Thursday, 8 February 2024
Ceisteanna Eile - Other Questions
Small and Medium Enterprises
35. To ask the Minister for Enterprise, Trade and Employment the current strategy in place to assistance small businesses; whether any further initiatives are contemplated in this regard in 2024; and if he will make a statement on the matter. [5675/24]
My question relates to the Department's plans to support the SME sector in Ireland, for the very reasons that the Minister outlined in his response to the previous group of questions. There are significant increases in costs associated, in particular, with businesses in the hospitality and food sectors which have been contacting me in increasing numbers in recent weeks. The Minister has already set out a great amount of information in the House this morning and I cannot help but feel that this question should have been included in the previous grouping. That being said, it would be helpful if the Minister provided a further response.
We can have another go at it, perhaps with a slightly different slant, because it is a good question. I propose to take Questions Nos 6, 9 and 35 together.
I assure the Deputy that the Government is committed to backing business and will continue to work closely with SMEs nationwide by supporting their growth, helping them to find new markets and stimulating job creation. I know that at present SMEs in certain sectors are facing several challenges due, in particular, to rising energy costs, inflation, a tight labour market as well as measures which are aimed at improving working conditions. While I am acutely aware of the pressures facing SMEs in Ireland, it is worth mentioning that the most recent and forthcoming changes to improve working conditions are a necessary step in ensuring that workers in Ireland can avail of the same conditions as those in many of our trading partners.
Furthermore, it is important to recognise the range of supports the Government has made available to small businesses in recent years to deal with shocks such as Brexit, Covid-19, supply change disruption and the rising energy costs associated with the war in Ukraine. I welcome the recent announcement by the Minister for Finance to make significant changes to the tax debt warehousing scheme with a reduction in the interest rate applying to warehoused tax debt to 0%.
As already stated, my Department secured more than €257 million for the increased cost of business grant, which will provide targeted refunds to some 143,000 businesses operating from rateable premises, or 95% of all commercially trading businesses nationwide. The ICOB grant will be targeted at small and medium businesses operating directly within premises that are commercially rateable by a local authority.
The Deputy will be aware that my Department and its agencies support SMEs through a number of initiatives. These include providing access to advice, training, mentoring and direct financial grants as well as working to ensure an adequate supply of credit to SMEs through State-backed loan schemes and equity investment schemes.
Enterprise Ireland supports Irish SMEs in the development of global markets through a comprehensive range of supports. The support offered by Enterprise Ireland varies from direct financial assistance through grants, loans and equity investments. Enterprise Ireland also provides market research and export development assistance, as well as funding and mentoring for innovation and research.
The Deputy will also be aware of the ongoing excellent advice and support offered by the local enterprise offices as the first-stop shop for anyone looking for general business advice, including on financial management and business planning.
I chair the SME and entrepreneurship task force along with my colleagues the Ministers of State, Deputies Calleary and Richmond. In recent years their work and efforts have strongly contributed to developments such as the launch of a range of new instruments to improve access to finance and digitalisation and reducing regulatory burden on small businesses through the roll-out of the SME test. In other words, this is a constantly changing marketplace that the Government needs to respond to but we have huge engagement with industry, employers and trade unions. We are constantly adapting policy and putting new financial packages in place to support the businesses that need it and we will continue to do it.
I thank the Minister for his detailed reply. I do not disagree with anything he said. However, we need to focus on certain sectors which he already identified in his response to previous questions, specifically the food and hospitality sector. As I said already, that sector is under acute pressures including as a result of quite a number of Government measures which are incredibly welcome but which in the current climate have placed significant strain on their margins. As the Minister knows, energy prices are increasing and the costs of the goods that they are supplying to their customers are increasing. The costs of being an employer have increased, and that is becoming an issue. I do not think it is as widespread as was portrayed in certain quarters but it is becoming increasingly obvious to me from the number of businesses that have been in touch, that there are constraints in respect of which the Department can provide further support. The Minister already mentioned the grant scheme, which is welcome. Getting it out as quickly as we possibly can is critical to businesses, particularly as we come out of winter.
I thank the Minister for the information he has given to the House. One thing seems certain: time is of the essence. The grave danger to my mind would be the extent to which the local authorities have sufficient staff to meet the extra workload accruing from the welcome measures and the need to touch base with the various local authorities at present to see how they are progressing and if needed to make further provision to enable them to bring the dates forward rather than to fall short of the deadline. What are the prospects of that?
I support what Deputy Durkan said about local authority staff. I recently met a restaurateur who had a turnover of €100,000 over the Christmas period but only made €1,000 profit despite working very hard and running a very efficient business. What is the Minister's view on returning to the 9% VAT rate for restaurants and the hospitality sector?
I hear the concern regarding the hospitality and food sector. I have seen that for myself. We have seen some quite high-profile cafés and restaurants going out of business. Let me set the context. It is important to say this. Considerably more businesses are being set up than are closing down. Last year, five times as many businesses were set up as were lost. That being said, in recent months the Department has looked at the combined cost pressures of policy changes and how they apply to different sectors in the Irish economy. For some sectors they have had virtually no impact on the cost base - it is 1% or 2%. In other sectors it is much higher with a cost increase of 12% or 13%. It is no surprise to hear that food retail is in that space.
The question now is how we can respond to that in a way that is appropriate, does not create demands in other sectors of the economy and does not require us to have a mini budget in the middle of the year. We only had a budget a few months ago and it was a good one. We are working on the appropriate policy response in some of these areas. As I said, the Minister, Deputy Michael McGrath, has already responded in a very helpful way with the change to warehoused tax debt providing significantly more flexibility and reduced cost in how that is managed for businesses. We are now looking at what else we can do on top of that. I think it is important not to create an expectation here that we can have significant tax and expenditure decisions between budgets. That is a difficult ask.
Regarding the lower VAT rate of 9% for hospitality, an argument was made to separate the treatment of bedrooms in hotels, for example, from the sale of food in restaurants and cafés. That proposal proved to be very complex to implement and so we decided not to go with it in the budget last year and those complexities are still there. It is up to Government to look at all of these things in the round. We should not create unrealistic expectations but at the same time we need to recognise that there is a problem. This is a pro-enterprise, pro-business Government. We will look at this with an open mind to see what more we can do to help businesses that are under pressure.
I thank the Minister for that comprehensive response. I recognise his point about a mini budget on the VAT question in response to Deputy Stanton's question. However, we need to try to determine a scheme that identifies those businesses that are struggling versus all of the businesses that the Minister rightly points out are opening up. The economy is buoyant and we are doing extraordinarily well but there are certain constraints, which I cannot help but feel that we, as a Government, have rightly introduced and brought on those businesses in part. That is part of the reason for the issues there. I accept the points the Minister has made particularly about the various measures the Government has introduced to try to support businesses through the recent period in particular.
We all agree with the measures that were introduced in the budget and the measures that are proposed in this grant scheme. However, I do not hear any response to the urgency of the situation. I am a bit concerned about that. It could be a wait-and-see approach. If we wait and see what the potential damage is, it may well be too late. That is what I would ask each of the Ministers to consider as a matter of urgency because there will be things happening in all of our constituencies at this particular time of year when there are many drawdowns on their finances. Businesses will be looking very seriously at their own viability in these circumstances.
I ask the Ministers to consider what else might be possible. The other possibility is that we will lose a large number of small businesses, and, perhaps, some that are not so small.
VAT is the one thing that could make a massive difference for smaller restaurants and for the food sector generally. That is the feedback I am getting. I ask the Minister to work hard to see if that can be split, as he suggested earlier.
I would like to dispel any concerns that we are not looking at this with a sense of urgency. We are. I fought hard around budget time, as did the Ministers of State, Deputies Calleary and Richmond, to make sure we could get as much money as possible for the ICOB scheme. I do not think any Opposition parties called for a fund to help compensate businesses for increased pressures in costs. We put a fund of €250 million in place and increased it by €7 million in order to increase thresholds, etc., to get 143,000 businesses in. It is a big priority for me and the Government to help businesses with cashflow. The Minister, Deputy Michael McGrath, also responded with some urgency in the last number of weeks with Revenue. We are not finished yet. We have done considerable work that has taken months to put together to look at the combined impact on different sectors in the economy of the increased costs they face. We are looking at putting an options paper together for how we might respond. This is being taken very seriously by the Government, but I do not want to raise expectations that we can introduce a mini-budget that would allow us to make a swathe of changes easily. That is not realistic. There are targeted things we can do. The real challenge is how to confine supports to the sectors under pressure in order that there is no moral hazard impact of spending tens of millions of euro in sectors that are not under pressure. That is not easy to do with either the tax system or a grant aid scheme. I assure the Deputy that we are looking at this issue and taking it seriously.