for instance, can have a dramatic effect on the sector.

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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It is good grub too. I have tasted it.

Photo of Mick WallaceMick Wallace (Wexford, Independent)
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I thank the Minister of State. Another cost factor is upward-only rent reviews, an issue which was also to be tackled. We know that rents were not touched because it would not have suited the banks, given that they take in the most rents on commercial property. To claim having a review would be unconstitutional is fine, but the Government should have tackled the issue, instead of caving into the banks. Getting access to credit, even for businesses that are doing okay, is unbelievably difficult. The most significant problem of all for the domestic economy is the fact that people have little or no disposable income.

Photo of Catherine ByrneCatherine Byrne (Dublin South Central, Fine Gael)
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The Deputy's time has expired.

Photo of Séamus HealySéamus Healy (Tipperary South, Workers and Unemployed Action Group)
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I welcome the opportunity to speak to the motion which I support. It is ironic that the party putting it forward is the very one that raided the social insurance fund during the years when it was in government. The fund is now in deficit and the only way to ensure it is brought back into surplus is by creating employment which will mean more payments going into the fund with less coming out because of fewer people on the dole queues. Unfortunately, the Government has a bad record in employment creation. In the past 12 months there has been a net loss of 33,400 jobs, despite jobs budgets, jobs initiatives and all the talk about job creation before and after the general election. The Government’s position is more job destruction than creation.

As other Members have stated, the moneys, approximately €25 billion, taken out of the economy in the past few years have decimated the domestic economy in particular. Smaller employers in this sector would be hit hard if the Government’s proposal on sick pay were to be implemented. Walking the main streets of our towns and cities, one will be more than aware of the number of small businesses and shops that have closed in recent years, with many thrown on the dole queues. The Government’s proposal on sick pay would be counterproductive and add to the high numbers already on the dole queues. It would also be a further cut to public services. Front-line services in health, education, the Garda and defence have already been decimated. The imposition of the Government’s proposed sick pay scheme would mean further cutbacks to public services. For instance, today in South Tipperary General Hospital 24 patients were on trolleys waiting to be seen to. If the Government proposal goes ahead, it will make these waiting times and conditions worse because there will be fewer funds available for front-line services. The same applies to community policing. The Minister’s proposal is wrong as well as unacceptable and will only make matters significantly worse.

Photo of Tom FlemingTom Fleming (Kerry South, Independent)
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The proposed statutory sick pay scheme amounts to nothing more than an extra tax on employment at a time when reducing costs and creating jobs should be the priority. Forcing employers to pay an additional €85 million to cover the costs of up to four weeks sick pay will make the country less attractive for investment and erode some of the hard won competitiveness gains made in recent years. By international standards, the cost of employing people in this country is already too high. The Government’s proposal will only make matters worse. The suggestion that Ireland is out of line with international practice on sick pay is misleading. Employers already pay 75% of the money that goes into the social insurance fund which covers sick pay benefit. In 2010 this amounted to €5 billion. The current proposal will make employers actually pay on the double.

International comparisons also need to recognise that Ireland’s employer's PRSI rate of 10.75% has no cap on the employer’s contribution. The rate applies to all income, unlike in the United Kingdom, for instance. The transfer of social welfare costs on to employers will force many of them to eliminate or reduce current sick pay benefits where these are being paid. It will also mean other cost-cutting measures will have to be implemented and employment will be reduced. It will put jobs at risk and add further pressure to an already stressed social welfare system, the last development the economy needs at this time.

Absenteeism already costs small firms much as they incur significant costs, including voluntary sick pay top-up, medical referrals, overtime payments, as well as the effect on quality and productivity. The proposal is also at odds with the Government’s Action Plan for Jobs which states one of its aims in making Ireland more competitive is to reduce the cost of employment to employers. There is a need for a rethink about this proposal. Many small businesses, whether it is a shop or a family business, have their backs to the wall with impediments in their way to survive. One only has to look at the hotel sector which gives sizeable employment, but many hotel rooms lie idle. We do not need to contract conditions even further.

6:55 pm

Photo of Derek NolanDerek Nolan (Galway West, Labour)
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I am an optimist at heart and I intend to consider the Fianna Fáil motion from a genuine point of view. There is a genuine case to be made for businesses struggling in the economy. There is no doubt the domestic economy has taken a whack and that small businesses are struggling with reduced incomes and profits as well as reduced customers. The cost base they are obliged to service is an ever-increasing part of their businesses and some of them are simply unable to cope with it or, if they can cope, they are staying just above the water. I wish to put on the record that there is a genuine case to be made for small and medium enterprises.

Our relationship with taxation has been always bizarre. We have never had the concept of a social wage or contract whereby a person pays taxes into a fund or to the State in return for services, a certain standard of living or a Government that provides for that person in return. We have always seen taxation as something that simply goes away, something that is taken from us and we have always resented it. There is no greater example than the Social Insurance Fund, which has been allowed to go into deficit to the tune of almost €2 billion in 2012. I understand the exact figure is €1.82 billion. If the fund is designed to provide for social insurance then it should balance. The fund should be paid into by employees and employers to provide insurance for those who cannot afford certain services or who are out of work and so on.

One issue that annoyed me about the universal social charge when we introduced it was that we gave it a nice name and we had the idea that people were getting social benefits from it, whereas in fact it was simply a tax. We need to move to a different form of taxation and a different relationship between people and the State.

Let us take a step back before we consider the statutory sick pay scheme. What is the first thing we know about sick pay? It is that there is no entitlement to sick pay from one's employer. Employees are often at the discretion of a benevolent employer who may decide to provide sick pay in the terms and conditions of employment. It is not something provided by right. If an employee is sick, the current position is that he or she is entitled to nothing for the first three days. After that an employee is entitled to apply for illness benefit.

The Minister has begun a consultation process on the introduction of a statutory sick pay scheme. While the interests of employers are very important because they provide jobs, we cannot exclude from the discussion the interests of employees. Employees have a right to earn an income, irrespective of whether they are sick, based on the relationship with the employer. In many countries throughout the world, especially in Europe, statutory sick pay schemes work successfully. Examples include Australia, where there is a statutory entitlement to ten days per year, Austria has a scheme for up to 12 weeks, the United Kingdom has a scheme for up to 28 weeks and Finland has a lower entitlement of nine days.

Many things need to be balanced. In discussions on the economy we are always quick to say who should not pay. Were we to listen to all of the debates no one would pay anything and a mythical source of gold somewhere would solve all our problems. Everyone must contribute. The issue of statutory sick pay and the benefits it would have for the economy and for employers in managing absenteeism are manifold. This is especially the case in the public sector to which the scheme could apply and serve as a good impetus for proper human resource management. A scheme would be also better for employees.

The Minister for Social Protection has set out a consultation process. At all times she has engaged with businesses, employee representatives and so on and this process should continue. We should consider the Social Insurance Fund as something to be properly funded and seen as a viable fund to provide services rather than something left to the discretion of a balance that cannot always met.

Photo of Gerald NashGerald Nash (Louth, Labour)
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I am amused these days when those in Fianna Fáil raise issues to do with business and the economy. They remind me of the B-movie villain who always returns to the scene of the crime with his hands in his pockets, whistling and asking innocently what has happened and whether there is some way he could possibly help. Let us make no mistake, Fianna Fáil is the villain of this particular piece. It is single-handedly responsible for wrecking our economy and for driving many businesses to the wall. Those in the party may now act the part of concerned onlookers but the memories of the people are not short and I do not believe anyone will be taken in by such brazen attempts to ignore the party's all-too-recent history. Much of the damage done to our economy and our indigenous businesses was caused by the previous Government's inability to stop pandering to special interest groups, a habit which the party responsible has yet to shake. Businesses and banks sought light-touch regulation and the party opposite delivered it. It constantly sought exemptions from rules which were in the public interest and which were the norm in other countries. Those in Fianna Fáil are at it again today and they were at it last night with their attempt to shoot down a proposal that employers should contribute modestly to statutory sick pay, a proposal which will do nothing but bring us into line with normal practices throughout Europe.

Chambers Ireland does much good work in every town and city throughout the country. The organisation should know better but it released a statement today criticising the Minister for Social Protection, Deputy Burton, and suggested that Ireland's situation is not unique but similar to that of France and Italy. This statement does not add up. In France employers must top up illness benefit to normal pay levels and in Italy there is provision for 180 days of statutory sick pay, similar to arrangements in the United Kingdom, our closest trading partner. This is the system that pertains a few miles north of us in Northern Ireland. If Chambers Ireland wishes to go down this road, I would be perfectly happy to support it.

It is no longer sustainable or affordable for the taxpayer to foot the burden of illness benefit in this country. According to figures issued to me in reply to a parliamentary question late last year, in 2010 it cost the taxpayer almost €1 billion for almost 26 million sick days. The taxpayer is predominately funding illness benefit and it follows that there is little or no financial incentive to tackle absenteeism. In the Netherlands before the introduction of a statutory sick pay scheme some 8% of the workforce were out on sick leave on any given day. It reached the point where the Netherlands was known as the sick man of Europe. Since the inception of an employer-funded scheme in the Netherlands, the Dutch rate has halved to 4%. This has led to productivity and profitability gains. We should move beyond the glib soundbites of the issue of statutory sick pay, some of which we have been treated to here in recent days. We should have an honest, open and frank debate, one that is evidence based. I firmly believe based on the evidence I have seen that the introduction of statutory sick pay will ultimately provide a win win situation for business and the taxpayer. I urge everyone in the House who has contributed to the debate to show responsibility in terms of the discussion.

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
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I welcome the opportunity to speak on this Private Members' motion. We should acknowledge that no clear decision has yet been taken in this regard. Perhaps it is one of the few debates where there is space for an ideological difference, and there is an ideological difference. We must acknowledge that the country has been put in a remarkably difficult position economically and Ministers seeking to reduce spending by in the region of €2.25 billion while finding an increase of €1.25 billion in income will find it difficult to come up with measures to secure these figures.

One of the most crucial sectors in the economy at this time is the small and medium enterprise sector, especially the indigenous sector. The country has done sterling work to continue to secure significant amounts of foreign direct investment. Our low corporation tax rate, our workforce and our access to the eurozone through our membership of the euro area have all led to significant job announcements and significant optimism.

The country has been less successful in protecting, encouraging and supporting small entrepreneurs, Irish people, to get to a point where they can set up and establish their own businesses. Let us consider the density of employment created by small business. Were our small businesses in a position to employ another one or two people, we would be truly on a march to economic recovery. I fully respect what the Minister has said and her ambition to reduce her expenditure. However, small businesses are already carrying a significant burden.

It is accurate to state that what is being proposed is not common across the euro area or the working world. Given the differential between the sick pay regimes in the public and private sectors, I would support in the first instance trying to adjust the percentages and the numbers in the former through a variety of schemes before looking at the small and medium-size enterprises.

The Government has done some excellent work on PRSI and the microfinance scheme to encourage people to set up of businesses and to employ. I would urge the Minister for Social Protection, Deputy Joan Burton, to look at this and to realise that there will be savings to her Department in reducing the number on unemployment benefit and in them paying taxes through their work. That debate is ongoing. I heard the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, and the Minister of State, Deputy Perry who, I suppose, share some of the concerns of the Small Firms Association and IBEC. These bodies have valid concerns. That is not to say that their concerns are any different from the large number of groups in the country which do not want to see their budgets cut and who do not want to pay any more towards economic recovery, particularly the self-employed. We all meet people in our constituency offices who find it very difficult to secure social welfare payments. Many of them have costs, such as loans. I myself come from this sector. Most who are self-employed and who run small businesses have no interest in being part of the social welfare system. They only require Government and State agencies to allow them the freedom to earn and to work. There may be other more preferential areas where we can look at securing savings in social welfare expenditure.

This is an ongoing debate within the Government and Cabinet. The motion is premature and largely unhelpful. At the same time, from my own point of view, I would seek to support the enterprise side of the argument.

7:05 pm

Photo of John O'MahonyJohn O'Mahony (Mayo, Fine Gael)
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I am glad to contribute to this debate. I acknowledge Deputy Calleary and Fianna Fáil for raising it.

This was a proposal in advance of last year's budget and here it is again. I welcome the Minister of State, Deputy Perry's important assertion last night that there is ongoing consultation but nothing has been brought to Government. Deputy Dara Murphy mentioned the debate was possibly a pre-emptive strike but let us take this positively as a form of the debate and the consultation.

The Ministers, Deputies Richard Bruton and Joan Burton, and the Minister of State, Deputy Perry, and those directly involved in this acknowledge that the 665,000 referred to who are employed form the engine room of the economy and also acknowledge that there are supports that have been put in place in recent times, such as the credit guarantee scheme, the microfinance scheme, the back-to-work enterprise allowance, revenue job assist, etc. I need not list them all here. I agree, as does everybody here on any side of this debate, that many small businesses are hanging on by their fingernails and if this proposal for sick pay is introduced - in the wrong way or possibly at all - it could be the tipping point for many of them. Everybody acknowledges that savings must be made but the way of doing it is important.

Only last week, I arranged for the Minister of State, Deputy Perry, meet the Chamber of Commerce in Claremorris where he heard at first hand the difficulties of small businesses, such as rates and car parking charges. All of these feed into the difficulties in businesses where there is a drop in footfall and plummeting turnover. There has been over-regulation, not only in this Government but in the previous Government as well, as I am sure Deputy Calleary would acknowledge. There were many agencies telling small businesses and shops that they need to do something one way while in the following week someone else from a different agency would tell them something different. The Government is committed to reducing the amount of red tape and regulation for small businesses and there are reports ongoing, but I acknowledge that we need to fast-track this so that these reliefs, as well as the existing supports, are brought forward quickly. Whatever consultation is taking place, it needs to consider carefully a cost analysis of the consequences of introducing this sick pay scheme. It also needs to consider the situation of small employers with two or three employees which would not have the capacity to pay this.

I was interested in the figures across Europe, where the absentee rate is 3.8% in the private sector. In Ireland, it is 2.5% and in small businesses, it is only 2%. This is not about pitching private sector against public sector, but there are a number of issues to be tackled in the public sector where absences are higher. With the goodwill of everybody on all sides of this House, I hope that this will not affect or cause further unemployment in small businesses.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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As the Minister, Deputy Joan Burton, and Minister of State, Deputy Perry, noted in their speeches last night, the SME sector is the backbone of the economy in Ireland. We in Government recognise this. Since we came into office, we have been working hard to create the right environment for companies to grow. Within a year of taking office we introduced the Action Plan for Jobs. It contained 270 different action points that each Department would undertake to help businesses set up and grow.

It is a pity the party that led us into the economic mess is too busy focusing on what might happen instead of focusing on the positives happening in the economy. Employment in export-oriented companies has grown by 10,000 over the past year and a half. Exports from Irish companies are up. They reached €15.2 billion in 2011, the highest level they have ever reached. New supports have been set up for the SME sector. For instance, a temporary partial credit guarantee scheme was launched last week. It will benefit companies experiencing difficulties accessing credit from banks. It will see an additional €150 million being made available to SMEs every year which will probably lead to 1,000 new jobs. The microfinance loan fund has been open for applications since the start of the month. Some €40 million will be available over the next five years to micro businesses. This funding will give people a chance to see whether their idea might work and it will give them the time to develop it into a sustainable business. It is hoped that this scheme can create another 7,700 jobs in the next five years. Those are not the only changes that have been made.

The Minister, Deputy Joan Burton, has made it easier for employers to employ someone who is long-term unemployed. She has changed the PRSI rules so that employers can get an exemption from PRSI for this employee for up to 18 months. That is what has happened already and there other measures being looked at.

In the newspapers on Sunday, there were reports of a debt deal for SMEs. This would allow an SME to restructure its debt. It has been called "examinership light". It would allow the SME to become viable again, continue to trade and, in the process, save jobs. It was a commitment of my party in the programme for Government and we are working on making it happen. I have contacted the office of the Minister, Deputy Richard Burton about this and his Department is discussing it with the Company Law Review Group. It is one more example of how the Government commitment to ensuring that the SME sector works.

On a personal level, I am very much aware of the difficulties faced by SMEs.

I set up an SME 17 years ago and I recognise the difficulties that SMEs are faced with in the current economic crisis. I also recognise the talent out there and the fantastic people who are running their own companies and working for small companies. I have no doubt that it is these small businesses that will be at the vanguard of getting us out of the current economic recession.

7:15 pm

Photo of Michael McNamaraMichael McNamara (Clare, Labour)
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I thank Deputy Calleary and Fianna Fáil for raising this issue and allowing us to look at it in some detail. In Deputy Calleary's speech last night he said that while some OECD countries have statutory sick pay schemes to which employers contribute, some do not. What the Deputy did not say is that the great majority of OECD countries have statutory sick pay schemes to which employers contribute. My colleagues have outlined in considerable detail the countries which have such schemes and Ireland is in a small minority of countries which do not have a fund to which employers contribute. However, Deputy Calleary did find a few countries where employers do not contribute and these include Canada, Greece, Portugal, Turkey and the United States of America. If one takes a cursory look at OECD data to determine what the income tax plus employee and employer contributions, less cash benefits were in 2011, as a percentage of labour costs, one sees that Ireland is ranked quite low, at fourth from the bottom. In figures, Ireland comes in at 21. 3% while Canada, which was cited by Deputy Calleary, came in at 26.1%. There was no data available for Greece. Portugal came in at 33%, Turkey at 35% and even the United States, also cited by Deputy Calleary, came in at 27.2%.

So, accepting the veracity of what Deputy Calleary said, that employers do not contribute to the fund in those countries, then if Ireland is lower than all of these countries in terms of income tax plus employee and employer contributions, that would indicate that the only way to counter that is to increase the employee contribution or to increase income tax. That is, of course, a way of paying for statutory sick pay but if that is what Deputy Calleary is suggesting, then he should be honest about it. Be the party of taxation. Be that welfare party that Fianna Fáil has had a slightly schizophrenic relationship with since its foundation. Be the party of tax and spend. The Bertie Ahern years were about spending and he was a socialist in some circles but, of course, he was a fiscal conservative in others.

The reality is that everything costs money, from statutory sick pay to the current scheme, which, as Deputy Burton pointed out, is unaffordable as it stands. The fund currently has a significant shortfall of income over expenditure. The estimated expenditure is €9 billion, set against income of €7.5 billion this year. In the absence of action to tackle that shortfall, the 2011 deficit of €1.5 billion will double to €3 billion by 2019. In other words, the shortfall will increase from 1.1% of GNP to 2%. This scheme is one proposal to fix that shortfall and there are others, including increasing taxation. However, this Government has said that it will not increase taxation and in particular, it will not increase the taxation of the low paid. If that is Deputy Calleary's solution then I invite him to be honest and outline that to the House in his summation of this motion. I thank the Deputy for the opportunity to look at this matter in considerable detail.

Photo of Martin HeydonMartin Heydon (Kildare South, Fine Gael)
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On the issue of small business in general, I am very proud to be part of a Government that is focused on not taxing work. In a very difficult budget last year, to have managed not to increase income tax and tax on workers directly was quite a feat by the Minister for Finance. That is something that must be recognised by everyone.

One of the commitments in the programme for Government, which was also in the Fine Gael election manifesto, is to reduce red-tape and bureaucracy for businesses. In that context, I welcome many of the measures that have been introduced, which are having tangible effects. The amendment refers to the administrative burdens within the responsibility of the Department of Jobs, Enterprise and Innovation being reduced by 24% this year, yielding potential savings of €206 million per annum for businesses. These are real changes that are feeding down. Local authorities have frozen or reduced rates across the country. The Valuation Bill that is currently before the Seanad will also produce changes. These are the types of measures that must be implemented because small and medium sized businesses are the life blood of our economy. The multinationals are brilliant and the jobs they create are vital but in every town and village in this country there are small businesses that employ one to three people, sometimes family-based and they are absolutely crucial to the future of our economy.

The amendment very clearly sets out the supports that are available to businesses already. These include the seed capital scheme, the three year corporate tax exemption for new start-ups, the back to work enterprise allowance scheme for the self-employed, the employment and investment incentives scheme, the research and development tax credit scheme, the accelerated capital allowance scheme, the Revenue job assist scheme and the employer job PRSI incentive scheme. The amendment also refers to the temporary partial loan guarantee scheme and the microfinance scheme. These are all real and tangible supports which small and medium sized businesses can avail of and they show that this Government is pro-business and is determined to support those who are at the coalface of driving our economy.

Within our overall budget we must try to ensure, while making the adjustments to which we are committed, that people have money in their pockets to spend on services and goods, which will help small businesses. At present, that is a very difficult balance to strike. A major challenge for small businesses at present is accessing credit. The fall off in consumer spending and consumer confidence in general are also serious issues. These are challenges that businesses are grappling with at present.

Regarding the overall issue of sick pay, it is important to point out that no final decision has been made on these budgetary matters yet. It is good that we are having the opportunity to discuss it this evening. There is no question, and the Opposition cannot deny, that we have a deficit in the social insurance fund, from which illness benefit is paid. The deficit is increasing all of the time. It must be tackled and this proposed measure is an attempt to do that. However, imposing a statutory sick pay scheme on small and medium sized business will not necessarily address that issue. We need to examine the matter in a very informed way. The key phrase, which the Minister for Health has used in relation to the health sector, is 'fact-based analysis'. Decisions that are made must be based on fact and must be capable of standing up to scrutiny. That is absolutely crucial.

I would have some concerns regarding the introduction of a scheme of statutory sick pay. It might lead to a situation where an employer would be reluctant to employ somebody with a history of bad health. I would be concerned that some people would be at a disadvantage when applying for jobs. We must also look at how we challenge absenteeism, in both the public and private sectors.

I welcome the fact that the amendment points out that the process of consultation and consideration is not yet complete and that no formal proposals have been brought to Government yet. This gives all Members the opportunity to contribute to the debate about the broader issue of the budget and the impact it will have.

7:25 pm

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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I commend Deputy Calleary on preparing this motion. Other speakers have described SMEs as the backbone of the economy but the additional €89 million in taxation which the Minister for Social Protection proposes to impose on them will make it more difficult for already struggling businesses. My party is opposed to any move to introduce statutory sick pay. We should instead be trying to reduce the cost of doing business so that the country can become more competitive. Many businesses are hanging on by their fingertips. A survey conducted by Chambers Ireland found that more than 87% of respondents believed that transferring the cost of sick pay to employers would affect their businesses negatively.

The issue has been extensively debated in local media in the west. The Tuam Herald reported that banks are stymying small business start-ups in Galway because they are not offering matching finance to companies approved by the county enterprise board. This is a worrying development because the board has been active in awarding a total of €380,000 to 28 businesses in the city and county of Galway, which has led to the creation of 56 new jobs and the retention of 77 existing jobs. This is happening at a time when the Government proposes to merge county enterprise boards with the local authorities. Funding for the Galway County and City Enterprise Board has already been cut with the result that fewer local jobs are being created and supported. Of the 28 businesses which received finance this year, 18 are existing enterprises. The remaining ten new start-ups could not get finance anywhere else. It is a serious matter if the main banks are that slow in helping new businesses. The banks provided only €80,000 in matched funding for the board's investments. I ask the Minister of State at the Department of Jobs, Enterprise and Innovation, Deputy Sherlock, to provide additional funding for the waiting list of pre-approved businesses. A delay in funding means that it will be too late to offer grants to those companies.

I welcome the introduction of the micro-finance scheme. The majority of small businesses will qualify as micro-enterprises or sole traders. Applications have been accepted and are now being processed. However, a report on enterprise found that the interest rate of 9.5% is putting many people off the scheme. Some 30% of clients were unable to draw down their grants or get further funding from their banks.

If employers are already paying large amounts in PRSI to cover the cost of sick leave, it will be difficult for them to do more. In 2010, employers paid €5 billion in contributions to the Social Insurance Fund, which was 75% of the total. The current proposal will make them pay on the double. For the more than 40% of small enterprises which do not at present incur sick pay costs, statutory sick pay represents a substantial additional burden. This new burden is seen as a tax on jobs which will impact most on smaller and more vulnerable employers operating low margin businesses. ISME has argued that it will lead to job losses and the cost base will increase. Where does the Minister of State think small and medium enterprises will find the money to pay for sick benefit in addition to paying for replacement staff given that the majority of them are hanging on by their fingertips?

Photo of Niall CollinsNiall Collins (Limerick, Fianna Fail)
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I am delighted to take part in this debate on the issues affecting small businesses, which are an important part of our economy and offer great potential for job creation in small communities and large urban centres. What has the Government got against Limerick and the mid-west in terms of job creation? The recent announcements from Kerry Group and Paddy Power were welcome but the new jobs will be concentrated along the east coast. The mid-west and the Limerick region have not benefited from any recent significant jobs announcements since the Labour Party and Fine Gael came into office. PayPal decided to locate in County Louth after considering both that county and the former Dell facility in Raheen. Limerick expects the delivery of a major employer at the earliest opportunity.

I commend Deputy Calleary on tabling this motion because it is very important. I wish to share with the House correspondence I have received on the issues arising from it. Correspondence I received from Shannonview Retail Limited which stated:

As a legitimate business in your constituency I would ask for your support to halt the proposal from Minister Burton to make me responsible for my employees' sick pay. We employ 40 full time / part time staff. Rather than support attendance this is more likely to encourage absence as the employee knows that I will have to pay their wages if they don't attend for work.
Correspondence from Mike Hynan, a coach company in Limerick, referred to the sick pay proposal and:
the impact it will have on small businesses, on employment and job creation.

I established my business eighteen years ago and we are based in Limerick We currently employ fourteen in both a part time and full time capacity.

It has been suggested that the cost of illness benefit to the State could be reduced if some of the cost burden was placed on employers, i.e. for employers to pay disability pay for the first four weeks associated with any period of illness.

I believe that such a policy change will have serious cost implications for my business and it amounts to an additional flat tax on employment.
Correspondence from Shellfish De La Mer Ltd., of Castletownbere in County Cork, stated:
The transfer of social welfare costs onto employers will force many to eliminate or reduce current sick pay benefits where these are being paid, implement further cost-cutting measures or reduce employment. It will put jobs at risk and add further pressure to an already stressed social welfare system. It is the last thing the economy needs at this time.
Correspondence from Limerick Chamber stated:
The restoration of cost competitiveness is central to any economic recovery. If Irish enterprises are to compete successfully for business in international markets, then cost competitiveness is one of the key determinants in achieving success.

It is imperative that the Government does not implement mooted plans of the Department of Social Protection to transfer these costs on to business. In our view the DSP should focus on saving costs elsewhere rather than simply passing additional burdens on to the job creating tax generating section of the economy.
I am sure the Deputies opposite have received similar correspondence.

We also need to address other issues affecting small businesses, including in particular commercial rates. The long promised valuations Bill has been poorly received by the retail and business community.

The Vintners Federation of Ireland was quoted recently as saying it is essentially a new Bill written by the Valuation Office for the Valuation Office and that it addressed none of the legitimate concerns of ratepayers. It does not address the issue of inability to pay or of a change of economic circumstances in the business and does not address the issue of fairness and equity in rates. As the Minister of State is aware, small businesses are key to the economy, to employment and to keeping our communities alive. We must listen to what these people are telling us.

I have not had the opportunity to mention the old thorny issue of upward-only rent reviews. I have in my possession a letter which was circulated around the time of the election in regard to these reviews and I regret that I cannot bring it to the attention of the Dáil tonight. Perhaps I can on some other occasion.

7:35 pm

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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I welcome the opportunity to contribute to this important debate and I thank my colleague, Deputy Calleary, on having the foresight to bring the matter to the House.

It is clear raising this issue has started to ruffle the feathers of some of those on the Labour Party backbenches. I had the benefit of hearing what Deputy Nash had to say before I left my office. I was a little disappointed by what he had to say, because I have quite a lot of regard for him and he usually makes a valuable contribution. I will give him the benefit of the doubt and put what he had to say down to Labour Party central issuing the first page of its defensive bible, which clearly is on the lines of suggesting its backbenchers should look at the guys in opposition and blame them and that will resolve all the problems.

Whether Deputy Nash or Labour Party central like it or not, we are elected to do a job. Whatever about holding the Government to account, with the limited numbers we have, we will contribute to the best of our ability and will bring forward ideas as best we can. I advise Deputy Nash and other backbenchers who are of the view that it is an appropriate defence to continue to kick Fianna Fáil and blame other parties for the state of the economy, to go back over some of the missives issued by their own parties over the past ten to 15 years. They need not go to their election material, but just to their regular press releases and commentary on the budget. I have seen very little over the course of that time that leads me to believe they would have done things dramatically differently. If we all accept we are in the position we are in and work to try to resolve it, it will provide for a far better and more appropriate level of debate in the Chamber, rather than continuing to denigrate the views of people on this side of the House because of issues in the past.

I listened to my good friend, colleague and neighbour, Deputy McNamara, who took us on a tour of the world that would make Kathryn Thomas of "No Frontiers" proud he covered so much.

Photo of Michael McNamaraMichael McNamara (Clare, Labour)
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Or a member of the Joint Oireachtas Committee on European Affairs.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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Indeed, or even of the committees on which the Deputy sits. He sought to suggest that while some other countries did not have this type of system, many did. He compared country with country rather than the basket of costs small businesses encounter, which is something one must do when looking at this kind of issue. The situation is similar when we try to compare personal taxes for different countries. It is not possible to make such comparisons unless they are done on a line by line basis.

We are all aware that the most important statistic at this time is that almost 15% of our people are unemployed. This is the significant figure, not anything else. Successive Governments have made it clear that they believe tax on work was a disincentive to work. The corollary of that is that if we increase the cost of providing jobs, jobs will be lost or will certainly not be created. Taking on board the fact there is almost 15% unemployment, we see the real constraints within the economy, particularly the domestic economy where the retail sector - usually a great generator of employment - is on its knees. If we accept this, we must recognise there is a crisis in employment and tread very carefully with regard to increasing the burden on any business seeking to retain what it has, let alone expecting it to create new jobs.

It is clear the SME sector is of vital importance, with approximately 200,000 small businesses in the country and 650,000 people employed in them. Significantly more were employed in the sector, but because of the current situation these enterprises are now under enormous pressure. Deputy Collins spoke at length about the rates situation. Until such time as we can figure out an appropriate rate, based on turnover rather than floor space, we can do nothing. There are a number of furniture shops in the town I know best, but product movement is relatively slow in the current climate. These businesses have large warehouse type showrooms, necessary to display the product they seek to sell, but they are being crippled by rates. There is no reference in the application of rates to the scale of activity or turnover. I do not suggest that chip shops or mobile phone shops or whatever are profitable, but they have a much higher turnover in a relatively small amount of space. Until we try to get this balance right, we are not acting in a way that demonstrates we have regard for and wish to support enterprise.

We have had the debate on upward-only rent in the House. If Deputy Nash was here or if anybody else wanted to see how disingenuous the Labour Party was in opposition and in the run into the last election, this was typified by what it did with regard to the so-called upward-only rent reviews for historical leases. It produced legal opinion, but when the time came, it accepted the opinion of the previous Government.

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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What is the Deputy insinuating?

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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I am insinuating nothing whatsoever. All the Minister of State need do is go back and check the facts. That was an exceptionally disingenuous situation.

Photo of Michael McNamaraMichael McNamara (Clare, Labour)
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There might be a solution.

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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It will not come from Deputy McNamara.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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I recall that the Labour Party packed the Visitors Gallery with people who supported its cause, but when it got them down the stairs and through the front gate, it closed it firmly behind them.

Photo of Seán BarrettSeán Barrett (Ceann Comhairle; Dún Laoghaire, Ceann Comhairle)
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Is the Deputy sharing time with Deputy Healy-Rae?

Photo of Michael McNamaraMichael McNamara (Clare, Labour)
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Deputy Healy-Rae may be able to offer a solution.

Photo of Michael Healy-RaeMichael Healy-Rae (Kerry South, Independent)
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I created more jobs in my time than Deputy McNamara.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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The Labour Party packed the Visitors Gallery with people who supported its cause, but when it got them to the front gate it closed it firmly behind them. Until such time as the Labour Party apologises for that, I will not take any lectures from Deputy Nash.

Photo of Michael Healy-RaeMichael Healy-Rae (Kerry South, Independent)
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I thank Fianna Fáil and Deputy Calleary for bringing forward this important motion. The Government continually talks about creating new jobs, but it misses the point that it must protect the jobs we have. Small employers in this country are pressed to the pin of their collars trying to keep their doors open and to keep people in employment. The proposal on sick pay will put them under unbelievable pressure and employers will not be able to keep the employees they have if this is foisted on them.

I am disappointed that the Minister for Social Protection, Deputy Joan Burton, is not here. I would like to know what is more important tonight than her being here to hear this very important motion being discussed. Employers and many employees will be looking at this debate and wondering where she and the people who support her are and how they are going to vote on this motion. This is about employers trying to keep employees at work so as to keep their households financially viable with money going into them every week.

That has been difficult for employers over the years. More than ever before, they are now being put to the pin of their collars. Rather than putting further financial burdens on them, the Government should protect those jobs by creating an environment that would make it easier for them to keep people employed. I hope Deputies will keep that in mind when they vote on this motion. I will conclude by asking somebody to provide IDA Ireland with a Sat Nav that would allow it to find County Kerry and perhaps create even one job there. It would be a help.

7:45 pm

Photo of Michael McNamaraMichael McNamara (Clare, Labour)
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Perhaps it will create jobs in a plant hire company.

Photo of John O'MahonyJohn O'Mahony (Mayo, Fine Gael)
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County Kerry is exporting jobs to County Kildare.

Photo of Michael MoynihanMichael Moynihan (Cork North West, Fianna Fail)
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I welcome the opportunity to speak on this important motion. I thank Deputy Calleary for tabling it. There is no doubt that small businesses that employ two, three, four or five people are hurting in a bad way. I refer particularly to retail businesses. This is a huge issue in smaller towns throughout the country. We are familiar with the fanfare that accompanies big job announcements. The employment they bring is very welcome. When the Government parties were on this side of the House, they used to argue that if every small business created one job, it would almost resolve the employment problem. I challenge them to take up what they said on this side of the House now that they are on the other side of the House.

For the last ten years, Departments, Governments and people have said there needs to be a reduction in the amount of red tape and bureaucracy encountered by those who have the gumption and the courage to take the ball and run. When individuals and groups that have established small businesses and taken on everything involved in them come to us for help and advice, they constantly complain about the bureaucracy they encounter in their dealings with Departments and State agencies that say certain things cannot happen for certain reasons. In the last Dáil, the current Minister of State, Deputy Sherlock, and I sat on a committee that set ambitious targets for reductions in bureaucracy, met officials from the Department of the Taoiseach and other Departments and did some work in this regard. What work has been done over the last 18 months to reduce bureaucracy? The Minister of State and I are well aware that the level of bureaucracy is causing huge difficulties and huge headaches.

We have to examine the possibility of determining commercial rates by reference to turnover rather than square footage. People who have confined their businesses to smaller sections of their outlets over the last three or four years have to pay rates on the basis of the larger premises. Some of the businesses in smaller towns that are having to close have been in operation for 70 or 80 years. I am aware of businesses in towns in my constituency that have closed for a raft of reasons, including difficulties in securing the proper terms from the bank and difficulties in meeting the targets that have been set down in relation to bureaucracy, etc. The Opposition in the last Dáil made huge play of the issue of upward-only rent reviews. It is time for the parties in question to come clean about the barrage of advice that was available to them. For all our sakes, they should admit they led the people up the garden path.

I wish to refer to an important issue that is constantly being mentioned by other Deputies. Self-employed people and small business owners who go out of business have nothing to rely on when they go to social welfare offices because of their class S contributions, whereas people who are made redundant can use their stamps to sign on for a certain period of time. A report that landed on the desk of the Minister for Social Protection this time last year set out how directors of companies, sole traders and others with class S contributions can have those contributions recorded in a way that would allow them to benefit from them if they became redundant or if their business ceased. I understand the United Kingdom has taken up an initiative to allow the self-employed to benefit from their contributions. My understanding is that in November or December of last year, the Minister, Deputy Burton, received advice from the Attorney General and the legal apparatus of the State, but we have heard nothing since. I have asked on a number of occasions for the advice on these issues that was brought to the Government to be made known. Sole traders and self-employed people who cease trading or go out of business need to be helped because the State is giving them nothing to rely on at present.

Photo of Brendan SmithBrendan Smith (Cavan-Monaghan, Fianna Fail)
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As we do our work on a daily basis, we must all be conscious of the huge importance of the small business sector throughout the country. Practically every parish, town and village depends on the small business sector for its economic lifeline. By and large, every small business is under severe financial pressure. Such businesses need cost reductions rather than additional costs. Like every other Member of the Oireachtas, I have received many representations conveying the concerns of employers about the possible imposition of additional sick pay costs. Those employers have clearly outlined the negative effects on employment that would ensue if such additional costs were imposed. These representations have come from all sectors and from businesses that rarely bother us about budgetary matters. They have made the point that the effect of this additional taxation would be to drive many small and medium sized enterprises out of business, with the attendant loss of much-needed employment. This country's 200,000 small businesses provide valuable employment for more than 655,000 people. In a small country like this, the provision of such a valuable level of employment in so many enterprises is a great testament to the individual entrepreneurs and their staff. It is a reflection of the valuable State assistance that has been provided over the years under various schemes and programmes.

By their nature, small and medium sized enterprises are located in both urban and rural areas. This country has a very dispersed population. It differs from many other EU member states in that regard. We need to incentivise small and medium sized enterprises for that and many other reasons. It is through the SME sector that we have some hope of dispersing business and employment opportunities throughout rural and smaller urban areas. Many of these enterprises are already dealing with additional costs in areas like transport because of their rural or peripheral locations. Deputy Calleary and other colleagues have dealt with the international comparisons, which had been the subject of misleading commentary. Over 40% of employers currently have no sick pay costs. They are predominantly small employers. It is clear that a new cost burden would be a further tax on employment. Businesses with low margin returns would be particularly vulnerable. The figures for the 2010 Forfás report are very important in this regard. They highlight that labour costs account for 60% of domestic input costs in the retail and hospitality sector and a much higher percentage in the services sector. Those sectors provide employment throughout the country. The major reduction in the redundancy rebate from 60% to 15%, along with the VAT increase in last year's budget, also had an impact on the necessary profitability and competitiveness of small and medium sized enterprises.

We cannot ignore the results of surveys recently conducted by representative organisations like the Irish Small and Medium Enterprises Association and the Chambers of Commerce. I would like to refer specifically to a survey carried out by Early Childhood Ireland, which is the representative body for child care providers throughout the State.

We are all conscious this is a relatively new sector of the past decade to 15 years, whereby 100,000 children are cared for daily in a professional manner, both preschool and after school. The sector has indicated that, if the sick pay proposal was introduced, 42% would increase their fees to accommodate the plan while 97% said they could not afford to pay for the four weeks of sick leave. More than half, unfortunately, responded that such a move would lead to them closing their service. We do not want to see the closure of services that are so important from the point of view of the development of the child and of providing preschool education, with facilities provided throughout the country in both urban and rural areas. They cannot afford to have such an additional burden imposed upon them.

I am glad the Minister, Deputy Noonan, is present. He will recall that through parliamentary questions I have raised the issue of diesel laundering and the illegal activities that are unfortunately so predominant in the Border areas. I know the Revenue Commissioners are introducing additional measures and I hope the Minister will give them every support possible in order to deal with those illegalities, whereby the Minister is losing revenue and local authorities in Louth, Monaghan, Cavan and Donegal in particular incur an additional cost in cleaning up after that illegal activity. Whatever additional measures are needed to deal with those sophisticated operations, I urge the Minister to introduce them and to assist the Revenue Commissioners in this regard.

7:55 pm

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
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It did not start this year.

Photo of Brendan SmithBrendan Smith (Cavan-Monaghan, Fianna Fail)
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I appreciate that but it is getting more sophisticated. I am not blaming the Minister. I am trying to help him get more taxation.

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
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I welcome the opportunity to speak on the Government amendment, which is focused on the important measures the Government can take to assist further small and medium size enterprises. Initially, I would like to focus on a key factor with which Fianna Fáil may not be familiar, the importance of political stability on economic confidence and growth. Political stability is a key factor within the Government's control which can assist economic growth and the business sector. Last year was the first year of economic growth after three years of economic contraction. Fine Gael and Labour are united in our core objectives of returning this country to growth and creating jobs for those who have been so badly affected by this economic crisis. Obviously, both parties have our own unique political positions, but we have an agreed programme for Government and we come to a shared Government position on issues in the best interests of the people of Ireland.

Despite the global economic downturn, Irish exports are still performing well. The services sector is leading the way, up 8% year on year in the second quarter. Foreign multinationals and global indigenous firms are continuing to invest and reinvest in Ireland. The recent announcements from the Kerry Group and the Paddy Power Group are a vote of confidence in the economy of the country, and this vote of confidence is by some of our own, which have now become multinational companies and yet choose Ireland to continue as their base. The success of our exports owes much to the significant competitiveness gains which have been achieved in recent years, and these gains are still ongoing. The European Commission is predicting Irish unit labour costs to improve by approximately 22% compared to the euro area over the period 2009 to 2013. The Government's business development agencies are working to assist SMEs that want to move into exporting. The foreign earnings deduction in last year's Finance Bill is a very good example of the assistance we can provide to companies which want to build export markets. The attraction of additional foreign direct investment jobs to Ireland is an essential support for driving the SME sector.

SMEs are the backbone of the domestic economy and the Government is acutely aware of the role the SME sector has to play in driving growth in the domestic economy. The Government is dealing with the employment challenge by delivering significant policy responses to provide a framework for SMEs and other companies across the country. These include the following: Pathways to Work, the Government's labour market activation strategy; the Action Plan for Jobs, which is designed to put in place the framework for job creation in all areas of the economy over the lifetime of this Government; the temporary partial credit guarantee scheme, which aims to provide credit to job-creating SMEs which currently struggle to get finance from the banks; and the SME lending targets of €21 billion over three years.

It is crucial that we continue to take steps to bring our public finances under control. Given the level of Exchequer spending on social welfare income support payments, it is incumbent on the Government and the Minister, Deputy Burton, to assess critically expenditure for her Department and, therefore, the issue of statutory sick pay also arises for consideration in that context. While no formal proposal on the introduction of a statutory sick pay scheme has yet been brought to Government, in any consideration of statutory sick pay there are a number of factors at play, including Exchequer savings, and these need to be balanced against the pressures to remain competitive in this challenging domestic and international marketplace being faced by SMEs. I know the Ministers, Deputies Burton and Bruton, are fully aware of the employers' concerns and the financial impact on employment costs and, by extension, unemployment levels if statutory sick pay were to be introduced, as well as the impact of this cost on SMEs in particular.

In conclusion, I assure the House that all the aspects of the budget will reflect the key role SMEs play in Ireland's economic future. We are actively working on measures for inclusion in the budget that will assist growth in the sector. We are also working to ensure the necessary fiscal adjustment impacts as little as possible on SMEs. We are acutely aware of the essential role SMEs play as drivers of employment creation across the country.

Photo of Séamus KirkSéamus Kirk (Louth, Fianna Fail)
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I thank Deputy Calleary for providing me with the opportunity to make a contribution on this important issue that has been swirling around in the political arena for some time. To paraphrase, the Minister, Deputy Burton, said two months ago that middle Ireland cannot take any more. As some of the previous speakers have indicated, there are approximately 200,000 small businesses employing over 650,000 people in the economy. In 2010, employers paid €5 billion or 75% of the total contribution to the Social Insurance Fund. Cost competitiveness is a vital ingredient for every company's success. Imposing an additional €89 million in taxation on struggling businesses with a new sick pay scheme will devastate small and medium size employers and they will be driven out of business.

The Government's record on tackling rising costs for businesses is not good. The reality is that if we are going to create employment in this country, the issue of cost competitiveness is vital. Some progress has been made but more needs to be made to ensure that, when the hoped-for lift in the eurozone and the world economy materialises, we will be in a position to avail of it.

In sectors such as retail and hospitality, employee costs account for 60% of overall costs. Job losses will be an inevitable outcome if this proposal is implemented in the budget. It is calculated that the average number of days lost per annum in the public sector in recent years was 12, four times the three days lost in SMEs. That statistic speaks for itself and indicates clearly where action needs to be urgently taken.

Under this proposal, businesses will take a three-way hit. They will be paying PRSI, paying sick pay and paying wages to cover the cost of replacement employees. Unfortunately, the proposal smacks of ideological prejudice of the worst kind. More SMEs will fold, with consequent unemployment for many people. Indeed, in a recent press release, IBEC calculated that the job losses could be in the region of 3,500. Frankly, that number of job losses in the economy at this time, with so many people unemployed, removes the justification for the imposition of a new statutory sick pay arrangement.

I am pleased the Minister for Finance is present in the Chamber for this evening's debate because, ultimately, he will be the one to take the decision on the matter. The introduction of a sick pay scheme would be the wrong thing for the economy at any time. We must get cost-competitiveness right for the business sector to allow it to fulfil its role of job creation, in addition to running its businesses, for the many people who are available to take up such work.

8:05 pm

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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I thank my colleagues, both on this side of the House and on the other side for their outright support, and in many cases tacit support for the motion last night and tonight. Some Deputies referred this evening to the motion being slightly premature. The difficulty is that this process, according to the Minister, Deputy Burton’s idea of consultation, began in 2011. She floated the idea ahead of last year’s budget and it is still floating around prior to the forthcoming budget. She had formal meetings in February and it is now the end of October, coming into November. The biggest issue facing business at the moment, among all the other challenges, is the complete lack of certainty in the economy. There is very little we can do, given the international situation and the domestic situation but when a Minister decides to play poker with SMEs as the Minister, Deputy Burton, is doing, that adds to the uncertainty. I hope we have brought the issue to a head this evening. I would like to think she, in particular, would learn from the debate and the fact that her partners in government are slightly sceptical of her views, and that she would put an end to the consultation and make a decision one way or the other.

I noticed all the Labour Party contributions were from first-term Deputies, all proclaiming that the Minister, Deputy Burton, is some form of economic guru. Those Deputies who were in the previous Dáil and had to listen to her as spokesman on finance did not quite sign up to that fan club this evening. Some Labour Party members were quite sensitive. Deputy Nash in particular was sore that we would raise this issue and seek to attack the Minister, Deputy Burton. I can but refer all those sensitive Labour Deputies to one of their own, Senator Whelan, who was quoted in the Irish Examiner – he did not even wait to go into the Chamber – as saying that he cautioned the Minister against making employers pay more PRSI and become responsible for sick pay. He said such measures could push many small and medium enterprises over the edge. Perhaps in adding their firepower to the debate those Labour Deputies and Senators would do well to listen to Senator Whelan who represents SMEs in his constituency.

In the presence of the Minister of State, Deputy Perry, I acknowledged yesterday evening that some good initiatives have been taken by the Government. I welcomed the credit guarantee scheme and the microfinance scheme as well as some of the other initiatives that have been taken. One of the difficulties is that there is still no one place to go, in effect, a one-stop-shop. I accept the Minister of State is in the process of implementing such an approach. There is difficulty in getting the information out there. The difficulty with all of the initiatives the Minister of State, Deputy Perry, has taken in the Deputy of Jobs, Enterprise and Innovation and those taken by the Department of Finance, is that although they have put a small but fragile foundation onto a recovery, “Hurricane Burton” is on the loose again. If she gets away with putting what she agrees is an €89 million burden on SMEs then the foundation will be swept away in one fell swoop.

As I said last night, she has form. The way she implemented the change in redundancies was absolutely disgraceful. It is impacting on small businesses right across the country. One only has to look at the Chambers Ireland survey for confirmation. Deputy Nash just dismissed it. He was disappointed with the survey because he did not like the message. The Chambers Ireland survey showed that the redundancy decision had a negative impact on 60% of respondents. The Minister assured me in the House in January 2011 that it would not impact on SMEs. She said it was directed at the big companies going to low-cost locations. We agree with that approach, but when I tabled a parliamentary question seeking the breakdown of company by size – companies with fewer than 50 employees, 50 to 100 employees, and so on, that had received redundancy rebates - the Minister said the information was not available in the Department.

I agree with those Fine Gael speakers who sought a fact-based analysis on the sick pay scheme. The Minister does not seem to have many facts at her disposal, or if she does she is not willing to use them. Let us have a debate on a fact-based analysis and publish the Forfás report that was commissioned by the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, last year. The report is in the Minister’s office but he refused to publish it. We want a fact-based debate that will allow us to put forward costed alternatives. Labour Deputies, and Sinn Féin Deputies who have become economically responsible in the past seven days, want to see alternatives. The former Minister, Deputy Ó Cuív, who was in the Department set out good ideas last night. If we are to have a fact-based debate then the Minister must publish the report that the Government’s own economic think-tank carried out on the scheme. It showed the negative impact it would have on employment and SMEs.

Those of us in the previous Dáil were treated to the hysterics of the Minister, Deputy Burton, on a weekly basis on the state of the country. Now she is being hailed as a guru and we must listen to her. She has had a Pauline conversion. The most extreme example of that would have shocked even St. Paul when last night she wrapped the flag of Seán Lemass around her. On a number of occasions last night she cited him as one of her inspirations. She said that Seán Lemass would never do certain things. He would never crucify the enterprise sector in the way she has done already, and if she gets away with it will do so again.

I am pleased the Minister for Finance, Deputy Noonan, contributed to tonight’s debate. Until he spoke, the impression was given to the House by the Minister for Social Protection last night that she was dead intent on pursuing her policy on sick pay. I am pleased the Minister for Finance is present. I take hope from his remarks that the voice of reason will prevail within Cabinet. Nobody who acclaimed the legacy of Seán Lemass in the manner in which the Minister, Deputy Burton, tried to do could be deaf to the rumblings from a graveyard in north Dublin last night. The Minister would destroy and crucify the enterprise sector, first with redundancy rebates and now by forcing a sick pay scheme on it. That is what the Minister plans to do. I do not know whether she just does not understand the SME sector, if she is not interested in understanding it or whether she wants to wrap the red flag of Labour around her and show that she is more socialist than some others within the Labour Party and get all those first-term Deputies to vote for her in a leadership election, but she did admit last night that €89 million is what she thinks her proposed sick pay scheme would cost. It will probably cost a lot more. She just threw it out there as a figure that would be contributed to the cost of the social insurance scheme.

We must have a debate on absenteeism. We must have a debate on the proposed scheme and the social insurance fund. That is why we should publish the report. Where does the Minister think the €89 million will come from, some magic pot at the end of the Labour rainbow? I think not. It will come from Irish business. The Minister for Finance was correct to cite the reduction in labour costs that have been achieved through much hard work and tough decisions, and on the back of many workers in both the public and private sectors. However, if one lumps a minimum cost of €89 million on top of those labour costs then many of the gains in terms of the cost of employment in this country will be lost and the graph will fall back.

The motion is about certainty. Irish businesses and SMEs must know where they stand. I was contacted today by a business in the mid-west which eventually managed to get bank funding and which was on the verge of setting up a business to employ 15 staff. Those involved did not wait for the IDA to come to the mid-west. However, the company has parked its proposal until its sees the budget and, more important, what cost the scheme will impose on it.

Consultations have been ongoing for a year. The Minister for Social Protection, Deputy Burton, has been talking to herself on the matter probably for a lot longer. It is time to end the consultations and to make a decision so that at least the SME sector and the business sector in this country know where they stand. If sense prevails, and I suspect if the views of the Minister for Finance, Deputy Noonan, the Minister of State, Deputy Perry, the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, and the Minister for Agriculture, Food and the Marine, Deputy Coveney, prevail, and this madness does not proceed then companies will be able to employ people and grow jobs, which despite our differences is what every single one of us in this House want to happen. They will be able to build on the foundations the Government has introduced, which I have acknowledged, and not have to worry that “Hurricane Joan” is going to destroy their legacy and ability. That is why we brought this debate to the House tonight. I hope the Minister for Finance will go back to Cabinet and put an end to this madness.

Amendment put:

The Dáil divided: Tá, 70; Níl, 45.

Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Michael Moynihan and Seán Ó Fearghaíl.

Níl

Amendment declared carried.