Wednesday, 2 October 2013
County Enterprise Boards (Dissolution) Bill 2013: Second Stage
I welcome the Minister and the Bill. I believe we will get involved in many opportunities to enable us operate successfully. I wish to speak about SME access to funding. Access to funding is a massive problem for SMEs, an issue to which Senator White referred earlier. The Government is providing additional back-up funding for people who have been turned down by the banks and other lenders through its new micro-finance service. I am also involved with Linked Finance which is a crowd funding company that has massive success. This is not a commercial venture for me, it is more to establish job creation. More than 50 jobs have been created by it since it was set up a few months ago. It hopes to fund 200 companies by the end of the year.
Can the Minister explain what part, if any, crowd funding will play in his plan for the new one-stop shops? I am an enthusiast of crowd funding. The basic idea is that if a business has been in operation for at least two years and wishes to have finance, it promotes itself through Linked Finance, a crowd funding operation. People can lend it money and negotiate what interest they will pay. The SME decides what interest to pay and who to select. One could end up with a local butcher's shop which wishes to spend €20,000 on a new cold room. It advertises and gets the €20,000 from perhaps 200 or 2,000 people, each paying, say, €10 and agrees to pay them an interest on it. It also means the butcher has 200 or 2,000 enthusiastic customers. Future financing is likely to involve crowd funding. Given the attitude of the banks and unfortunately the fact that many SMEs are still unaware of the benefits or even the concept of crowd funding, it is vitally important that is relayed to SMEs. Mr. Peter O'Mahony who set up Linked Finance summed up the concept as follows:
It is the first time that accessing finance has been this fast, fair and affordable, because it is not about, "how do I get access to the decision makers in that bank?", or "who do I know in that venture capital outfit?" This is all about proving your worth to your customers and fans, getting them to validate your idea and fund it.Another suggestion is to allow tax credits to be converted to cash if a business hires an employee. Related to the issue of cashflow, could the tax credits for start-ups, including new retail outlets, be converted into cash? What start-ups need is cash but they need it now. If a start-up hired an employee, then the tax credit could be converted into cash. This exact initiative took place in the US and the cash incentive worked.
On the day President Obama took office, the US had less than 2% of the world market in manufacturing the high-powered batteries for hybrid or all electric cars. On the day of the congressional elections in 2010, thanks in large part to the tax-incentive policy, the US had 20% of global capacity, with 30 new battery plants built or under construction, 16 in Michigan, which had the second highest unemployment rate in the US. Can the Minister of State explain whether he would be open to trying out this initiative? I think it would be a super idea to try out to help SMEs.
People should be allowed moreaccess to pensions to free-up cash. We suggested this idea before the budget last year and I know the Minister recognised its importance. It is a question of businesses getting cash. At that time I advocated for the release of some pension funds to allow citizens some relief and get cashflow into the economy. I welcome the recent move to allow people access to 30% of their additional voluntary contributions, AVCs. This will help thousands of people in trouble. This very forward-thinking move is really helping people. I have received correspondence that this is life-changing for people. However, what the Government must realise is that people are being crippled by household debt and we should consider extending this initiative.
If a person or SME could access €2,500 tax-free from their pension tomorrow they could, say, pay off a credit card debt and several overdue bills. They could get back on their feet or even start their own business. It would also stimulate the economy. For example, they would pay for house renovations, holidays, and, perhaps, change their car. They would spend cash and it would get cash flowing back into the economy. This is totally against everything I heard in school and college, where people are encouraged to spend instead of to save. Our savings are very good and we are afraid to spend.
The possibilities for a person who can start up by accessing some cash are very exciting. If people can do this, then we have set the conditions for them to do something like starting their own business. This is what government should be all about - not simply giving them a job but giving them access to cash which is vital. To further this, we could set up a scheme where if an SME hired a person, it could access cash locked up in a pension. Now is the rainy day. Now is the time when SMEs need access to cash. We can do much more in this area.
Retailers and SMEs employing fewer than 50 employees should not be subject to the same regulations as big business and it should be made easier for them to take on workers. I ask the Government to examine the possibility of not imposing the same regulations on companies employing fewer than 50 people. We should not impose on micro-enterprises the same burdens as those placed on a multinational company. Should we impose the same legislation on a company of, say, 500 people and a company of, say, four people? We want to create jobs, establish start-up companies and help people who have a concept and want to start a business. Perhaps such persons should not be bound by the regulations and red tape applying to big businesses? In France many regulations come into force once firms employ 50 workers. We should consider doing something similar here. The difficulty is that if one has 45 workers and is tempted to take on another six, it means one has to operate under different regulations. Should Google be subject to the same regulations as a small food company employing five people?
Regulations are a huge deterrent to a person who wants to start a business, employ people and get off the ground. Businesses employing fewer than ten people should notbe subject to the same regulations that apply to bigger businesses. There is a need to tailor regulations instead of a one-size-fits-all approach. It is an issue to which we should give serious thought. The EU has recently incorporated such thinking into any new legislative proposals. If we are to establish businesses and create jobs, the immediate ones will come mainly from the SME-retail area.
Another suggestion, which I had included before I read today's newspapers, is to get rid of Sunday payments to help retailers. Something must also be done about the old-fashioned system of Sunday payments. I note that the Minister is moving in this area with regard to hotels and restaurants.
We must review all regulations on the retail sector and introduce red tape challenge to help retailers. Can we improve the situation to make it easier to do business? Sweden undertook a systematic review of all regulations in the 1980s. Any unjustified requirements were cut in a "guillotine" initiative. Mexico took a similar approach in the 1990s. In the UK, in 2005-10 a programme reduced the burden of regulatory compliance on businesses by 25% according to the Government. That amounted to savings for firms equivalent to £3.5 billion. New initiatives are under way such as the "one in, one out" system and the red tape challenge. The red tape challenge uses a public website where the Government gathers the views of the business community and the public and invites practical suggestions for alternatives. Anybody can access the website and comment on any particular statutory instrument identified for review. The feedback from those affected by regulation will inform Government decision making. When the period for comments closes, Ministers have three months to decide which regulations to keep and which to scrap, taking account of the comments provided.
This exercise presumes that burdensome regulations will be removed if there are no good reasons for keeping them. We could do something similar here and I would like to see more done on this issue.
I wish to raise a particular topic that I have raised here before. The Minister will have heard me talk about it and I apologise for repeating myself. There is an understanding about the percentage tax rate. If income tax or company tax is reduced in a clever fashion then it will increase moneys for the Exchequer, a win-win situation. Taxes have been reduced in the past. Let me give an example. Close to 20 years ago the then Minister for Finance, Mr. Charlie McCreevy, announced that the betting tax would be reduced from 20% to 10%. Of course there was a huge howl that he was simply looking after his horsey friends in Kildare but he stuck to his guns. The following year he announced that the Exchequer had taken in more money at the 10% rate rather than the 20% rate. Therefore, he declared that he would reduce it further to 5%. One could not keep reducing the tax rate and when it reaches 0% one does not take in any money at all.
I am delighted to see the Minister of State in his chair. I remember meeting somebody, some years ago, who said that he always worried about anybody in authority who had never worried about where to get the money to pay wages at the end of the week. He was talking about Ministers for Finance in that case. A grocer makes a very good Minister because he will have had to balance the books and knows how to reduce a percentage and price in order to take in more money. That sort of thinking can help a great deal.
Some of the points that I mentioned are worth noting. I urge the Minister of State to show the same enthusiasm as he has done in the past couple of years and I hope that he will continue to do so.