Tuesday, 6 March 2012
Action Plan for Jobs 2012: Statements, Questions and Answers
At the outset I would like to thank Senators who made submissions when we were putting together the Action Plan for Jobs 2012. They will see that some of the suggestions put forward by Senators are reflected in the action plan and others are still under consideration. I reiterate that this is an annual process. It is not a case of producing our best thoughts and then retiring from the struggle. This will be a year in, year out process. We will be generating an action plan for jobs with specific measures we will take during the course of the coming year.
I do not need to tell any Senator the reason we have decided to put jobs at the core of the Government strategy. In the past three years we have lost 350,000 jobs, almost 15% of our workforce, and almost 80% of those are people under the age of 30. We are losing the sort of people we look to to build the strength of our economy in the future. That is a compelling case in terms of the reason Government should put this plan at the core of what we are about.
This plan is ambitious but it is realistically ambitious. It has set a target of 100,000 net new jobs - more people at work - by 2016 and a further 100,000 by 2020. It has also set the ambition the Taoiseach has repeatedly emphasised that we seek to have Ireland become the best small country in which to do business by 2016. There are other ambitions set out in the plan which those Members who want to go through programme can read. They are important statements of intent and are about what the Government is demanding. That puts a huge focus not just on one Department such as the Department of Jobs, Enterprise and Employment but on the entirety of Government in that they all have a role to play. If Members ask me what is different about this action plan from what we have seen previously, the most important difference is that every one of the 15 Departments have contributed to this plan. A total of 36 agencies, not just from my Department but from agencies across the spectrum, have contributed.
In terms of what is also different about this plan, those Members who studied public service reform over the years and seen the production of glossy reports on the health strategy, the climate change strategy, the decentralisation strategy or many of the other myriad strategies that did not lack ambition will know that some of them were right while others were a bit misguided depending on one's opinion but they fell down on implementation. What is different about this plan is that it does not offer a big bang solution. It has ambitions but it does not pretend to be the magic formula. Instead, it is a workmanlike document about what we can do now that over the next 12 months will make it better for employers to take on people and make it easier for people to get off the dole.
The big change is that there is an absolute emphasis on implementation. Every one of the 270 measures has a quarter within which they are to be delivered during 2012, either in quarters one, two, three or four. From the Taoiseach's Department, with both my Department and that of the Minister for Public Expenditure and Reform, Deputy Howlin, making an input, there is a monitoring system where each Department, agency and Minister will be held accountable to deliver on time. That is a big change in the way we approach planning and delivery within the public service. It puts accountability at the heart of the process and is an important change, quite apart from what is in the document. It is a whole of Government approach and it will be delivered consistently and next year we will seek to introduce new measures that will match our ambitions. It is important that Senators see it that way to ensure that if they have ideas that will create opportunity, and there are people here from all walks of life who have experience, we want to hear about them, stress test them and see if we can implement them over the course of 2013 if they are not included in 2012.
In critiquing this action plan many people will say the core issue in the economy is demand. There is a validity in that. There is no doubt that we have a constrained public sector because we must reduce our borrowing and consumers are equally constrained by borrowing commitments that are bearing down on them, not to mention the economies they are being forced to make by decisions coming their way. We do not have the option of abandoning the borrowing targets we have agreed with the IMF and deciding to introduce an additional stimulus package. What we have to do is to box smarter with the resources we have, and that is the emphasis in this plan. We do not have the option of a big free-rolling Keynesian plan, about which we economists often talk, but we have the option to be smarter in the way we spend money, and that is important. For example, in terms of the strategic investment fund or NewERA, we are seeking to take amounts of money we have in the National Pensions Reserve Fund and, to use the financial phrase, to leverage up that money. In other words, for the €250 million we have put into the strategic investment fund from our resources, we are getting a matching €750 million from pension and insurance fund managers to match the money that the State is putting in. Suddenly starting from funds of €0.25 billion, we have €1 billion of funds available to invest in infrastructures, once they wash their face, as it were. The issue now is to find investments that can show a commercial return and that can draw down this money we have created in terms of a fund.
In the same way we seek in many other ways to leverage with small resources much bigger amounts. For example, the partial loan guarantee scheme, for relatively small money from the State, in terms of exposing ourselves to some risk in the bank books, can leverage a good deal off lending to small business. In the same way, with the micro finance scheme, with relatively small amounts of money, we can match that equity by additional funds that we can borrow. The banks will feel secure in lending to a microfinance fund when it has a good equity base. Much of what we are doing is seeking to leverage financially but also to leverage through smarter use of the resources we have.
For example, the idea that we will pull local authorities into the task of driving enterprise development in their localities is an issue, which I know from travelling around the country, that is generating some controversy That is an explicit decision. We are now determined that we will offer small business a high quality service. The traditional way was county enterprise boards dealt with the small business, Enterprise Ireland was in another space and there was a breach in the ladder between people who were supported by county enterprise boards and the next step of getting access to Enterprise Ireland. Many people would also express the view that there was also a sense that the local authorities were not sufficiently engaged in making it easy to set up business, keeping down the cost of rates and services and making the regulatory system easy. We seek now to bring all those pieces together. A local enterprise office will be located within and supported by the local authorities, bringing together the business units of local authorities, seeking to make it easier to establish in that area but also having seamless access to Enterprise Ireland as a centre of excellence. Enterprise Ireland will be developing the policy tools that can be applied at local level. We believe that this is a win-win scenario. Admittedly, it is challenging in its implementation and many people would say "our local authority is up for this". I believe they are. Senators know more than most the commitment of local councillors and local authorities, but we have to engage people. We cannot afford to have local authorities being seen as part of the problem, they have to be seen as part of the solution.
Other ways in which we seek to leverage new thinking is that for the first time Enterprise Ireland will invite players in niche areas of industry to form a cluster, which will then develop and provide support, with State resources, to drive that cluster to do new things. Our system has been criticised for having strong agencies but relatively weak companies. This is a chance for companies in niche areas to say "let us do something different, let us seek to shape the way in which our niche can develop and let us come up with ideas". This is an opportunity to do that. There will be an invitation from Enterprise Ireland for players in niche areas to come forward with their ideas.
An important element of what we are trying to do is to ensure that with money scarce we box smarter. We need to get more people and communities involved. With Senator Quinn present, it would remiss of me not to say that one of the elements of this plan is to examine how Chambers of Commerce and local authorities but also local communities can become more involved. Senator Quinn was very prominent in the local heroes initiative in Drogheda and several other towns.
We all need to think of what we, as a community, can do to promote employment. The local heroes initiative was very interesting because it involved fairly simple things, such as using technology to advertise local services more effectively. It brought more people into the town who picked local things to do and generated activity. A lot of our current challenge also involves giving people the confidence to invest.
People have said it is all very well for foreign companies to invest in Ireland but we need demand locally. That is true, but it is equally true that for every job created by foreign companies at least one other is created by the demand that generates, such as in restaurants, bars, shops, hotels and so on. Demand flows from international investment. The sense of international confidence that is returning, as seen from the IDA results, is having a local fillip. Investment in a town like Dundalk has a major impact on the area.
The core of this strategy is built around enterprise. When the economy was going well we were good at seeing a balanced expansion of enterprise and public service growth because we had strong enterprises which exported. We were nimble and quick to adapt to changing trends. One of the disasters that befell this country was not just the impact of the housing crisis on banks, but also the six years of declining market share in our export markets. We saw the core of a small open economy being eroded by excessive growth in the building and banking sectors.
We have to create a strong indigenous engine of growth based on the capacity to export. A lot of what we seek to do for indigenous business is to make it easier to start up enterprises, which is vital, and for companies to grow to scale. There are numerous initiatives to make it easier to start up companies. From visiting different places around the country, I found it surprising that a lot of people do not know about established concessions.
For example, they do not know that if one sets up a business for the first time one can claim back the last six years of one's income tax to create a shareholding in a new company, which is a very valuable concession. Some 12,000 new businesses were set up in Ireland last year but only 63 chose a concession that is generally available. A few sectors are excluded, such as hotels, catering, horticulture and some agricultural areas, but by and large it is broad-based. However, there has not been a large take-up of the scheme.
Some 1,000 people a month set up businesses and we have to make sure they succeed and do not stumble on the valley of death during the initial difficult years. We need to build a better support network at local level, have a stronger mentoring service and better microfinance, which we are developing. We need to ensure those with high potential can migrate into the Enterprise Ireland programmes which offer opportunities to develop.
We are also seeking to raise the ambition of a lot of local companies. One of the important initiatives in that regard concerns exporting. We are setting up a first-time exporter division within Enterprise Ireland to target approximately 1,800 companies that we believe have the potential to export but which have not put their toes in the water. It is important that, with demand constrained domestically, we chase the opportunities for new demand elsewhere. This is a very practical way of supporting companies that have the capacity to enter export markets. It is supplemented by the Minister for Finance's concession in the Finance Bill to allow people obtain tax relief if they put people in the BRIC countries, in addition to South Africa. If one is willing to put feet on the ground in those countries, which one must do to be successful, there is now a tax concession.
We are expanding management training and introducing new forms of management training to seek to lift the horizons of companies. A development capital fund is another innovation in the programme. It is targeted specifically at growth companies, not at the very vigorous ones that avail of venture capital, which we are also funding, but at companies that are more established and which are often forced to sell out in order to reach the next level of growth. To lose control within Ireland represents an awful loss. We are, therefore, establishing a development capital fund, again under Enterprise Ireland, to target those companies which, with access to the equity, can continue to drive their growth from within Ireland.
We need to recognise that the presence of multinationals presents an enormous opportunity. In many ways, what sets Ireland apart is the presence of really strong multinationals. We need to think more strategically about how we use that strength. We need to see multinationals clustered more strongly not only with their existing supply chains, but with indigenous businesses which are coming through with new ideas. The medical devices sector comprises a wonderful example in this regard. It is predominantly based in the west, where strong multinationals have bred equally vibrant indigenous companies that are developing new ideas that can be applied and developed within the cluster. It is a really great example and we need to build more such clusters. The action plan seeks to identify the sectors where Ireland can stake out a future and build successful clusters. Some sectors are well known, such as financial services, tourism, ICT, medical devices and life sciences. Other sectors, such as clean technology and digital gaming, present new opportunities in respect of which we believe we have the basic ingredients to succeed.
Another exciting initiative involves making Ireland a destination in which companies can establish. One striking point about places such as Silicon Valley is that many of the companies that establish there are not US companies. People go to Silicon Valley because of the environment it offers, including access to venture capital and the buzz associated with the setting up of new businesses. We have that sort of buzz in many sectors. We have the venture capital and the good taxation environment, and we also have the flexibility and a quality workforce. Increasingly, we have start-up companies.
Mr. Dylan Collins, who set up the digital gaming company Havok and other companies, is a business ambassador and serial entrepreneur. We need to see people like him piloting projects and promoting Ireland as a place in which to set up a business. We are seeking to box a little more smartly. Instead of relying on Enterprise Ireland, the body that now promotes Ireland as a start-up location, we are bringing the IDA in on the scheme. We are using the much broader international office presence of the IDA to promote Ireland as a start-up location.
I do not want to spend too much time talking about this as this opportunity is more about hearing the views of the Senators. The last area worth mentioning, however, is the one that people think of most of all. We need to rebuild our competitiveness. To be fair, it has improved in the past few years. Some would say this is attributable to the recession itself but unit costs in Ireland have improved by approximately 20% relative to those of our competitors in the eurozone. This is a very significant change. Unit costs in Ireland have improved by about 20% relative to our competitors within the eurozone. That is a very significant change and it is the reason one sees Ireland back on the radar for many investors. Not only do we have a good environment, but we have also become more competitive.
However, we cannot afford to rest on our laurels in that area. We must look at how we can become more effective in many different ways. The skills area is important. One of the casualties of the boom, aside from banking, the mortgages legacy and so forth, was the choices young people made about their careers. At the beginning of the last decade, almost 10% of people were picking technology as their career, but by 2008 that had dropped to 3.5%. That is a huge handicap as we now seek to rebuild an enterprise driven economy focused on exports. That is the reason there are scarcities in certain skills, and we must address that both in the short and long term. Recently, the Minister for Education and Skills, Deputy Ruairí Quinn, has created opportunities for people who have completed other courses to switch into technology through the springboard courses. We need to do a great deal more of that.
We must also look at the critical mass we have built in science and research capability, which is now very strong. For the amount of money we are spending relative to other countries, we have done much better in terms of patents, citations and whatever else academics use to determine the measure of success. The challenge now is to go from being successful academically and to sweat that resource for economic outcomes. The research prioritisation exercise undertaken by the group chaired by Jim O'Hara, formerly of Intel, has sought to stake out the areas and sectors where Ireland has an opportunity to be a leader and to have the critical mass whereby we can create ideas that can be made commercial. People talk about the importance of research. When I was in the United States recently, a man said something very original, although it might not be to the Members. He said research is about the process of transforming money into ideas, but innovation is the taking of ideas and turning them into money and jobs. We need the innovation part. We have the research part and the challenge is to convert that into a higher flow of innovation. That is a huge element of competitiveness which we can build.
Competitiveness stretches to many areas, which is why we have enlisted 15 Departments. It stretches to regulatory burdens that are often inadvertently created by processes that grew like Topsy. We must focus on whether these regulatory burdens are necessary and whether they can be done more smartly and better. My Department is examining the employment rights and industrial relations system. It grew like Topsy. There were 30 different forms on which people could make complaints until we started to address the matter. There are five different bodies involved in this area. We believe we can craft a much simpler process that is better for workers seeking their rights, better for employers in terms of certainty, better for compliance and more effective all round. There are opportunities to do this in the public service and help businesses in critical areas. This process is about identifying and seeking to seize those opportunities.
Again, I thank the Senators. This is an opportunity to hear Members' reaction and, from my point of view, to learn for next year. It took a great deal of effort to produce this plan. I am not accompanied by any civil servants but I thank them, in their absence, and many other people for the long hours that were put into the plan, even over the Christmas period. However, we need to build something better. This is an important piece of work but it is not the end. It is only the start. We need to build on it and to draw on the experience in this Chamber and in the many chambers outside the Oireachtas to help us in what can only be seen as the most compelling challenge our society faces for the foreseeable future.
I welcome the Minister. I congratulate him on coming to the House alone. It is rare that a Minister comes here by himself. In my experience, the Minister is a most well intentioned and idealistic Minister with responsibility for enterprise. The Minister knows that the lack of credit is an emergency situation. It is the elephant in the room but we must address it.
In his speech at the weekend, Deputy Micheál Martin said that legislation may be required if the banks do not give out credit. I am an admirer of the Minister so I am not being personal in my remarks but he must listen more to businesses than to the banks. The two main banks are supposed to be giving out €3 billion a year each but they are not doing so. The situation is in crisis. At a conference last Friday in the Central Bank to issue a report on the subject of credit availability to small and medium companies, the Governor, Patrick Honohan, said that small and medium-sized businesses are facing a dual challenge in terms of funding. For example, the personal wealth of families is being depleted and they cannot put money into businesses.
It is much more difficult to start a business today than when Connie, Judy and I did so in the 1980s. We were given £5,000 from the Bank of Ireland in Dundrum to research our project on chocolate-making. It is much more difficult now because the money is not there. There is no doubt that small and medium-sized Irish companies are the generators of new jobs in our economy. The report stated that foreign direct investment companies are more productive but that is because they are more capital intensive while our indigenous industries are more labour intensive. The Governor of the Central Bank also told the conference that credit conditions for Irish small and medium enterprises are worse than for their European counterparts. A total of three quarters of Irish firms say they must pay higher interest rates compared with 62% in the euro area. It is also more difficult to obtain larger loans in Ireland and collateral requirements are also higher.
The Minister is an economist and will be familiar with the February edition of the Department of Finance monthly economic bulletin. The chart in the bulletin can only be described as brutal because it shows a consistent decrease in credit availability to the private sector. The bulletin states that the annual rate of growth in private sector credit advanced to Irish citizens was minus 3.8% in December, accelerating from a 1.9% decrease in November 2011. I am sympathetic to the Minister's position. The banks are holding on to money for their reserves and they are not giving it out. I know there is no magic bullet but something must be done otherwise employment will not be created nor will companies be able to continue in business.
I refer to the Minister's document but, in my view, it was a bit too lengthy. Albert Reynolds relied on a one-page solution to problems. The temporary partial loan guarantee scheme and the micro-finance loan scheme have been announced but these much-needed major initiatives will not be up and running until the second quarter of this year at the earliest. I do not understand why they are not available and why the money from these two schemes has not been provided. I ask for the Minister's comments in this regard. The only aspect of the action plan for jobs which interests me is the availability of credit. I am disappointed with the situation regarding the county enterprise boards. Has there been an increase in funding? The enterprise boards should have been transferred to Enterprise Ireland under Mr. Frank Ryan. I have personal experience of dealing with him when he worked with Mr. Padraic White in the 1980s. When he worked in the United States he would go through steel to get a project.
I disagreed with my colleague, Deputy John McGuinness, at our seminar on jobs. I did not believe that the situation in enterprise boards was so bad. I ask the Minister to explain the reason they were put under the control of the local authorities.
I believe the Government has a higher regard for foreign direct investment than the then Fianna Fáil Party when in government. I remember during the years of the Celtic tiger there was very little appreciation for multinational investment coming into the country. The then government was blinded by the tax yield from the property bubble. It does my heart good that Mr. Barry O'Leary and Mr. Frank Ryan are getting such support from the Minister. Where would we be without the multinationals? They were not appreciated by the last government. I was in the Seanad and know what was said and what was ignored. The regional transfer of PayPal to County Louth is a perfect example of a dramatic job announcement.
I know the Minister has his heart in the right place but he must put the screws on the banks. Do we need to bring in legislation to ensure they provide funding for business? That is the bottom line.
I thank the Minister for his brief outline of what he can do because there are 270 elements to the Action Plan for Jobs 2012, which is very welcome. The most important element of the plan is the tracking mechanism for the end of quarter results. We will be able to judge the performance in each quarter and the Minister will report on how the recommendations have been implemented. This is difference, which is very welcome.
I too wish to comment on the credit lines offered by banks to small and medium enterprises. I too read a report of the conference organised by the Central Bank, which was reported in Saturday's newspapers. The Central Bank Governor, Professor Patrick Honohan, had outlined the serious lack of credit for small businesses and said that the lack of bank credit is likely to be a more serious drag on our recovery than it might otherwise be. He also pointed out that it is having an effect on competitiveness and this is borne out by how Irish small and medium sized businesses are competing vis-À-vis their European counterparts.
This issue keeps coming up, it was also included in Mr. John Trethowan's report. The Minister of State at the Department of Jobs, Enterprise and Innovation, Deputy John Perry was in the Seanad recently and he is meeting individuals from the business community around the country to discuss issues with them. The Minister was in Cork last weekend to meet groups from the business community who raised the issue of funding for small and medium enterprises and the way the banks are behaving to businesses that have a long track record and would be viable. I accept that not every business can be viable in these straitened times but some businesses are going to the wall and having to lay off staff because they are not getting even low levels of support from the banks. This remains a critical issue.
The headline figure of 100,000 jobs to be created by the Action Plan for Jobs 2012 is broken down in the report, which outlines where those jobs can be targeted. The Minister mentioned the one-for-one job where each job created by the IDA or Enterprise Ireland leads to the creation of a job in the local economy. We see evidence of that across the country. I see it in my own area when I look at the number of pharmaceutical companies, with eight of the top ten pharmaceutical companies in the world located in and around the Cork area. Pfizer in Ringaskiddy has generated a great amount of employment in the nearby town of Carrigaline. A myriad of supporting services surround that one industry such as crèches, food, clothing and recruitment. One can really see one-for-one job creation reflected in the local community. The recent announcement that PayPal will create jobs in Dundalk has also had a huge impact. Last week, Eli Lilly announced it would create 200 new jobs in Cork, which is a statement of its confidence in the economy and willingness to re-invest to raise its activities to another level. Such confidence is reflected throughout the country.
We do not step back often enough to acknowledge the work of IDA Ireland. Last year, it created more jobs than were lost. Some people may criticise that and say we are at a standstill but that is a noteworthy figure when one considers the economic global climate. Recently, Enterprise Ireland appeared before the Oireachtas Joint Committee on Jobs, Social Protection and Education to outline its work. The jobs plan contains an initiative for IDA Ireland and Enterprise Ireland to work together, particularly focusing on SMEs. They will ensure SMEs can piggy-back on foreign direct investment by providing such services as facilitating and mentoring them when procuring contracts from foreign companies investing here. The synergy between the two bodies is important and I am glad the plan states that we will establish a tangible committee for them to work together.
The proposal to abolish county enterprise boards and develop local enterprise offices, LEOs, in local authorities is a welcome and positive step and one that will benefit local authorities and enterprises. Small businesses will have a "one-stop-shop" to go to for information on regulatory matters. Enterprise Ireland will feed into the LEOs so people can benefit from its expertise. That type of connection was not previously provided by the county enterprise boards and is a welcome move. We are not going to lose expertise; rather, small micro-enterprises will be able tap into Enterprise Ireland and its expertise and extensive knowledge of the sector.
Unfortunately my time is up but perhaps I can return to the subject again during the questions and answer session. I compliment the Minister on the plan and on recognising the contribution that small and medium enterprises make to our communities. If SMEs can be facilitated to create one extra job, we will go a long way to bridging the enormous gap between employment and unemployment. I welcome the initiative.
Regarding research and prioritisation, one hears a lot of criticism about funding for research. People question whether money has been spent wisely and if the taxpayer got value for money. Last week, Jim O'Hara launched the report of the research prioritisation steering group which identified 14 areas for investment. The Government, under the chairmanship of the Minister of State, Deputy Sherlock, will ensure the funding is spent as intended. We now have certainty about the sector because we can see how valuable the 14 areas will be to the local economy. I thank the Acting Chairman for the time granted and look forward to contributing again.
I welcome the Minister to the House and thank him for attending. I also thank the Leader for holding a debate on our ideas for job creation in January so our views could feed into such an important public policy document as the action plan. I also thank the Minister for incorporating a section on social enterprise and social entrepreneurship in the action plan and I will speak a little on it. I am an advocate for social enterprise and social entrepreneurship, and will continue to champion it as an integral dimension of the Government's plan to create jobs. I will be zealous about it, not unlike the Minister and the way he presented his plan to us this afternoon. The plan is impressive, particularly its focus on implementation, the whole of Government approach and all of the different Departments involved. As he said, implementation of the plan will be difficult. It will be a complex journey but it have given us a lot of hope.
The Government has also made an explicit commitment to evidence-based and proven models for the development of public policy. It wants to create the best environment for creating jobs and, as I said, the action plan gives us a dynamic framework. This afternoon the Minister demonstrated an eloquence when describing the framework's dynamics. When developing and implementing the framework I urge him to be attentive to the evidence that has emerged on social innovation and social enterprise. Over the past 20 years it has emerged as a business model.
Earlier the Minister spoke about innovation. I shall focus on social innovation and define it as comprising new strategies, ideas, concepts and organisations that meet social needs and contribute to economic growth or, using his phrase, turn them into money. Social innovation leads to job creation. Social innovators create employment and solve social and environmental problems. It is also a key component for the reform of public services and provides initiatives and approaches that deliver higher quality public services with fewer cash resources.
The action plan contains a definition of social enterprise so we know that it is businesses or organisations set up to tackle social, economic or environmental issues. They engage in trading or commercial activities to pursue such objectives. They are not profit driven but produce excess income that is often used to further their social mission. The estimated annual revenue generated by the social enterprise sector in Ireland stands at €240 million, its annual spend in the economy is over €230 million, 9,300 people are directly employed in it and 5,100 people are indirectly employed. Many of my colleagues know or are aware of Social Entrepreneurs Ireland because it briefed us leading up to our debate on jobs. It has supported 150 social entrepreneurs and each one of them creates an average of 23 new job opportunities.
I will focus on one example of a proven model of social entrepreneurship that is ready to scale. Fledglings Early Years Education was set up in 2008 as a small business unit within a larger community organisation named An Cosán. I am a co-founder so I know the business from the inside. It is located in west Tallaght. It is a not-for-profit social franchise that supports and mentors early years educators and helps them to set up affordable services. It is like Snap Printing, the printing franchise model, but this one establishes early years education and care centres. It has created 42 new jobs over the past couple of years in five centres. It has been approached by five interested parties to replicate its model throughout Ireland with an average of nine jobs per centre. It is ready to go to scale. There is also a number of other examples of social innovation that will be demonstrated by social innovators invited to Ireland by Ashoka Ireland towards the end of March. They will share their ideas and we should be ready to listen.
The Minister's plan acknowledged the strong social enterprise base here and I welcome that he will examine its role and that a report will be developed. Recent EU announcements present a prime opportunity for us to develop the role. The European Union has recognised the significance of the social innovation sector with entrepreneurship identified by the European Commission as one of the 12 levers that will boost growth, strengthen confidence and revitalise the Single Market. Social business employs 11 million EU citizens, which is 6% of the total employment in the EU. Recently the European Commission recognised the growth potential of the model in its new social business initiative and I am happy that the initiative was noted in the action plan.
The Commission has proposed in the context of the initiative several measures under three key headings. The one I wish to emphasise is the measures to improve access to funding for social businesses. This includes developing a European regulatory framework for social investment funds and the setting up of a European financial instrument of €90 million to improve social businesses access to funding. That instrument can be effectively described as a fund of funds. The EU will establish a fund that can be accessed by the institutions of regional or member states or organisations that are providing themselves funding support to social enterprise projects.
We need the State to express its full support for the already vibrant social enterprise sector in Ireland to maximise its potential. We also need the State to take a driving role so that Ireland can avail of these opportunities at EU level. The most effective way to achieve this would be to include social innovation as part of a ministerial portfolio, for instance, under the remit of the Minster of State with responsibility for research and innovation. It should come under the Department of Jobs, Enterprise and Innovation because it is a business not a charity model. Ireland needs to engage with European developments to maximise the support from Europe and take its place as a European leader that supports social enterprise and innovation. It is particularly significant at a time when we are debating Ireland's place within the EU and the Government's efforts to advocate a "Yes" vote for the upcoming referendum. Fiscal and social compacts should go together. The Government's leadership in developing the social enterprise sector would go a long way to making that visible to voters and citizens. I would look forward to and be pleased to work with the Minister's officials in advancing this sector's potential.
I welcome the Minister for Jobs, Enterprise and Innovation to the House. It is a coincidence that Donegal is currently hosting its enterprise and business week, an annual event organised by the Donegal County Enterprise Board. Donegal's local economy is typical of counties outside Dublin with a mix of tourism, agriculture and technology companies, all of which have the potential to be improved.
The agenda for Donegal's enterprise week refers to media and marketing, food, agriculture, tourism and developing the county's job strategy. Since coming into office, the Minister, along with the Minister for Social Protection, the Minister for Finance and the Minister for Education and Skills, has given the jobs initiative and forum his full attention. However, unless counties such as Donegal get a stimulus package and job creation up running again, there will be many closures of retail businesses and small and medium-sized enterprises. I have been involved in a small business over 25 years and I see the changes to the jobs profile in Letterkenny and Donegal. We must get the domestic market up and running again through stimulus packages.
The Government has already delivered Pathways to Work and other social supports to get people off the unemployment queues. There is nothing more frustrating for any community, such as Letterkenny, to see a dole queue in which many had decent jobs in the past. Their next choices will be either emigration or retraining. It is important to encourage people in such circumstances to get back into retraining. Unless we achieve this soon, the flood of emigration will continue.
I had heard of Saskatchewan before, knowing it only as a mid-west Canadian province consisting of large tracts of land and cowboys. I never thought it would come to Ireland's rescue by offering us employment. It is surprising that a province such as Saskatchewan can provide employment. This country is recognised as having skills from medical to pharmaceutical to academic to the extent that we can surpass even countries such as Canada and its province of Saskatchewan. Portugal and Greece do not have our profile or skills. They did not invest money in the education or skills system as we did.
That is okay. I welcome any action taken to provide jobs. In the first 12 months the Government has provided much support and innovation that will be helpful in the future.
The Border counties are a special case because of the current gap with sterling. The exchange rate can move up and down by the day or week. Many businesses in Border areas are sensitive to fluctuations in sterling. Lifford is practically dead on its feet because there is an Aldi store in Strabane. Businesses in Letterkenny are waiting for sterling to get stronger around Christmas time, which is not a good way to run an economy or a business. Perhaps the Minister has a view on how to address the issue. I accept we cannot control the currency market. In good times businesses find it difficult to survive in Border areas. I am aware of start-up businesses that have gone to banks and the first thing that is said is that while the plan may be good, it may be impacted by fluctuations in sterling. That is not something a business can control. Businesses have dealt with that previously but because credit is difficult to get, they are told by banks that sterling may make or break them. The issue does not affect businesses in Cork, Galway or Limerick. A special case could be made for Border counties when we formulate a jobs policy in the future.
I welcome the Minister. It is not the first time we have had such a discussion. I recall meeting the Minister's brother when we were writing a better way to plan the nation's finances and I then served on the group that produced the Culliton report some time after that. The approach has been around for some time. I am delighted the Minister is doing this every year.
I encourage him to please be radical. I am sure he would have the support of the House for that because this is a problem which is deep-seated. The 300,000 plus unemployed to whom the Minister referred includes 23,000 gone from agriculture and 65,000 from industry, which peaked in 2007 at 299,000 and is down to 233,000. We all know that construction is down by 164,000. The retail trade is minus 42,000 and accommodation and food, due to the decline in tourism, is minus 24,000. This is the serious problem of an economy that just got totally uncompetitive.
I spoke in Enniskillen on Friday and I looked at some of the minutes of Fermanagh District Council. It had a contract for work on the airport in Enniskillen and it showed me how uncompetitive we are in this country. The winning tender for architectural services was £6,875 sterling. The average of five tenders from the Republic was £36,890. For structural engineering services, the winning tender in the North was £6,075 - the average of our 13 was £19,859. A mechanical and electrical engineering contract at the airport was £1,981. The two tenders from the Republic were £22,500 and £32,500. We have a serious competitiveness problem and we must address how we reached this point.
The reform of banking has been too slow. Mr. Elderfield attended a meeting of the finance committee. I believed that the new directors of the banks were to have been installed by 1 January. The banks brought us to the brink.
Regarding the failures in our system of public administration, there should never again be an incorporeal Cabinet meeting. There is no such provision in law. We must be prepared for when pressure is placed on the Government to accept offers of the type that did such serious damage to the country. It was probably the most successful rent-seeking or lobbying episode every accomplished.
We need a central office of project evaluation. The Irish Times published a list yesterday. Individual Departments being captured by client groups promoting their pet projects is not good enough. As the Minister correctly stated, it all adds up to a loss in economic competitiveness. The interest groups gain, as their pockets are filled, and the bureaucracy involved can expand, but that approach is bad for the rest of the country.
We need to consider reforming the permanent government. The Wright report found that, regrettably, only 7% of the senior staff of the Department of Finance had qualifications in economics. We need qualified people to undertake these serious tasks. We cannot let public administration off the hook in respect of, for example, the McLaughlin report, which found seriously excessive managerial costs in local government. Charging for septic tanks, waste disposal and water is one part of the equation, but the other is considering the report's findings. The Minister for the Environment, Community and Local Government, Deputy Hogan, and the Minister of State, Deputy O'Dowd, are interested in this matter but work is not progressing quickly enough.
Each Bill should be subject to a regulatory impact analysis, RIA, of whether it will add to the cost of doing business. Should we intervene to save property prices from falling or should we let them fall sooner rather than later, a question that also includes downward rent reviews? It would return the economy to competitiveness.
We have an agency problem. Dr. Chris Horn has pointed out that more than half of Enterprise Ireland's budget is spent internally. The percentage of the IDA's budget that is spent on its running is also increasing rapidly and the percentage that goes to firms is declining. These agencies must become more productive.
According to Mr. Damien Kiberd's estimates, we gave approximately €10 billion to firms that employed 50,000 fewer people in 2009 than they did ten years prior to that. It is not just a question of additional PR, as we must insist on value for money in the grant-awarding agencies. They should not be the focus. Instead, job creation should be the focus. In this regard, we have been failing for a variety of reasons.
I caution the Minister on tax lawyers and accountants. They abstract a vast amount of money from the country's tax base. Dr. Michael Collins estimates it amounts to approximately €12.8 billion. The Culliton report stated:
... the competitive edge of Irish industry has been blunted as effort and energy have been distracted from the proper emphasis on serving the market and achieving high productivity into maximising the grant or tax benefit. Tax avoidance and grant maximisation are the directly unproductive activities (or rent seeking in the economist's jargon) par excellence.
We should develop a focus on enterprise. The innovation report's penultimate recommendation was to develop some measure of return on the immense research and development effort that we are undertaking. There is none currently. Bord snip nua asked for it, but none has been provided. Science Foundation Ireland, SFI, must get involved with economists. It is not a kick-and-hope situation. That is what we did with the property sector. Read Mr. Simon Kelly's book. The property sector was selling to hotels tax breaks on office blocks while tourism declined by 31% during a four-year period. We must have a connection between the results and the inputs being devised by the Cabinet. Beware of the tax lawyers and accountants, as they are serving their clients rather than the unemployed.
I welcome the Minister. We have one of the highest rates of unemployment in the EU, which can be as high as 29% in the case of those who are under 25. The figures are even starker when we consider the extremely high rates of emigration prevalent in Irish society. The image of thousands of young people queuing up outside the RDS to get into the Working Abroad Expo is testimony to the unemployment crisis we are facing. The ESRI has stated that 40,000 people will emigrate this year, meaning that 12 people in each of the 3,440 electoral divisions in the State will emigrate, which is nearly an entire GAA team in thousands of communities. I paint a picture that stands in stark contrast. At a time when GAA clubs are struggling to field a team, 40 clubs have been established across London alone. These comprise 36 men's Gaelic football teams, 11 hurling teams, 11 ladies' Gaelic football teams and six camogie teams. That highlights the effects of emigration.
The recently announced jobs plan only mentioned young people once or twice. I know the Government cannot create jobs and can only create the conditions for them. However, not all young people will have the third level education or the high-level skills suitable for industries such as the pharmaceutical sector. We need to start assessing individually these young unemployed people to find how we can match their skills to jobs and get them into the labour market. Why is there not a specific action plan on tackling youth unemployment?
I recently met European Commission officials on foot of the initiative announced by the Commission President, José Manuel Barroso, to work with member states with high levels of youth unemployment and to put in place measures to tackle it. Unfortunately, I was not very encouraged from what I heard at that meeting. The Commission's big idea was essentially to reallocate unspent
Structural Funds to provide a stimulus for job creation, but we have already spent most of our Structural funds quota so it is pretty well useless for Ireland. What ideas have the Government brought to the table in this regard? What benefit will the meetings have? Apart from giving a positive appearance of a proactive attitude, what are we doing? What is the next step? The Minister stressed that previous reports and plans fell down on implementation. Where next in tackling youth unemployment?
Contributions have been quite wide ranging. Senator White focused on the banks and made a very valid case. The recent Mazars report, which was commissioned by the Department of Finance, sheds considerable light on the problems. Demand for credit from small businesses has reduced substantially, which is understandable given that many businesses are trying to reduce their exposure to debt. However, the report also finds a very high level of refusal overall at more than 30% and higher still for smaller businesses, which indicates a clear problem in this area. In addition to setting the €3.5 billion lending target for each of the pillar banks in 2012, the Government is seeking to become more forensic in how that target is set. The Senator is not right in saying the targets were not hit last year. They reached the targets, but it included much restructuring finance as well as new finance to small business. There is an effort this year to focus much-----
That is a problem. The Government is taking a range of initiatives. Clearly monitoring the banks' delivery on their targets is being done much more aggressively this year. There has been a series of meetings with the banks since the beginning of the year. Mr. John Moran, the senior official in the Department of Finance dealing with banking, is on the road show with the Minister of State, Deputy Perry, talking with the owners of small businesses and getting a much better understanding of their experience. To be fair, there are two sides to this. Small businesses are often presenting their loan applications in a way that is not sufficiently well developed to get approval and there needs to be a better presentation. The banks are also failing to inform people of their rights to challenge a refusal, including going to the Credit Review Office. Even though relatively few loan applications are being referred on to the Credit Review Office, in more than half of the cases, the decision of the bank is reversed. We need to get a much firmer handle on this area.
To supplement the targets for the banks, as Senator White recognised, we are introducing specific schemes to deal with market failure, including micro finance, the partial loan guarantee, the development capital fund, etc. The Senator asked why it is taking considerable time to develop these proposals, which is because we are developing them from scratch. Given that the State is entering an agreement to guarantee loans issued by a bank - the public are pretty sick of providing guarantees to banks - we want to be very sure that where we provide a guarantee it is small business that benefits. We need to get the scheme well designed and will soon bring legislation to the House to get Senators' endorsement because we will not spend money without their endorsement. We first designed the scheme and then contracted for an operator who is now in place. The next step is to get banks familiar with this product. They will have skin in the game - we are not taking all the risk and they will share the risk. We believe that this will mean that projects that are now being refused will be accepted. However, the State is taking a measured and managed risk and it must be done right.
The same is true of micro finance, which is being developed from scratch as there has been no State micro finance initiative previously. We are close to having developed a workable model that we can bring forward for implementation. These matters need to be designed correctly because I would not like to return in three years to fact the scrutiny of Senator Barrett saying that this was throwing good taxpayers' money after bad. We need to ensure it is done right.
Senators White and Clune took opposite positions on the restructuring of the city and county enterprise boards. Without being partisan, I must say I am very much in Senator Clune's camp on this one. We must develop a one-stop shop to which businesspeople can go to access information about licensing and planning requirements, business start-up options in the local area, details of grant eligibility, options for tax reliefs and concessions of different sorts. We want to deliver them in one place. We also want - I believe Senator White recognises this - a seamless connection with the centre of excellence that is Enterprise Ireland with its capacity to develop good policy instruments to deliver to small business. What will be different is that Enterprise Ireland will be setting standards as to what is expected of the local enterprise offices. There will be service level agreements and an expectation of a standard to be delivered, which is new. There has not been such demand or insistence on standards in the existing model, which is an important innovation.
Enterprise Ireland will also benchmark the local authorities in how they become more business friendly, including the speed with which they turn around licensing or other decisions and the price they charge for water or other services. There will be carrot and stick in this. We are seeking to bring the local authorities into the economic development challenge more centrally and have them linked into the enterprise family. However, it is a two-way process, which we believe is worth trying. It rationalises and consolidates the structures to offer a more streamlined service with the capacity to be better. Obviously, we must prove that it delivers and this is the work we must take on from here. Senator Clune also referred to the banking issue. She called for more co-operation between the IDA and Enterprise Ireland in certain areas and I endorse this view. Their job is to get indigenous companies into the supply chain and to get first-time companies to pick Ireland as a place to start. These are areas where Enterprise Ireland and the IDA can work together. There will be positive gains from closer work in these areas.
Senator Zappone is a zealot for social enterprise and I do not disagree with her. However, before we commit to creating a Department for social enterprise we must establish a model and determine how it can be supported and how it will develop. Most people here are too young to remember the late John Kelly. He used to be very withering in his criticism of those in State bodies who spent great deal of time buying the furniture and the brass plates to put up on the wall before slipping into lovely soft seats and then asking what they would do next. In this climate we must establish what we will do before we set up the brass plates, the soft seats and the centre and the unit. I am not being facetious; Senator Zappone has raised an important issue. There is capability and capacity here. Other countries have created models in which social entrepreneurs deliver public services more cost effectively and with better outreach and impact than a concentrated, centralised public service. We must find the vehicles that can release this potential. Any such vehicles are unlikely to be enterprise funding models in the sense of the funding model that our Department develops. Other models will be necessary such as the social bond, a concept developed in the United Kingdom which is effectively a form of tendering. It opens up the tendering system for the delivery of certain services by social entrepreneurs as opposed to in-house provision or otherwise. It is important to have a workable model and Forfás will work in this way.
Senator Harte commented on the Pathways to Work programme and related issues. This is another dimension to be addressed. Senator Reilly made the same point, asking why there was not more discussion of youth and skills. There were two parallel processes in the previous Government. Perhaps they should join together at a certain point but initiatives such as Pathways to Work, Springboard and the educational dimension have been developed between Deputy Joan Burton's Department and Deputy Ruairí Quinn's Department. My focus has been on the enterprise development end. There has not been extensive discussion about the skills needs of young people and skills conversion because this is the focus of the work under way in the Pathways to Work programme. This does not in any way diminish its importance.
The issues associated with Border counties represent a challenge as does regional development in general in the current climate. As Senators are aware, higher grants are available in the Border, midland and western, BMW, region. The IDA works within a target of at least 50% location outside of Dublin and Cork. While it did not deliver this last year, so far this year the plan is on target. This is a challenge especially in the case of overseas investment. Increasingly, the type of company coming to Ireland seeks deeper labour market pools and skills. They are keen to be close to the third level colleges. They seek large labour markets where there is diversity. This is a trend in the type of investment coming here and in the way it has changed. This is challenging. However, the IDA is examining how to encourage smaller companies to choose Ireland. Such companies can have a greater affinity with regional locations. This is an ongoing challenge, as is trying to find a competitive edge in the regions. Perhaps this is more a part of the Enterprise Ireland brief and the indigenous enterprise area rather than the foreign direct investment area. It may be more a case of securing expansions from within the existing base of foreign enterprise. Such ventures may be more regionally mobile than new investments coming for the first time. This is a serious issue and we discussed it in the context of the midlands last night with Deputies and Senators from the midlands. I recognise that it is a difficult area.
Senator Sean Barrett raised a range of issues which go well beyond the debate under discussion today. These included the adequacy of economic evaluation and so on. There is no gainsaying that economic evaluation has been weak in recent times and we must be a great deal more forensic. The case put forward by Senator Barrett to the effect that Enterprise Ireland and the IDA are top-heavy with administration must be scrutinised.
Both organisations have been reducing in size, especially Enterprise Ireland. Let us consider the size of Enterprise Ireland now compared to what it was ten years ago. There is no comparison in respect of the reform carried out.
That is an easy critique to put forward. It is easy to suggest that the number of jobs went down despite continued investment at a time of declining employment in a recession. The truth is that companies and job creation do not have an indefinite life. Jobs do not last forever. Companies merge and change and certain projects succeed. A project that remains in the country for seven years probably repays the Exchequer at a ratio of 5:1, not to mention the impact in corporate tax and so on. There is a strong bang for the buck in supporting enterprise development. Rather than the macro argument to the effect that jobs went down and costs went up and ergo the strategy does not work, we should examine individual programmes and come up with ideas for improving them. Certainly, I am open to hearing critiques of programmes or the management of individual programmes and I will consider these. However, the use of crude top-line numbers does not convince me. If there are criticisms I am willing to engage with them because I recognise that no organisation is perfect.
The case is similar with research and development, R&D, returns. This has defied people the world over. Ireland is not unique in finding it difficult to find measurable indicators of the impact of R&D. Nonetheless, one half of IDA investments now come with R&D elements. Some €500 million of investment in R&D capability by multinationals comes to Ireland each year. One of the reasons they come is because they can lock into the capability of established research centres in Ireland and the sort of people who are emerging as fourth level graduates. This is a difficult area but I fully accept Senator Barrett's challenge. As Chris Horn said, we must turn our R&D spend from a shipbuilding yard into an admiralty. We have spent many years launching individual research projects which are seaworthy and which will happily sail off but we must become strategic and turn them into an admiralty which actually delivers. That is the best way of describing what research prioritisation is about. That is the challenge in this area.
Senator Reilly focused on emigration. I do not dispute that this is the biggest issue and represents some of the most tangible evidence of our economic failure in recent years. That is the reason this process is so important to get us back to strong enterprises, exporting capability and the ability to innovate and to win new markets. These are at the heart of the plan.
I am somewhat unclear about Senator Reilly's point on Structural Funds from Europe. I presume the Senator was suggesting that Europe keeps referring to growth strategies but she cannot see the substance of it. That is a fair point. We need a more credible growth strategy from Europe. On the other hand, one must acknowledge that the European Central Bank, under its new management, is a great deal more pro-growth. We have seen the banks become underpinned. Rates are now coming down because the European Central Bank is taking a different view. Now, we have the chance to put in place a treaty which gets countries to sign up to reasonable rules of behaviour. Those two things go hand in hand. The treaty is about retrofitting to the eurozone a system that makes the euro able to respond to crises. What has been manifest in the last 12 months and more is that the eurozone was not designed to deal with a crisis that probably should have been anticipated but was not. We need, therefore, to retrofit a system to respond to that. That is what a lot of the process of getting back to a growth strategy is about. We must get the eurozone properly underpinned, which is at the heart of what is going on in this treaty debate. It is frustrating and slow but it is changing. If one looks back to Europe's attitude to the crisis two years ago and where it is now, one can see it has moved a great distance. We are moving towards resolving these issues.
There needs to be more imagination regarding the type of growth initiatives that come from Europe. It is a continuing challenge for the EU. Every time we hear the Taoiseach in Europe, he is continually emphasising that agenda, which includes questions such as what we can do for small businesses, how we can get banks lending again, what changes we should introduce to make our markets work better, how we open up new foreign areas and how we can use Europe's huge funding in research and development capability to better effect. These are major challenges that we face as a community.
I answered Senator White's question when she was not here.
Yes. Five Senators have indicated that they wish to ask questions. They are Senators Mullins, Higgins, Mooney, O'Brien and Norris. In addition, Senators Heffernan, D'Arcy and Conway have indicated. They must remember that they have one minute to put a question; it is not a statement. We will take the questions in groups of three.
I welcome the Minister and thank him for a great plan of action which will be accountable. I am also encouraged by his invitation to Members of this House to continue to feed ideas to him following the excellent debate we had recently. In his plan, IDA Ireland is mandated to locate 50% of foreign direct investment outside Dublin and Cork. I hope that a town like Ballinasloe, which has lost 1,000 industrial jobs in recent years, will be high on the IDA's priority list. That is not the feeling locally, however, despite the fact that we are located in the centre of Ireland with fantastic conditions, including education facilities. I ask the Minister to keep pressure on the IDA to look favourably on Ballinasloe.
I welcome the one-stop-shop concept, but who will decide the location in counties where there are two local authorities, such as Galway city and county? It would seem to make sense to locate one in the city and one in the east of the county, in Ballinasloe. Who will make the decisions on that?
We are obviously trying to encourage new entrepreneurs, but there is a disincentive.
The Minister needs to provide more clarity on what is happening in the banks. We have public service directors sitting on bank boards, yet they are massaging the figures by turning overdrafts into term loans, which is crippling small businesses.
Last weekend, the Heritage Council issued a report which indicated that if the Government were to accept its recommendations, upwards of 5,000 jobs could be created in the heritage built environment across the country. I am not sure if the Minister has had an opportunity to see the heads of that report. If not, I urge him to look at the recommendations contained in it, as reported in The Irish Times. That seemed to indicate that, in common with the Minister's progressive policy to improve tourism and increase visitor numbers, this is an obvious area for development. Many people visit this country because of its cultural attractions, including the built heritage environment. On first reading, the figures from the Heritage Council's report seem very impressive. It appears that it would genuinely create new jobs. If the Minister does not have an opportunity to respond to this question now, perhaps he can read the report's recommendations which can then be raised in some other forum.
I welcome the Minister to the House and commend the Government's swift and decisive action on tackling the jobs crisis. A number of essential practical measures will help businesses to create jobs in this and subsequent years. I particularly welcome measures to help the SME sector to get better access to credit, which has been a major problem. Last year, 1,900 companies went to the wall or into liquidation as a result of finance not flowing into them. That is not taking into consideration the partnerships and sole traders that went to the wall.
While we are doing well with foreign direct investment, we need to protect our own companies by ensuring that they can access such finance. The Minister for Finance has earmarked €3.5 billion worth of funding to be made available to the SME sector. However, we must be mindful of a practice that has been established in banks which are withdrawing overdrafts and turning them into term loans, thus letting them masquerade as new lending. We need to put a halt to that. I respectfully submit to the Minister that we should focus on draw-down figures as opposed to the numbers of people getting loans.
The Minister should urgently initiate the strategic investment bank, which could concentrate on high-end start-ups of indigenous Irish companies.
Yes, I will do so. Senator Mullins has again raised the issue of the IDA's regional strategy. It is a big challenge in that a lot of the companies coming here look for deep labour market pools. They are seeking city and university-type environments. The potential for the IDA to deliver on the 50% target is through examining expansions of companies that are already located here. PayPal is significant in that it was a Dublin-based company whose expansion was into the BMW area. That was a great part of that announcement. In addition, the IDA needs to look at smaller companies who would be more familiar with regional locations and more willing to commit to them.
Enterprise Ireland will work with local authorities on where local enterprise offices are to be located. The local authorities will obviously have a significant role in property solutions.
The Senator almost answered his own question on sole traders in that there is a serious gap there. The Minister for Social Protection, Deputy Burton, is examining the matter. One of the terms of reference for the commission examining welfare is how we can deal with that. We must bear in mind that for PAYE workers, the employer's PRSI is give or take 15%, while it is 4% for a sole trader. The amount of money going into the pool is much larger, therefore, and there may be cost and contribution issues if cover is to be extended.
Senator Mooney raised the issue of the banks as did Senator Higgins who asked if they were restructuring loans as part of the €3.5 billion figure. While it is a feature, that is not to say that restructuring of loans is always bad. Some of the loan restructuring that is going on is important; it is not all to be rejected. We need to ensure, however, that the refusal rate is brought down. The latter rate has been surveyed at about 30% across SMEs, which is too high. The refusal rates which were down at about 2% in the heyday of the Celtic tiger, clearly were too low. We need to get those rates right and much work is being done in this regard. I cannot accept Senator White's suggestion to create a legal obligation on banks, as banks must evaluate risk by examining the cash flow and applying rules to that risk, with their own skin in the game, so to speak. The State cannot underwrite everything nor can it legislate for lending to small business.
Exactly and in an emergency it is important that policy tools are introduced which will work, not ones which may have a political appeal but which will expose the State to very great implications.
The Government of which Senator White was a member refused to have a partial loan guarantee. We have introduced for the first time the notion of a microfinance scheme-----
I did not promise. We only made explicit quarterly commitments in this document. We have committed to introducing it in the second quarter for the reason that it must come before this House as a legislative proposal because the Oireachtas is underwriting the State providing a guarantee to banks and this is an action which requires legislative underpinning. Ministers cannot willy-nilly offer guarantees on loans as this must be done with legal authority, with the Oireachtas satisfied that we have put in place a robust structure. We have designed the structure, appointed an operator and we will shortly introduce legislation in the House which can then be debated. This has to be done properly-----
That may well be; they have codded a lot of people over a long period. We now see that for the first time there is a real firm hold in the Department of Finance. John Moran is the assistant Secretary General-----
-----and he has brought a new dynamism and a new understanding of the needs of business and results are being seen in that area.
In reply to Senator Mooney, I have not yet seen that report so I cannot comment on it but I will read it. Senator Higgins made the point that we need to take a forensic attitude to the banks. We are already developing some of the elements of the strategic investment bank. The State is moving to fill in some of the failures in the banking space, so to speak, with actions such as microfinance and guarantees and also with regard to the strategic investment fund which has already funded through pension reserve funds a series of innovation funds which are aimed at the most progressive, high-growth companies. We are now committing to using similar funds for development capital, which will help companies which need capital to progress to the next level. We are developing a series of policy instruments in the banking area which at the moment are travelling under strategic investment funds but in the longer term, the notion of a strategic investment bank knitting these together is very much on the Government's agenda. We are moving rapidly to fill gaps as we see them.
I will be as concise as possible. I thank the Minister for coming to the House. As I travel around the country visiting my colleagues, associates and friends, small-business owners and people who would like to start a business, one of the points I keep hearing is the terrifying amount of administrative compliance required and the knowledge, time, energy and talent needed to deal with it. In a previous contribution I identified one very simple step to reducing administrative costs for small businesses. This comes in the form of an optional directive agreed in February at a meeting of finance Ministers of the European Union. The directive would allow small companies to be exempted from publishing annual accounts in a bid to lessen their bureaucratic costs and to encourage small firms to take on more staff. The rules will apply to companies which have an average of ten employees or fewer within the course of an accounting year, with a balance sheet of under €350,000 and a net turnover of €700,000.
I am just giving the Minister the background information. I ask for clarity on the Government's position regarding this directive. I would hope the Government would sign up to this worthwhile proposal which will make a significant difference to business owners who are the life, soul and blood of this economy. I ask the Minister to be vigilant and tough in his dealings with the banks such as they are with us small business owners.
I have one particular question for the Minister. I have always had sympathy for agency workers such as the people who were employed by Irish Shipping and such groups but there is a serious problem at the moment because the transposition of the EU agency workers directive is in the process of being done in what seems to be an inflexible way. I ask the Minister to review this transposition. I ask him to ensure it is as flexible as possible because we need flexibility in employment. I understand the Minister has been made aware of a report by Jim Power, the economist, which illustrates there could be a loss of up to 10,000 jobs if this directive is inflexibly implemented. I ask the Minister to give an undertaking to review it, particularly with regard to the comparative situation in the United Kingdom where there was a lead-in period of 12 weeks, a form of apprenticeship and this derogation was obtained with the assistance of the social partners. Is there a chance the Minister might be flexible? I know he is aware of the situation and I will provide him with some further information because I understand I have only one minute speaking time.
The Minister is welcome to the Seanad. I congratulate him on his work. Due to the massive downturn in the construction industry, many are unemployed in that sector, including professionals such as architects and engineers. In that regard, there is a significant untapped market in the Middle East for such people. I have been contacted by people in Kuwait, Iraq, Libya and Qatar. One of the companies I spoke about to the Minister has just secured a contract in Qatar to project manage and construct 50 residential properties. I ask the Minister to ask Enterprise Ireland to review its Middle East strategy and to ask the Department of Foreign Affairs and Trade to consider moving some of those countries from the political division to the economic division of the Department. I ask the Minister to use his good offices to consult with the Department of Foreign Affairs and Trade to ensure that people coming from Libya with United Kingdom visas can use those visas to gain entry to Ireland.
In reply to Senator O'Brien, I will look at that proposal. It probably is a matter to be dealt with by the Department of Finance but there would be company registration obligations involved. On the wider issue, if the Senator can supply examples of administrative compliance problems that stand up to scrutiny, I would like to see them because the Minister of State, Deputy Perry, has a committee examining this matter and undertaking an audit of licences under the plan.
The transposition of the agency workers directive was discussed in the House. The derogation will need to be negotiated by the social partners without the intervention of Government and it was not possible to secure that intervention.
It was encouraged by the previous Government and by the present Government. It was not possible to get across the line and I do not foresee a sudden change of heart. The directive, which is an obligation on us, has been transposed in the most flexible way possible while still honouring the derogation. Amendments were put forward in the other House that sought to make it more flexible but they were in breach of the derogation and therefore could not be accepted. We have been constructive in that regard.
I will follow up the issue raised by Senator D'Arcy, which he has raised previously in the House. As he rightly said, Enterprise Ireland is already active in a number of Middle East countries supporting construction contracts but for political reasons there has been a pull-back in other countries. The question is whether the time is right to examine that again, and I will get an assessment done of that situation.
I welcome the Minister to the House and commend him on his Action Plan for Jobs 2012. I will travel to London next weekend to visit my brother who is working there and anything that will get young women and young men like my brother back working here is welcome but the proof of the pudding will be in the eating. The Minister stated that the plan will be reviewed on a quarterly basis and that everybody will have to put their shoulder to the wheel. I am sure he will be cracking the whip behind them, and fair play to him for that, but-----
My question concerns the county enterprise boards. I want to be clear on an aspect of the Minister's contribution. Will the county enterprise boards have local autonomy and will there be a local assessment body that can arrive at quick decisions? Will the local enterprise offices, or LEOs as they will become known, be able to issue grants or will they be required to get further approval from Enterprise Ireland?
On small and medium-size enterprises which employ between ten and 50 people, the Minister said there was a break in the ladder, so to speak, between enterprise boards and Enterprise Ireland. Will the new one-stop-shop take those businesses under its umbrella because the Minister will understand they provide valued employment, especially in areas in rural Ireland? I refer to those enterprises who do not export.
Well done, Minister. My question is simple. He spoke at a conference here recently hosted by Ahead. The issue I want to raise is that the joined up thinking among Departments still has not reached the level we want. That programme is being supported by FÁS but the problem is that it could have the funding pulled, although it is a job creation initiative. Are there working groups within each Department specifically charged with ensuring the red tape is cut to facilitate job creation?
You are a tough Acting Chairman. What is the Minister's opinion on foreign direct investment jobs? The previous Government's policy of gateways and hubs effectively meant that some portions of the country were abandoned. We saw that the assessment of the number of jobs was done on a regional basis and then on a county by county basis. In my county there has not been a substantial job announcement in terms of foreign direct investment for many years. I refer to hundreds of jobs. I accept companies like PayPal do not come around very often but does the Minister believe there is any potential for the review of that policy on gateways and hubs? I ask him not to allow the areas that have been abandoned, such as my county of Wexford, to continue to be abandoned?
To reply to Senator Heffernan's question, there will be a local autonomy. There will be a local loan assessment board which will not have councillors on it but will be independent, much like the existing one. It will have grant giving powers but it will be under a service level agreement with Enterprise Ireland. It is delegated autonomy within an agreement, and that is the right way to move.
There will be a new support for enterprises which do not export. There will also be a keenness to get companies which do not export to export for the first time but we believe that under this new structure, in which Enterprise Ireland and the local enterprise office will be seamlessly connected, there will not be the gaps to which the Senator referred.
I understand the point made by Senator Conway. It does not fall within my area but the Ahead programme is about supporting people with a disability to get access to placement programmes, funding and so on. I will take up that matter with the Minister responsible to determine if that funding line is at risk.
In response to Senator Michael D'Arcy's, there is not a rigid gateways and hubs strategy being pursued by IDA Ireland. It is a case of what companies want and the fit we can achieve. Regions must recognise that 92% of employment in regions is not through foreign direct investment, FDI. A total of 8% is FDI but FDI has specific needs and it is different from many of the needs of the other 92%. The first issue is whether we can win the project for Ireland, which is often the hardest one. It is then the case that issues like the depth of labour pools are often strong. That is the reason gateways and hubs come into play because connections with third level institutions become very important in terms of the confidence a company has. However, companies coming here for the first time will often hire consultants who give them rankings of different areas, and that fixes their mind, whereas companies already established here can look more benignly on other regions. The PayPal decision to go to Dundalk was an interesting example of a company with a Dublin base moving to a BMW region. We are seeking to get the regional spread but it is not as simple as moving pawns around on the board because the company's needs are often very specific.