Clare Daly (Dublin North, Socialist Party)
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7. To ask the Minister for Jobs, Enterprise and Innovation the action he will take to assist small businesses in this current economic climate in view of the fact that they are the largest employer in the country. [42576/13]

John Perry (Sligo-North Leitrim, Fine Gael)
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The Government recognises that small and medium sized businesses are a key component of the Irish economy and the backbone of employment in Ireland. SMEs make up over 99% of businesses in the enterprise economy in Ireland and account for almost 70% of people employed. Supporting SMEs in the current difficult economic climate is a key Government priority. Government action to support small and medium sized businesses in the domestic economy have been set out in the Action Plan for Jobs 2012 and 2013 and work will continue in the context of the Action Plan for Jobs 2014.

Significant initiatives have been taken in a number of areas, including improvements in access to finance through the credit guarantee and microenterprise loan fund schemes; tackling of the issue of late payments through the transposition of the EU late payment directive into Irish legislation; development of a single licensing application portal in respect of 159 licences across all sectors of the Irish economy, 35 of which are in the retail trade and are provided by 13 different authorities; reform of the county enterprise boards through the establishment of a first-stop-shop for small business through the new local enterprise offices, mandated by an effective service level agreement with Enterprise Ireland; improvements in the competitiveness of the business environment; expanded supports for start-ups, first time exporters; and new schemes to help small businesses recruit via JobBridge, JobsPlus, Springboard and Momentum.

The Action Plan 2014, which is currently being finalised, will seek to build on the progress already made and is set to deliver a suite of actions to support enterprise. The focus of the budget will be very much on entrepreneurship. SMEs will continue to be a key element of this process and a number of proposed actions are currently being examined, the focus of which will be aimed at supporting this vital sector of industry.

The Government is also committed to ensuring that ongoing dialogue with the small business sector is facilitated to ensure that business and Government work together to identify the necessary actions to support SMEs in Ireland. This is being done through the Advisory Group for Small Business and the High Level Group on Better Regulation, which includes representatives of ISME, construction companies and so on. I am encouraged by the progress in employment creation by small business in the last 12 months. Most of the 39,000 additional jobs in the economy have come from the SME sector. However, we have a long way to go. The High Level Group on Better Regulation, which brings together senior Government officials, representatives from local authorities, business and trade unions, also serves as a forum for Government to connect with business. The Government is working to reduce the burden of red tape on companies.

Clare Daly (Dublin North, Socialist Party)
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The problem is that the Minister of State's response is that what the Government is doing is in the plan. However, the reality is that for many small and medium sized business on the ground life is still incredibly difficult. Despite the list of initiatives listed by the Minister of State they are still struggling. It is not good enough that some of these initiatives are only coming on stream two and a half years into the lifetime of this Government.

There are 408 rateable properties in Swords, which is in my constituency. Some 120 of them are empty. One of the key pressures on small businesses is that of council rates. Councils are also under considerable pressure because of the precarious nature of Government funding. In many instances, the pressure being put on small businesses to pay rates is driving them out of business, leading to premises lying idle. I have not seen anything from Government to address this scenario.

Businesses are also being squeezed in other ways. I am currently dealing with a case involving a medium sized sub-contractor who has done work for a major construction company that has a contract with a local authority. The main company concerned, SIAC Construction, has been paid by the local authority but refuses to pay the sub-contractor who is a small to medium sized business providing employment. Main contractors who engage in the sweating of sub-contractors in order to get a lower price should be prevented by Government from accessing any future public contracts. This type of behaviour is jeopardising employment in the small and medium sized sector.

John Perry (Sligo-North Leitrim, Fine Gael)
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We are not only talking about taking action, we are delivering on it. Yesterday, officials from the Department of Public Expenditure and Reform dealt with the issue of rates and the valuation process. Current property ratings are based on 1986 values. A review of rates in Dublin and, possibly, Limerick is currently ongoing. Rates for properties constructed during the boom are also based on property values in 1986. The roll-out of the local enterprise offices will provide local government with the autonomy to work with local authorities in providing derogations in town centres. I agree with the Deputy that many companies are struggling and that many premises are vacant. We must encourage enterprise into these premises by way of rent reductions and derogations from local authorities.

There is a late payments directive in place. This requires all Departments to make payments within 15 days. There is also a voluntary code in this regard for the private sector, in respect of which there is a code of conduct. The Government has also launched the trading online and local employment office initiatives, which are important. Reform of the Companies Act is also ongoing. Many initiatives have been introduced. I agree it is about confidence and credit in the economy to encourage local spend.

Yesterday's report is encouraging as it shows that confidence is growing again. The review of the microfinance fund will enable people to apply for finance when starting up a company. I travel around the country and I am greatly encouraged by the number of enterprises being established daily. While the economic climate is difficult, opportunities are available.

Clare Daly (Dublin North, Socialist Party)
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Flexibility in the rates system is critical. I am not sure of the timescale the Department has in mind or how creative local authorities will be allowed to be in this regard. A fundamental departure from the current system is required to critically support companies that are struggling and may have been operating in an area for some considerable time. This issue needs to be addressed. The largest problem facing many small businesses is the lack of purchasing power among ordinary people. Unless the Government departs from the austerity policies of cutting wages, increasing taxes and taking money out of the economy, many businesses will not take flight and succeed. I concur with the Minister of State that there are many creative, innovative ideas and expertise in the economy but unless people have money to purchase the products that companies and individuals want to develop, these ideas will go nowhere.

Mick Wallace (Wexford, Independent)
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While the Minister has done well in meeting his responsibilities for exports, jobs and enterprise, the economy has suffered a great deal on the Government's watch. Besides the lack of action to address upward only rent reviews, which I do not propose to discuss now, lending to businesses remains a serious problem. I am aware from experience that banks are ending financial arrangements with companies in order that they can recommence them. A company will receive a letter stating the term of a loan has been cancelled and a week later the bank will indicate it is willing to re-open the loan. The reason for this approach by the banks is that it allows them to define such loans as new lending.

Many companies are borrowing from banks to repay loans to other financial institutions. Another significant problem is the lack of loans to companies in the domestic economy that are seeking to reinvest.

Rates are also a serious problem. I have five premises in Dublin which are being re-rated. We have been informed that the rates on these premises will increase by 47%. While we have appealed the decision, we are not sure what will be the outcome. I do not understand the logic of increasing rates which were already set at a high level.

There is no doubt the reduction in VAT to 9% in the hospitality sector has been of great benefit to the restaurant and hotel industry. For example, my companies have benefited from the measure. I am not sure what the Government plans to do in the budget but I hope the new rate will be retained. The level at which rates are set is creating a serious problem. If they increase further, as seems likely, it will be very challenging for the sector.

Dara Calleary (Mayo, Fianna Fail)
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I concur with Deputies Daly and Wallace on the issue of rates. The Minister of State referred to local government reform. The abolition of town councils will result in higher rates for many businesses. No detail has been provided on rates equalisation. Many businesses in town council areas pay a lower rate than businesses in county council areas. Will their rates increase as a result of the abolition of town councils?

Has the Minister made proposals to the Department of the Environment, Community and Local Government on introducing an inability to pay mechanism for businesses which do not have the funds to pay the rent for a specific location?

I recently met representatives of the Waterford city centre business association. The re-rating project in Waterford is resulting in horrendous increases in rates for premises whose value has declined. Business in the city is not even at the level recorded in 1986, yet the rateable valuation of many premises is increasing significantly.

Deputies cannot ask direct questions about financing for small and medium-sized enterprises because they are redirected to the Department of Finance. Asking a question of that Department is akin to throwing a ball against a haystack. Surely the Department of Jobs, Enterprise and Innovation has a position on the possibility of establishing a bank to provide funding to domestic small and medium-sized businesses, as the former ICC Bank used to do. We are back in that space and I hope the Department acts as a champion in government for the case for having a specific focus on banking and an outlet for domestic companies.

Brendan Griffin (Kerry South, Fine Gael)
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I concur with previous speakers' comments on rates, which are a noose around the necks of business. The system must be reformed. The broadening of the tax base through the introduction of the domestic property tax and water charges has created scope for carrying out a review of the manner in which rates are collected from business. I have always maintained that rates on business should be linked to the performance of the business as opposed to the value of the premises. Under such a system, businesses which can afford to pay will pay and large rates bills will not block new entrants to business.

We have heard a great deal about the 9% VAT rate for tourism related businesses in the context of the budget. Not only should we retain this beacon for the economy, but we should extend it to other sectors. The introduction of a 4.5% rate of PRSI for people earning €350 per week or less was a proactive measure, which has helped many employers bring people into employment. I urge the Ministers to seek to retain it in next Tuesday's budget.

John Perry (Sligo-North Leitrim, Fine Gael)
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Of the 39,000 jobs created, more than 19,000 were created in the domestic economy. On the issue of purchasing power, consumers have benefited from greater value for money in the retail trade, which has become extraordinarily competitive. Expenditure on shopping has declined significantly, although I recognise that people have limited budgets.

Deputy Wallace raised the issue of rates. Ultimately, a company's customers will pay the rates as they are built into a business's stacked up costs. Rates have been in place for decades and are factored in when calculating one's profit margin. Current rates are based on 1986 property values. People have been advised to appeal or seek a review of decisions on rates. The information provided to us yesterday indicates there should not be any substantial increases in rates. Businesses also have available to them a mechanism for reviewing decisions.

On the issue of banking, we have a State-owned bank and two pillar banks which are committed to lending €8 billion that has been ring-fenced by the Government for that purpose. Securing funding from banks is not the only issue. Many retailers are collaborating with their suppliers and availing of alternative mechanisms. I meet many young people who are starting businesses. The issues they face are not only securing loans, but also developing a business plan and company profile. While one can blame the banks, lending is a two way street. If a loan application is viable and stacks up, it makes good sense for a bank to approve it because banks are in the business of lending money. They want customers to grow on the basis that they must satisfy their shareholders. The domestic banks need business.

We are encouraged by The Gathering. Those who visit Dublin at weekends will see no sign of recession in the capital. One will see confidence in city centre businesses, especially restaurants. The new VAT rate has been of great help in that regard.