John Perry (Sligo-North Leitrim, Fine Gael)

On the occasion of my first attendance in the Seanad since my appointment as Minister of State with responsibility for small business, I congratulate the Leas-Chathaoirleach, Senator Denis O'Donovan, on his appointment and wish him well. I congratulate Senator Paddy Burke on his election as Cathaoirleach and wish him well in his very important role. I congratulate Senator Maurice Cummins on his appointment as Leader of the Seanad and Senator Darragh O'Brien on his appointment as Leader of the Opposition.

This is a very important debate on job creation and the role of small businesses. The Government will be concerned about and will have respect for their role. It acknowledges the critical role of the domestic economy in this regard. Job creation is central to our economic recovery and at the core of the programme for Government. That is why the Government regarded the jobs initiative as a key priority within its first 100 days in office.

Small businesses are the backbone of the economy. There are some 250,000 such small businesses, employing approximately 700,000 workers. By appointing a Minister of State with specific responsibility for small business, the Government is clearly signalling to the business community and the public at large that small businesses are and will continue to be central to economic recovery.

The role of my Department is to ensure we have the right policies in place to support and grow our enterprise base to facilitate both job creation and job retention. It is only by creating the right environment for businesses to expand that we will see new jobs coming on stream. We must champion the cause of businesses, particularly small businesses which can create good jobs in sustainable activities.

The jobs initiative is part of a strategy of the Government to kick-start domestic economic activity. We have noted considerable foreign direct investment in Ireland, which is very welcome, and acknowledge the role of Enterprise Ireland. Given that the domestic economy employs 700,000 people, the real job of the Government is to offer encouragement in this sector. The intention of the proposed measures is to target our limited resources at key sectors of the economy that can assist in getting people back to work, provide opportunities for those who have lost their jobs to re-skill and build the confidence that will encourage consumers to spend. In particular, the jobs initiative focuses on measures that offer the greatest potential for expansion and employment creation in the domestic economy. It focuses on labour-intensive areas that will generate jobs quickly.

One of the key issues that impacts on the ability of viable small businesses to create jobs is access to credit. This is a challenge the Government is determined to address. The recently announced plans to restructure and recapitalise the banking system are the principal response to this challenge. The plans are designed to secure an adequate flow of credit into the economy to support economic recovery, even as the banking system is downsized. The banking system must provide for substantial new lending into the economy. The business plans submitted by the pillar banks provide for over €30 billion in new lending in the next three years across their core business areas. Up to €20 billion of this figure will go to small and medium-sized businesses. The financial authorities will be rigorously monitoring the banks' activities to ensure credit is available to borrowers who meet reasonable credit standard requirements. Mr. John Trethowan in the Credit Review Office will have a benchmarking role in this regard. It is very important that viable businesses obtain the necessary working capital to ensure they can sustain jobs.

As part of the jobs initiative and in accordance with the commitment given in the programme for Government, we will be initiating a tendering process for the development of a temporary partial credit guarantee scheme, which I very much welcome.

This will be a targeted scheme aimed at commercially viable businesses that can demonstrate repayment capacity for the additional credit facilities but which cannot secure credit facilities due to insufficient collateral for the additional facilities or because they are growth or expansionary companies which, due to their sectors, markets or business model are failing to get support under the banks current commercial lending decision making. It is important that we deal with those vital emerging markets in the economy.

The design of this scheme will draw on international experience to support new lending that would not otherwise have been extended by the banks. In this way, the scheme will complement, rather than be a substitute for, existing lending activities by the main financial institutions. It will be designed to encourage banks to lend to new or expanding commercially viable SMEs to allow them grow their company, develop new products and expand into new markets.

The Government's commitment will be for an initial period of one year. Specific performance criteria will be set down that will allow for review and revision of the scheme at the end of that initial period before committing to a roll-over of the scheme for subsequent years.

There will be a modest level of exposure to the taxpayer when the scheme is launched, but there will also be a significant positive knock-on benefit to the economy in terms of job creation, welfare savings and returns to the Exchequer by way of tax revenue generated.

Together with my colleague, the Minister for Enterprise, Jobs and Innovation, Deputy Richard Bruton, we will work with the Minister for Finance in developing this proposal further with a view to having a targeted scheme in place by the autumn.

An equally important fund is the micro-finance start-up fund. The Government also recognises the importance of supporting business start-ups if we are to encourage entrepreneurship and create more jobs. We acknowledge the difficulties which can be experienced by micro-enterprises in getting access to finance at such an early stage of business development. That is a critical area of Government to encourage enterprise at the local level. Coming from a business background I am aware that getting working capital is critical for start-up businesses.

The Government is committed, therefore, to developing a suitable micro-finance fund for the micro-enterprise sector. Arrangements for the establishment and operation of such a fund will be developed in consultation with the relevant stakeholders, with a view to formalising proposals for this year's budget. This commitment on a micro-finance fund is the Government's contribution to filling this gap in the area of financing enterprise.

Equally, we are delighted with the 15 day prompt payment across the public sector. Cashflow and working capital requirements have also been an issue of major concern to small businesses in recent times.

To improve the cash flow of businesses, and particularly small businesses trading domestically, the Government now requires the Health Service Executive, the local authorities and all other public sector bodies, excluding commercial semi-State bodies, to pay suppliers within 15 days of receipt of a valid invoice. This measure is applicable from 1 July 2011.

The initiative is an extension of the arrangement that currently applies to payments made to suppliers by Departments. Public sector bodies covered by the new arrangement will be required to publish quarterly reports on their websites outlining their performance in meeting the new requirements.In addition, all Ministers will be responsible for publishing reports on the performance of all bodies for which they have responsibility. This will ensure that any payment difficulties being experienced should be addressed to the bodies concerned.

These new arrangements will directly assist SMEs by improving their cashflow. The State has shown its commitment to helping the SME sector. There is a need now for the private sector to improve its payments record and to respond more quickly in making payments to suppliers. Increased cashflow will help improve our economic recovery.

SME procurement is important also. In Ireland it is worth approximately €15 billion per annum and is an important source of business for SMEs. The Government will build on existing initiatives to promote greater access to procurement opportunities for SMEs, including through identifying and overcoming barriers to their participation in the procurement process.

We will also seek to foster greater SME engagement in developing innovative products and services to meet the needs of public bodies within the framework of EU law and will explore similar schemes in other EU countries in that regard.

Every 1% increase in public procurement contracts won by small and medium-sized firms would deliver €150 million extra in business for this crucial sector. Greater access to procurement opportunities for SMEs, within the parameters of EU public procurement rules, can therefore generate increased business for those companies and help maintain jobs. As well as being an important source of income, winning public sector contracts here can have a very positive impact when companies are looking to win contracts abroad.

The Government has undertaken in the jobs initiative to build on existing initiatives to promote greater access to procurement opportunities for SMEs. Specific actions will include the provision of training to procurement officers in Departments and Government agencies to ensure that their approach to public tendering does not inhibit access by small companies; being open to consortia bids from SMEs; splitting tenders into lots, which might stimulate more involvement by SMEs; and removing any cultural obstacles in the system which prevent SMEs winning tenders, such as dealing with existing large service providers and familiarity with large companies.

Enterprise Ireland will assist its client companies to build capability in responding to tenders, connecting them with public sector buyers, and building an understanding of future needs of purchasers on the one hand and competences within firms on the other.

We will also seek to foster greater SME engagement in developing innovative products and services to meet the needs of public bodies and will explore similar schemes along the lines of the small business innovation research programme in the US, and schemes in other EU countries that help to provide partnering and networking opportunities for small businesses, and provide the impetus to start projects that otherwise would not have got off the ground.

Employers' PRSI is important also.One way to help job creation and improve our labour cost competitiveness is to ease the costs on employers of taking on new employees. Accordingly, and in line with the commitment given in the programme for Government, there will be a halving of the lower rate of PRSI until 2013 on jobs that pay up to €356 per week. This measure will take effect from 1 July next and will reduce employers' costs by 4% and offset the restoration of the national minimum wage committed to in the programme for Government.

The existing employer job PRSI incentive scheme will remain in place until the end of this year to ensure that enterprises and businesses that had planned to take on staff under this scheme in that period may continue to do so.

On reducing business costs, which is important also, the Government is committed to keeping all costs which impact on business as low as possible to enable them to benefit fully from the stimulus provided by the jobs initiative. This will require a joined-up effort across all Departments. In this context, I will work with my ministerial colleagues to explore options for further reducing costs to business, particularly those that are set by Government or at local authority level. Work to further reduce the administrative burden on business and to tackle costs in sheltered sectors will also continue across Departments.

In addition, my Department has measured administrative burdens arising for business in three key areas of regulation: company law, employment law and health and safety law. It was found that the burdens across these three areas amounted to €831 million per annum for business. The Government's target to reduce these burdens by 25% dictates that €208 million must be cut from these costs for business.

At this stage, 90% of the €208 million has already been targeted, and this amounts to almost €187 million in savings this year. The savings can be realised by, for example, submitting returns to the Companies Registration Office electronically, taking up the available audit exemptions, using the Health and Safety Authority's on-line tools to assist with risk assessment and safety statements, and using the simplified on-line procedures and forms for redundancy rebates. Details of the practical areas in which savings can be realised by companies are available on the business regulation section of my Department's website.

Regarding improvements in cost competitiveness, the loss of competitiveness in the Irish economy during the boom years, coupled with the global economic downturn, has had a profound impact on the bottom line for many Irish companies. This has had a drastic knock-on effect for employment, with many employers having to lay off staff, and reduce hours for those employees remaining.

Addressing the issue of competitiveness in the economy has been one of our top priorities since taking office. There have been some recent improvements where the Irish economy has regained some of its cost competitiveness. This has included, for example, reductions in electricity and gas prices for businesses, and the reduction or freezing of local authority rates.

The cost of water services to business also compares favourably with that in our main trading partners, while the cost of broadband services compares favourably with the EU average.

Measured by the harmonised index of consumer prices, the rate of inflation fell continuously in Ireland between March 2009 and December 2010. Even with the moderate growth in prices for the first four months of 2011, we continue to have the lowest growth rate in inflation across the European Union. As a result, our prices have continued to come closer to those of our main trading partners. Despite this progress, the National Competitiveness Council cautions that further improvement in cost competitiveness is essential.

The Government is committed to doing more to reduce the cost base for business. The programme for Government centres strongly on enabling growth in the domestic economy, while continuing to maintain a strategic focus on exports and investment. As part of these efforts aimed at economic recovery, we will explore initiatives that will assist Irish business, as well as tackling costs in the so-called sheltered sectors for professional services.

There has been an overall decrease in labour costs in the economy, coupled with improvements in productivity. EUROSTAT data for unit labour costs across the European Union show that costs in Ireland fell by over 7.6% between the fourth quarter of 2009 and the fourth quarter of 2010, compared with an EU average rise of 1% in the same period. The recently published report on the independent review of employment regulation orders and registered employment agreement wage setting mechanisms examines how to implement meaningful and overdue reforms in wage-setting mechanisms which affect key sectors of the economy in order to protect existing jobs and encourage employment growth. The review of employment regulation orders and joint labour committees will be crucial to the bottom line of many small and medium businesses. The Minister for Jobs, Enterprise and Innovation intends to finalise consultations with relevant stakeholders this week, ahead of submitting a final action plan to the Cabinet before the end of June. The review of employment regulation orders and joint labour committees, together with the job creation initiatives and incentives announced last month, will facilitate both job creation and job retention.

Rental costs are an important factor for the competitiveness of businesses in the economy. In recent years upward-only rent reviews kept rents for many businesses at an artificially high level, despite the fall in property values and open market rental trends. While upward-only rent reviews have been banned in new leases signed since 28 February 2010, the programme for Government expresses our intention to legislate to end upward-only rent reviews in existing leases. The Minister for Justice and Equality and the Attorney General are exploring the legal options in this area.

Other areas of the jobs initiative I want to highlight include the following. An additional 20,900 places are being made available on specific education and skills training courses, including places on back to education initiative, post-leaving certificate courses, under the third level springboard programme and the new national internship scheme. Approximately 1,000 jobs will be created by the rehabilitation of local and national roads, with the implementation of smarter travel and management schemes. An additional €19 million in Exchequer funding has been allocated to the retrofit scheme which will create approximately 850 direct and almost 400 indirect jobs.

It is likely that the impact of the jobs initiative on employment will be most visible from 2012, as economic activity picks up in response to the initiative and other Government measures. The stability programme update, published on 29 April, foresees net creation of 100,000 jobs between 2012 and 2015. As signalled at the launch of the jobs initiative, there will be further announcements which will lead to additional job creation in areas where the economy can gain a competitive advantage such as health care, the life sciences, cloud computing and the green economy. Only yesterday Dell announced the creation of 150 new jobs in Limerick and in its first cloud research and development centre in Dublin. That is very welcome news.

As Minister of State with responsibility for small business, I will ensure the concerns of small business will continue to be at the forefront of Government initiatives in order to harness the growth and job creation potential of this critical sector. Next week, with the Taoiseach, I will be launching the small business advisory group which I will chair. The group will be made up of small business representatives and will focus on issues of immediate concern to the sector. Arising from its work, I will bring appropriate proposals to the Government for action on an ongoing basis.

In accordance with the further implementation of the recommendations in the EU Small Business Act, I have been appointed as Ireland's SME envoy. I will be ensuring the interests of SMEs continue to be given priority in the European Union and that the principles in the Act are more fully embedded across the Administration.

The jobs initiative represents the first steps of the new Government on the road to improving the economy's international competitiveness and promoting job creation. More initiatives will be implemented in the coming months. For my part, I will ensure SMEs have a voice in this Administration and that pro-business policies are followed. I am delighted to speak on this very important issue.