Dáil debates
Thursday, 26 October 2023
Saincheisteanna Tráthúla - Topical Issue Debate
Business Supports
3:25 pm
Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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I thank the Minister of State, Deputy Richmond, for being here to deal with this.
Joe Flaherty (Longford-Westmeath, Fianna Fail)
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Echoing that sentiment, I thank the Minister of State for coming to the House to address this important issue. I compliment the Ministers, Deputies Michael McGrath and Donohoe, and their ministerial team, including the Minister of State, Deputy Richmond, on the work done on the budget. It was a momentous budget, one that was historic in many respects. It set the tone and template for the achievements of the Government. It is often the case that actions in a budget can have unintended consequences. One such unintended consequence relates to the measure to assist businesses that will grapple with rising costs in the coming 12 to 18 months. I will deal with that later.
Obviously, the Finance (No. 2) Bill is progressing through the House. We agreed Second Stage last night and the Bill has gone to the select committee. I know from my conversation with the Minister, Deputy McGrath, that there is still an opportunity to fine-tune the cost of business support scheme and make it a much more inclusive scheme to address the challenges facing many businesses. We are very much dealing with a changed landscape for business. Covid transformed the way business is operated. We have a generation of young people who will probably never go into a bricks-and-mortar shop but, rather, do the predominance of their shopping online. Retailers have responded. They are doing experiential retail and it is very different.
To put my point forward in the best manner possible, I will articulate the comments and sentiments of a business owner who contacted me on this issue in recent days. His is a long-established family business in Longford employing 80 people. He has taken issue with what he sees as the shortcomings and inadequacies of the budget in trying to alleviate the challenges his business and contemporaries will face in the coming 12 to 18 months. The business employs 80 people, all of whom are from the locality. It provides part-time employment to many students who balance that work with their college life. Many people had their first job there. The business owner makes the point that the proposed business scheme will go nowhere close to addressing the serious issue faced by his business and many others. The business will not qualify as it is over the €20,000 rates threshold, notwithstanding the fact that it very much operates a low-margin and labour- and energy-intensive business where the biggest cost is the wage bill.
That business and many others will soon have to deal with the increased minimum wage, statutory sick pay and, further down the road, pension auto-enrolment. Those are laudable developments and key planks in the programme for Government but, much as we have in society, we need a glass floor through which no people should fall. We should also have a mechanism that ensures businesses that have been the bedrock of local communities for many years are not punished. The business to which I have referred would make the point that its largest cost, namely, wages, increased by 25% as a result of some of the measures I outlined. The measures will add an additional cost of approximately €4,000 per full-time employee, which is significant for a business that typically operates on a margin of 8% to 9%.
The business has done everything humanly possible in respect of packaging and meeting our challenges for the green agenda but it is one of many businesses that will struggle. We need to use the time and space in the coming weeks to tweak the Finance (No. 2) Bill to ensure we do not throw the baby out with the proverbial bathwater.
Neale Richmond (Dublin Rathdown, Fine Gael)
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I am grateful to the Deputy for raising this important matter and for his consistent advocacy on behalf of businesses throughout Ireland, but particularly in his home town and his home county of Longford.
I empathise with many of the points he has made on behalf of the local business person in Longford. There are a few points to address. The first relates specifically to the increased cost of business, ICOB, scheme. It was a major plank of our Department's budget offering a fortnight ago. The scheme is going to be worth €250 million and will apply to 87% of businesses across the State. It is deliberately targeted at small and medium enterprises. That is why the initial decision was to make the scheme available to every business that paid €20,000 or less in commercial rates this year. It gives them the ability to receive half of their rates back in a cash grant of up to €10,000 in the first quarter of next year, with minimum administration, minimum fuss and cash going direct to the source.
We acknowledge that there are serious costs associated with doing business in this State. That runs parallel to the extremely strong economy we have, with the rapid economic growth that we have seen in Longford and the creation of hundreds of jobs in the last 12 months, much of which is down to the Deputy's own advocacy. It runs parallel to the new businesses created in tandem with the Deputy's local enterprise office, LEO, which I was fortunate enough to visit in August, as well as the consistent work done to make this an open and thriving economy. Businesses are doing well, but we acknowledge the costs. We acknowledge that as the Deputy has outlined, many of those costs are costs that are being brought in by this Oireachtas, such as the increase in the minimum wage as per the recommendations of the low pay commission, the move from three days of paid sick leave to five days on 1 January, the additional bank holiday on St. Brigid's Day and the introduction of pension auto enrolment in 2024. They are all adding to businesses' costs, but there is a return on those investments. I know the Deputy shares my belief that there is always a return on those investments. As we move towards a living wage of 60% of the median average income, it will ensure people stay in those jobs, which are good jobs that they can maintain. We will ensure that they can return resources back into the economy, and with pension auto enrolment, we will ensure that they can prepare for their later days, which present so many difficulties for the State.
That is why the ICOB scheme is just a small effort towards alleviating those costs, as well as rising energy costs and rising interest rates. That is why it is focused on those who pay commercial rates. We are due to see energy costs come down in the next few weeks due to the decline in wholesale prices. We have seen a lot of moves from the major energy providers, although I think we all share the opinion that many of the energy providers could indeed go further.
A number of other supports were brought in for businesses in the budget. I want to refer to them briefly before I conclude and I might go into a bit more substance in the supplementary reply. We provided increased funding of €9 million to the LEOs to help them work with local businesses, and not just new businesses but businesses of up to 50 employees. There is increased funding for Enterprise Ireland and increased resourcing for Microfinance Ireland. We have raised the VAT registration threshold for SMEs to €40,000 for services and €80,000 for goods businesses. The accelerated capital allowance regime for energy-efficient equipment has been extended to 2025. There are new and improved grants available through the Sustainable Energy Authority of Ireland for businesses that want to reduce their energy bills. Across the board, there is an opportunity for businesses to avail of cheaper finances and grants and to play their part in making sure that we can continue to make this economy grow. The ICOB scheme is just one element in the entire budget that acknowledges the rising costs of business. I think those of us who are present in the House are all in agreement that making sure our economy grows and that we remain an open and attractive economy is what will benefit all businesses in all towns and cities across our State.
3:35 pm
Joe Flaherty (Longford-Westmeath, Fianna Fail)
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I thank the Ceann Comhairle for the opportunity to come back in. When I talk about retail, it would be remiss of me not to mention my late mother. She ran a shop all her life and worked herself to the bone. I remember that when I was thinking of dropping out of school, she gave me very salient advice. She said if I wanted to find out how popular I was, I should open my open business or go into politics. Sadly, I did not listen to her. That is just an aside.
These businesses are very much the bedrock of rural Ireland. They are the shops and the retailers that were there through Covid and looked after us. They are the small local businesses and medium businesses that can reach out to the elderly and those who are struggling with mental health issues. People I have spoken to have told me that they shop in a particular shop, and only reason they go there is because the staff stop and say hello to them. These businesses are doing untold work for our society and communities.
We have had many achievements, but we really cannot be let it be a stain on the legacy of this Government that we made it harder for these businesses to do business in rural Ireland. Certainly, we welcome the ICOB scheme. It has a lot of merit in it, but it does exclude some businesses. I fear that it is not going to go far enough in the scale of supports that these businesses need. In fairness, the businesses are not coming, cap in hand; they are coming with a proposal. Over the coming weeks we have an opportunity to look at the proposal for the abolition of PRSI for lower-earning workers over a three-year period in 2024, 2025 and 2026. I think that would give these businesses sufficient opportunity to come to terms with the increased costs. More importantly, it would also be of huge benefit to those workers in terms of the challenges that they face economically as well. It is a point that these businesses have articulated to me and it is one that I hope the Minister of State can bring back to the Department of Finance to put some meat on the bone. I think it is a realistic and viable solution for these businesses in the challenging 18 months ahead.
Neale Richmond (Dublin Rathdown, Fine Gael)
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I thank the Deputy for the tone of the debate and indeed for the constructive proposal. It is constructive, but it will require quite a bit of reflection from the Government in relation to the abolition of PRSI for lower-paid workers. It would come at a cost, today as well as in the future, and we have to bear that in mind. I will bring it to the attention of both the Minister for Social Protection and the Minister for Finance for reflection.
The Deputy mentioned his mother growing up as a shopkeeper. The Ceann Comhairle and Deputy Durkan will know Gillespie's in Baltinglass very well, in the neighbouring county to them. That is where my father grew up, over the shop where my granddad was manager down below, working six days a week. They took Sundays off in those days. That instilled in me the respect and understanding that retailers are some of the hardest workers in our society. Nowadays, they are working seven days a week, often long and late hours filling shifts and dealing with many costs. Through my role as chair of the Retail Forum, I work with individual retailers, their representative groups and their suppliers on a daily basis. One thing that we have put huge focus on is the online retail scheme. The intention is not to replace the bricks and mortar store or to force it to be solely an experience-led activity, but to make sure that we can use the Internet to drive more people through into traditional retailers.
In relation to the ICOB scheme, we will use these next two weeks to make sure that we do not leave anyone on the margins and that those who are there or thereabouts in relation to the €20,000 will be open for consideration. It is under real reflection. The one thing we want is a scheme that works for as many businesses as possible in a manner that is impactful and that can be delivered in the first quarter of next year, just when many businesses are finding things tough. I really appreciate the Deputy's input today. I will feed what I can in to other Ministers and take it on board in my own role as well.