Wednesday, 2 October 2013
County Enterprise Boards (Dissolution) Bill 2013: Second Stage
I welcome this opportunity to present the County Enterprise Boards (Dissolution) Bill 2013 to the Seanad. The purpose of the Bill is to give effect to last year's Government decision to reform the system for the delivery of State supports to micro and small enterprises by dissolving the current county enterprise boards structure and creating an enhanced enterprise support model to be delivered at local level by a new initiative establishing local enterprise offices. The creation of the local enterprise offices will result in the establishment of a local first-stop shop for new entrepreneurs and existing micro-enterprise and small business owners. The offices will become the front door, so to speak, through which all information on State supports for small and micro-businesses can be accessed and signposted and through which other supports and bodies with programmes relevant to small business as well as important local services and compliance requirements can be provided. In summary, the new local offices will deliver the following under one roof: local entrepreneur support programmes, a suite of other enterprise supports and development services, and other business development services of the local authority. We will have a renewed local emphasis on enterprise and job creation, combining the best of the community enterprise boards, local authorities and Enterprise Ireland.
I propose to outline first some background to the rationale for reforming the system for delivery of supports to micro-enterprise. At both national and local level, the indigenous micro-enterprise and small business sector - the lifeblood of our economy - is central to economic recovery, job creation and the future development of the economy. Our vision is to ensure locally accessible supports are available that will nurture entrepreneurship and promote the creation and maintenance of employment, with a dedicated culture of delivery. This reform is a major commitment in the programme for Government and a core element of Action Plan for Jobs. In recognition of the changes to the social, economic and technological landscape of Ireland in recent years, this strategic reform of the system for delivery of support to businesses will make the operating environment more coherent, responsive and conducive to entrepreneurship at local level.
County and city enterprise boards have had an impressive track record in job supports over the past 20 years. The local enterprise offices structure will draw and build on the positive enterprise culture of the successful county enterprise board model which supports 33,000 jobs, 900 new projects per annum and almost 25,000 training participants. Under the new arrangements, the local enterprise offices will deliver tailored supports to the highest standards, in a partnership between the local authorities and Enterprise Ireland based on a robust service level agreement. The proposed reforms offer a major opportunity to leverage the skills, resources and experience of the county enterprise boards, Enterprise Ireland, local authorities and the local business community to create an on-the-ground approach to local entrepreneurs and small businesses, which dovetails with national enterprise supports and agencies.
As part of the reform of the system of local enterprise supports, the first-stop shop service will be delivered through a network of 31 local enterprise offices nationwide. The offices will deliver the combined functions of the county enterprise boards and business development units of the local authorities, as well as developing an enhanced service to business at local level. The local enterprise offices will be the first-stop shop through which all information on supports for entrepreneurs and small and micro-businesses can be accessed. Where businesses have clear high growth potential, they can be fast-tracked to the next level of support from Enterprise Ireland or other State agencies.
Locally, the local enterprise office will act as the catalyst and advocate for the establishment of a best practice enterprise culture. It is envisaged that there will be a high level of co-ordination and collaboration between local enterprise offices and other providers of support to the micro and small business sector, for example, chambers of commerce, institutes of technology and Leader partnership companies. There will also be greater co-ordination of delivery of services between local enterprise offices in each area and other actors to support a regional strategy for enterprise and jobs. They will be incentivised to come together to pool expertise and resources and co-operate on a regional basis to deliver various services, for instance, running joint training and mentoring programmes. A competitive funding element will also be designed and introduced to support the best projects to demonstrate success and best practice and encourage high performance and innovative ways of working across the local enterprise office network.
The local enterprise offices will be supported by a centre of excellence, which has already been established within Enterprise Ireland. The centre will lead, develop and manage the enhancement of a support service that generates innovative small and micro-enterprises capable of increasing employment, exports and value added to the economy. In practical terms, the local enterprise offices, enabled by the centre of excellence, will draw upon a first class online support resource which will offer a range of tools and information relevant to all businesses in the State. The centre of excellence, which is up and running, will have a high capacity and will enable local enterprise office staff and companies to identify startup and development issues and signposts to appropriate supports. A newly developed website will proactively promote a range of tailored State supports, both financial and non-financial.
A key aspect will be self-assessment tools and best practice case studies. In addition, the functions of the centre will include the following: promoting innovation and best practice in the approach to supporting start-up and entrepreneurship; working in conjunction with local enterprise offices to design and deliver appropriate national training and management development programmes at local level; developing a common approach to mentoring and mentor management; providing ongoing training and development for local enterprise office staff; reviewing and benchmarking the services and supports available from each local enterprise office to promote best practice; developing and reviewing the service level agreements and promoting high levels of performance and appropriate metrics; and developing and overseeing metrics on the quality of the local business environment.
The local enterprise offices will be underpinned by a robust service level agreement between Enterprise Ireland and each local authority which will set out protocols relating to the following: budgets, project evaluation and approval; micro-enterprise policy guidelines, as articulated by the Department of Jobs, Enterprise and Innovation; robust performance indicators measuring employment, start-ups and other metrics; roles and responsibilities of the relevant bodies, namely, Enterprise Ireland, local authorities and local enterprise offices; benchmarking the success of local enterprise offices; and corporate governance.
This detailed service level agreement will provide a framework for the delivery of an enhanced service to micro-enterprise and will be periodically reviewed to ensure impact and value for money are being optimised via the local enterprise office network.
A key element of this new structure will be the consistent application of the policy and best practice across all local enterprise offices from the evaluation of applications to the spending of budgets allocated. This will be monitored using the agreed service level agreement in each local authority. The ongoing drawdown of budgets by LEOs will be contingent on their reaching agreed targets. The highest level of corporate governance will be applied. This will involve the articulation and dissemination of the new national micro-enterprise model, the allocation of budgets in line with agreed funding guidelines, including spot-checking and quality assurance, the management of assets and liabilities, and ongoing engagement with stakeholders.
To ensure that local enterprise offices are delivering best practice supports for entrepreneurship, research into international programmes will be carried out in conjunction with the evaluation of current programmes run by the local enterprise offices. A series of metrics form part of the framework service level agreement and will be tailored to suit the size and capacity of each local enterprise office. They will be included in a local enterprise development plan, to be agreed annually between the local enterprise offices and Enterprise Ireland, which will serve to address the development needs of micro-enterprises in each county.
Financial and staffing implications will arise from the Bill. It is to be expected that over time there will be some savings resulting from the removal of costs associated with the individual company status of each county enterprise board and reduced rental costs associated with the relocation of some offices. However, initial direct savings will be modest because it could take some time to realise these savings due to existing rental arrangements. Some small additional initial expenditure will be needed, for example, for staff training and to develop a single local enterprise office website to replace the 35 existing sites. There will be no savings on staffing arising from the dissolution of the county enterprise boards because existing staff will be redeployed to the LEOs.
Section 1 defines certain terms used in the Bill. Section 2 defines the functional area of a city and county council for the purposes of the legislation. Section 3 states that any expenses incurred in the administration of the Act shall be paid out of moneys provided by the Oireachtas. Section 4 empowers the Minister to appoint, by ministerial order, the day on which the county enterprise boards shall be dissolved. Section 5 enables the Minister to dissolve the county enterprise boards on the appointed day.
Section 6 relates to the transfer of functions. It provides for the following: the transfer of the existing functions of the county enterprise boards to Enterprise Ireland; the transferred functions to be performed by a local authority, in the functional area of that local authority, on behalf of Enterprise Ireland; and for the amendment of section 10 of the Industrial Development Act 1995 by deleting the words "subject to the prior consent of the Minister" because Enterprise Ireland already has the enabling powers specified.
Section 7 provides for all land and other property, including assets, previously vested in county enterprise boards to be transferred to Enterprise Ireland. It provides for all rights, powers and privileges relating to or connected with such lands to be vested in Enterprise Ireland without the need for a conveyance or assignment. Section 8 provides for the transfer of rights and liabilities of a county enterprise board to Enterprise Ireland. It also provides that in the event of an action to sue, recover or enforce, Enterprise Ireland may do so in its own name without the need to give notice of the transfer to the person whose right or liability is transferred. Finally, it provides that any lease, licence, wayleave or permission granted by a county enterprise board shall continue in force as if granted by Enterprise Ireland.
Section 9 will allow any claim in respect of loss or injury alleged to have been suffered during the performance of county enterprise board functions to now lie against Enterprise Ireland. It allows Enterprise Ireland to take the place of a county enterprise board in any legal proceedings to which that board is a party immediately prior to the transfer. Section 10 ensures that anything commenced by a CEB, for example, loan agreements, grants, equity investments, etc., do not fall on the transfer to Enterprise Ireland of the functions, assets and liabilities of the county enterprise boards.
Section 11 empowers the Minister to designate staff of a county enterprise board to Forfás, Enterprise Ireland or a local authority. Section 12 provides for Forfás, Enterprise Ireland or a local authority to accept staff into their employment who were previously employed by a county enterprise board on terms and conditions no less favourable in respect of remuneration. This section also amends the Second Schedule to the Industrial Development Act 1993 in respect of the secondment of staff. Section 13 sets down the provisions relating to the preparation and submission by Enterprise Ireland of final accounts and reports of the county enterprise boards. Section 14 provides for the Short Title, County Enterprise Boards (Dissolution) Bill 2013, and commencement.
I emphasise that these reforms are about delivering improved supports at local level to more businesses and ultimately about creating more jobs. Micro and small enterprises are a central part of our economy and their ability to succeed and grow underpins our future potential for jobs, growth and prosperity. Fully 98.5% of all firms are small. They employ over 650,000 people throughout the country. It is vital, therefore, that we continue to focus on delivering a practical programme of actions and enhanced supports that can achieve positive improvements to the operating environment for micro and small businesses.
It is my pleasure to welcome the Minister of State to the House and to speak to the County Enterprise Boards (Dissolution) Bill 2013. Altogether 98% of Irish enterprises are micro or small enterprises. They employ 622,000 people and contribute €10 billion to the Exchequer each year. Micro-enterprises are defined as enterprises with a turnover of under €2 million and fewer than ten employees. A small business is defined as employing ten to 49 employees with a turnover of €10 million. The County Enterprise Boards (Dissolution) Bill 2013 will dissolve the existing county and city enterprise board structure and transfer the functions, land assets and other property and liabilities to Enterprise Ireland. The Bill empowers the Minister to deploy existing staff of the enterprise boards to Forfás, Enterprise Ireland or a local authority. Staff will keep their jobs at their previous terms and conditions in one of these organisations. Local authorities will perform functions on behalf of Enterprise Ireland until the new local enterprise offices, which will be known as LEOs, emerge.
Fianna Fáil opposes the dissolution of the county and city enterprise boards and the subsuming of their role into local authorities. This decision by the Government is part of a pattern of Government decisions which has more to do with creating an illusion of reform rather than delivering real results. Local authorities do a good job within their currently defined role of housing, planning, recreational facilities, etc., but, by their nature, they are not entrepreneurial and do not have the experience that start-up companies need. There is a strong need to streamline and retain the existing structure with greater co-operation across city and county enterprise boards and to share best practice ideas while retaining the ability to response to specific local needs. Concerns relating to future funding have not been addressed and there is a strong likelihood that the change will lead to less money being available to support local enterprises.
I draw the attention of the Minister of State to the farce of the microfinance money that is available. The scheme is lauded by the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, relentlessly but he is talking through his hat as far as I am concerned. I express my disappointment at the early results of the Microfinance Ireland scheme. To date, one year after the scheme was launched, approval rates are at less than 45% and just over €1 million in loans have been granted to small business.
Moreover, a 9.5% fixed interest rate is charged on all loans with a three-year repayment term.
This provision of €1 million in the first year is far off the initial target of granting €90 million in loans over a ten-year period, which is highly unlikely to be met. While I am not accusing the Minister of State in this regard, this is spin on the part of the Minister, Deputy Bruton, along with the lies he is telling about the Seanad. For God's sake, 45% approval to help small business people start up is a farce. It is a camouflage for not doing anything while glossing over such a rate, as though something was happening on the ground when money is not available. In my experience, the county and city enterprise boards have been sadly neglected over the years by the Department of Jobs, Enterprise and Innovation. There was no overall strategic plan, some were better than others and there was no leadership from the Department. Again, there was what one might call a bureaucratic mishandling of the entire issue of the county and city enterprise boards. The McCarthy report of 2009 recommended that the functions of the enterprise boards be transferred completely to Enterprise Ireland. However, the report of the local government efficiency review group published in 2010 recommended, as was natural for it, that the county and city enterprise boards be merged with local authorities.
As for the model of the enterprise boards, more than 33,000 jobs nationwide have been created since 1993, as well as an average of 900 projects per annum and almost 25,000 training participants per annum. An examination of the projects assisted by enterprise boards throughout Ireland over the last year shows a wide breadth of new business activity. Most do not involve research and development or scientific innovation, which tend to get so much attention these days but they are highly effective at creating local sustainable employment. Oisin Geoghegan, chief executive officer of the Fingal County Enterprise Board, has commented that the vast majority of the projects it sees are ordinary rather than high-tech but they do provide employment. One good result, which was highlighted in The Irish Timesearlier this year, concerned Sandra Maguire, who was supported by her local enterprise board of Dún Laoghaire-Rathdown and who produced the education bills app, EduBills, for schools.
The county enterprise boards will be dissolved in their current legal format and as I indicated earlier, their functions, assets and liabilities will be transferred to Enterprise Ireland. Enterprise Ireland is being mandated to work with the local authorities to develop benchmarks for service delivery and enterprise supports, as well as appropriate structures and delivery models for each local enterprise office, LEO. As for Fianna Fáil's reasons for opposing the dissolution of the county enterprise boards, the measure smacks of reform for the sake of reform without a detailed plan for how the changes can be implemented. I reiterate the county and city enterprise boards have proven to be one of the one of the most effective supports provided to small local business. Importantly, the board members are drawn from the local authority, representatives of the trade union movement, local employers, State agencies, local businesses, local councillors and the county or city manager, as well as representatives of Enterprise Ireland, the Irish Congress of Trade Unions, ICTU, and IBEC, all of whom give their time voluntarily. One risks losing the breadth of experience provided by the 15 people who are members of these boards. They do this at their own expense and a discussion is required in this Chamber in the future about the amount of time-----
We will see. A public debate and discussion is required about the amount of volunteering time that Irish people do for organisations nationwide. Moreover, such people never get recognition from the Government. It is never put on the radar that so many people give so much of their time free to help their local communities. The Fine Gael-Labour Party Government set itself the task of abolishing quangos. That agenda was expedient in opposition but it undermines excellent work being done by the enterprise boards. Moreover, it will not achieve any savings for the taxpayer but will make it more difficult to create and sustain jobs. There have been outrageous attacks on the competence and professionalism of county and city enterprise boards staff across the country and this has been unfairly used as a basis for this decision. I reiterate that I lay the blame for this on the Department of Jobs, Enterprise and Innovation. That Department lacked a strategic plan, did not have a timeline for each enterprise board for the delivery of jobs and so on. They were neglected, including financially, by the Government. I believe the Minister for the Environment, Community and Local Government has upstaged the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, at to where the LEOs would go. My instinct and suspicion is that the Minister, Deputy Bruton, wished to have them under the aegis of Enterprise Ireland but the Minister, Deputy Hogan, seems to want them to operate under the local authorities. I am greatly concerned by this development.
Councillor John Brassil of Kerry County Council has commented on the change and desires that the new local enterprise offices will operate consistently and effectively throughout the country. Moreover, key performance indicators and measurable outcomes must form part of the new structure, although this was not done by the Department. Councillor Brassil also underlines that from a local authority perspective, there must be greater flexibility regarding many areas, such as planning, rate charges and development levies. These details must be considered. Councillor Mattie Ryan of North Tipperary County Council has voiced concern that in counties in which the local authorities will be merged, such as Tipperary, there is a risk that services to new and existing businesses will be diminished rather than enhanced unless the correct supports are put in place and made accessible to entrepreneurs. The chairperson of the Cavan Enterprise Board, Mr. Jack Keyes, has called for the local dimension to be paramount in any future arrangement. Mr. Keyes also highlights that boards are well served by the voluntary effort of the board and evaluation committee members. I myself was honoured to be asked to serve in that capacity by the former city manager, Mr. Frank Feely, and was appointed in 1993 to the evaluation committee of the first Dublin City Enterprise Board. As a new and embryonic entrepreneur at that stage, I still was able to make my contribution to the aforementioned committee. Interestingly, the chief executive officer of the Donegal County Enterprise Board, Mr Michael Tunney, poses the question as to whether there are sectors of the economy that currently are excluded from accessing supports that should be included. For example, service and retail businesses in the main are not eligible for grant aid and this should not continue. Having tried to help and support a hairdressing salon in north Dublin recently, I acknowledge there are enterprises that are not eligible for a financial grant when they are not exporting but serious mentoring and guidance should be made available to those companies.
I accept this measure is on a roll, is coming through and that Members cannot do anything about it. While Enterprise Ireland will have a role as a centre of excellence, this move is crazy. Why were the new bodies not brought fully under the aegis of Enterprise Ireland? They still could have been locally-based. The Enterprise Ireland people are missionaries in the development of entrepreneurial culture in Ireland but one cannot say the same about the local authorities. It is not their remit and I acknowledge they do a good job in what they are doing.
Cuirim fíor fáilte roimh an Aire Stáit chun éisteacht leis an díospóireacht tábhachtach seo. Cuirim fíor fáilte roimh an scoil go Teach Laighean freisin agus chuig an obair tábhachtach atá ar siúl anseo inniu. I reiterate my welcome for the Minister of State and the representatives of the school who are present for this important debate on the dissolution of the county and city enterprise boards. As the Minister of State noted, they are to be replaced by local enterprise offices, LEOs. Speaking of LEOs, I note the word "leo" comes from the Latin word for lion, which is the strongest animal. I look forward to seeing the LEOs or lions being the strongest element of local governance and local work with small and medium enterprises and that the local authorities, local elected representatives and communities will be involved in doing what they can to ensure small and medium enterprises are enhanced and helped at every opportunity.
The Minister of State stated that a new website would be developed for the local enterprise offices, or LEOs. It is important that they carve out their own identity in the community. Local authorities have logos. I looked up the logo for the LEOs - the lion - which is a simple one showing a circle with an extension reaching out, as the local enterprise offices are doing, reaching out into the community. It is an apt symbol and very simple. Designers look for simplicity in symbols. The identity of the LEOs is to be part of but not lost in the local authorities so it is important to give them their own identify as a first-stop shop for entrepreneurs at local level. They will provide an integrated system of working with Enterprise Ireland.
The Bill conforms to the standard model of legislation for dissolution of State bodies and consequent transfer of staff, property and liabilities, as the Minister of State noted. It is part of a programme of reform that will bring together in one place the micro and small business supports that are currently provided by the county and city enterprise boards, Enterprise Ireland and the local authorities, allowing them to be the first-stop shop that everybody can get to know. The Bill will also remove anomalies in the current system and ensure that all micro and small businesses can access supports. It will establish a centre of excellence in every county and city in the country, in conjunction with the local authorities and Enterprise Ireland. These will have responsibility for setting policy and monitoring delivery. This last is most important, as another speaker noted - ensuring delivery of a world-class support for micro and small businesses in a consistent manner. Consistency is important because very often the county and city enterprise boards had the same idea but took different routes, some of which worked better than others.
Enterprise Ireland is an expert body with many years of experience in dealing with companies and budding entrepreneurs. Its priority is to deal with national and larger companies but the connection at local authority level is important. As the Minister of State noted, small and medium enterprises are the most important businesses in this country. They create jobs and therefore must be nurtured and supported. Enterprise Ireland has many different programmes for high-potential start-up companies with capacity and capability to sell into the export market, manufacturing internationally and traded services.
The county and city enterprise boards, CEBs, receive an Exchequer capital allocation each year towards the provision of grants and soft supports, and individual capital allocations are made within this. The Minister has set in place a way of doing this and it will be interesting to compare and contrast, seeing where money is spent, how it is spent and ensuring it gives value for money. We can compare and contrast this work with how the CEBs work now, how they worked in the past and how they will work into the future. Senator Mary White, who has a good entrepreneurial head, pointed out some issues in this regard.
I emphasise the importance of the voluntary boards of the local enterprise boards. The people who volunteer are not praised often enough. This voluntary capacity is one aspect of the current boards and I am delighted it has been put on the clár today by the Minister of State that it will remain. I served on an enterprise board when I was a member of South Dublin County Council. The business, political and community inputs of the board gel and work together to enhance the work and ensure that if one person does not come up with something, another person will. Everybody brings their own expertise and this aspect will not be lost.
The last speaker mentioned that local authority staff are not entrepreneurs. I spent 20 years on a local authority where I saw the advancement local authorities have brought about, bringing on local business development units within those authorities. I can only speak for South Dublin County Council where we developed lots of industrial units that worked with the local communities, providing buildings and facilities. That was not all - they also aided computer software development and that type of thing with the local business development units. In this way the local authorities have a great deal of expertise to bring and, most important, they bring in the actual facility which is situated in a place people can get to know as a business development unit. What is more important? Developing roads is important; developing protection of the environment is most important, but developing jobs in the local community is what local authorities should also be doing. Every local authority in Europe is known for doing that - why should we be so different by doing it nationally? We are always talking about devolving power to local authorities - this initiative will do that to some authorities. It will not take the power but will work in co-operation with the LEOs, establishing businesses in and with the local community and its groups. It will also bring accountability through the system of locally elected representatives. Devolution of function to local authorities is one way to achieve this but it is also important to ensure that local development business units in that authority can act alone as stand-alone business units and become known for doing so. It is important for them to carve out their own identity, using symbols and logos.
These measures are designed to increase the number of start-ups and to ensure they survive. We have seen many start up but not all of them survive five years. To get them past that five-year pitch by giving a leg-up must be one of the major goals of the new LEOs. Every entrepreneur is not looking for a hand-out - all they need is to have a hand held and to be got onto the road. The local offices must ensure there are no obstacles put in the way of start-ups, ensure they have fewer forms to fill, give out whatever grants are available, and make all of this easier and more accessible.
I am also delighted to see support for and an increase in the number of start-ups by women; an increase in exports from microbusiness and small business, respectively; and an increase in the record of job creation and innovation in the sector. Female entrepreneurs, one of whom is Senator Mary White, must be supported in every sphere. A quota system has been brought in for the political arena and the EU is recommending a quota system for women on boards. Ireland has fallen down in this regard. This Bill has nothing to do with putting women on boards but the Minister of State must keep an eye open in respect of local authorities and boards of enterprise to ensure this outcome. I do not advance the case of women over men but putting women alongside men is important. Everybody brings their own expertise and everybody has a left and a right side of the brain which sometimes act differently. It is important to ensure that all genders are represented in all spheres of life.
It appears from the Minister of State's speech that the centre of excellence and Enterprise Ireland will lead, develop and manage the enhancement of a support service which is designed to increase employment and exports and ultimately create more jobs in the Irish economy. Governments do not create jobs but they show the way and help. One such way is that at local level local authorities will be involved in doing this on a statutory basis. It is not that they have not been involved before now but it will now be put on a more statutory footing. This service will in the first instance be handled by the LEOs. In turn, the centre of excellence will develop benchmarks, monitor progress and promote good practice. I look forward to reports on that which will go also to the local authorities.
Micro and small businesses are the lifeblood of the economy. As the Minister of State observed, they employ more than 650,000 people. I know a little about small businesses because I have three children, all of whom have their own business. Money is not the only support businesses look for; they seek that things be made easier, with less bureaucracy and form-filling required. The Minister of State has done much on this issue along with the Minister, Deputy Bruton, since we came to Government. The reforms are about delivering improved support to more businesses in better and local locations, ultimately creating more jobs.
When I was a local councillor I do not know how many times I was asked where was the county enterprise board. People did not know even though there was a sign over the door. It would be better if one could direct a person to the local authority and let it be known it is a business hub and ensure that world class services are delivered locally and uniformly across the country.
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.
I shall not need ten minutes. I welcome the Minister of State.
The measures that have been introduced are a step forward. However, we must ensure that there is not simply a change of name or location but a change of policy. Donegal and areas outside Dublin are not getting the same jobs boost as the east coast. Areas like Donegal and the Minister of State's area of Sligo suffer a great deal of unemployment so we must target and develop the businesses in those regions.
Over the years the county enterprise boards have had to deal with a different economy but now the economy has changed. Therefore, it is important that the new local enterprise offices, LEOs, focus on creating sustainable jobs in areas other than Dublin which seems to be progressing very well.
Senator Quinn has left but I wish to refer to his comment on pension funds, an issue that I was going to raise at some stage. I spoke to an employee of an American company in Donegal that administers pensions in the US. I am sure that people are aware that in the US one can borrow against one's pension but pay it back without defaulting. That is a very strict system. As Senator Quinn has said, it would be helpful if a person with a pension of €0.25 million could pay it back at a reasonable interest rate. However, if he or she misses one payment then the penalty would be much worse than on a normal missed payment to a bank or a credit card company. It is a very strict scheme but gives a person an opportunity. The fact that it is a person's pension fund then it must be reimbursed. A person can benefit as long as the fund is replenished by he or she paying the money back at a certain interest rate and reaches retirement age. We should introduce a similar scheme here. We have discussed pensions here and how to release pension funds. It was mentioned that one could take out the pension and not repay it but that is not a good idea. People depend on their pension. At 50 years of age it might seem like a good idea but one would regret it on reaching 65 years.
Another suggestion was that one could borrow against one's pension through a bank. I disagree with that suggestion because a pension fund should be sacrosanct. It is important to point out that the pension belongs to an individual and cannot be chased by creditors. Letting a bank use it as collateral would destroy the reason for people to take out a pension.
Let us examine the American pension model. Earlier I mentioned an employee I happened to meet in my office where he spoke about a pension scheme. He said that the scheme worked efficiently and that the American company issued cheques from Letterkenny to people in places like Alabama or California. He made the point that if a payment is missed then it became dangerous for the company concerned and the employee. The scheme must be administered well.
I digress so I shall return to discussing the replacement of county enterprise boards with local enterprise offices. Senator White said that she was not sure where the new offices will be located. Perhaps the Minister of State will outline their location. Will the new office be located in the same building as the former county enterprise board in Letterkenny? Is it planned to have different offices? I would also like to know the physical nature of the scheme. The staff of the county enterprise board in Letterkenny do a great job. They have facilitated many information evenings for small businesses and provide their expertise and a mentoring service.
As I said earlier, the economy has gone in a different direction and away from manufacturing and construction. Senator White mentioned that Michael Tunney, in Letterkenny, said that services and certain industries were not being supported. Obviously they cannot be supported under the legislation. However, we should examine services because areas like Donegal depend on more than one industry. Donegal, like every other rural county, has the tourism sector, the services sector which is increasing, agriculture, financial services and computing services. The new LEOs must examine providing long-term help to the sectors because the physical structure of employment has changed. We can no longer build advanced factories like in the 1960s, 1970s and into the 1980s. Factories waited for a generation hoping for the arrival of a large employer from Europe or America. Now one can create ten or 15 jobs from one desk in a small office. That is where we need to go and we have a good example in Letterkenny. I refer to CoLab located at the Letterkenny Institute of Technology. I know that the Minister has visited the place and wonder will he visit it again soon. Small incubation companies export all around the world from that location. That global market was not possible ten or five years ago. Recently I visited some of them and saw their innovative work first hand and anyone interested in job creation should visit them. Those young guys and girls operate under radar to create jobs and with the support of CoLab have the potential to create a massive amount of jobs.
Recently I spoke to an individual who is talking to CoLab but has not joined it yet. He hopes to develop a flu test for animals that could be transferred for use in humans and marketed worldwide. Such veterinary tests cost a lot. The Donegal company comprises two men and a couple of associates. A large drugs company has already indicated a willingness to invest. High value jobs are the future for this country so we must move away from what was the norm in the 1970s, 1980s and 1990s. Obviously we lost our way during the Celtic tiger years when it came to sustainable jobs and thought that the world would keep turning with an unending property market. With the recession we have had to make a massive adjustment. I work in the small business sector and anyone operating in the small business sector knows the difficulties that the sector has encountered in order to restructure. It has not been easy, particularly when change happened overnight. Many companies have gone through that experience and many businesses will experience difficulties until the future becomes more certain.
I welcome the change provided it is not just cosmetic or for the sake of some ticking off some aspect of the programme for Government. We must see real change in areas which are not getting jobs, and I include all parts of the country. As I said earlier, Dublin seems to be getting its fair share and there are reasons for that. There is no reason companies cannot locate in rural areas because we have broadband, services, skills, institutes of technology and universities in those areas. Hopefully, in four or five years' time, we will see the results of this and that the programme for Government can produce the jobs which will sustain areas and keep our graduates locally if they wish to remain.
I welcome the Minister of State, Deputy John Perry. In the current economic climate, this is possibly one of the most important debates we will have. We are all well aware that the great challenge which faces us currently is how to create and sustain businesses and create employment. We are particularly lucky in the Seanad to have Senators like Senators Mary White, Mary Ann O'Brien and Feargal Quinn because they have demonstrated their entrepreneurial skills, have been at the coalface and know the challenges and the opportunities. For that reason, one is inclined to listen very closely to them.
Senator Cáit Keane gave us a very interesting Latin lesson on Leo the lion. I suppose it prompts the observation that one hopes Leo will have more teeth than roar, which will be very important. I will come to that in the context of seed capital in a moment. I was glad the Minister of State acknowledged the work of the county and city enterprise boards. It is quite evident that they have been very successful in creating jobs. If one changes from one system to another, one needs to be fairly sure one has a workable model. One of the strengths of the enterprise boards was that they drew on the expertise in the area. Like the three Senators I mentioned, that will be a vital ingredient.
I would not, in any way, denigrate the local authorities because we all know how successful they are in their own realm but we must ensure the new process is not just a second thought within the local authority and that it is able to work closely with the expertise which was, in the past, available on a voluntary basis.
There is nothing sadder than for enterprising young people, putting whatever limited money they have into a little business, whether a restaurant, a craftwork, a shop or whatever, and simply because very often we have too much bureaucracy and because they do not have that initial capital to get them to a point where they become competitive and capable of marketing to see it close in a matter of 12 months. I see it in my own town of Cashel and elsewhere. One can only imagine what it must be like if one was enthusiastic, excited and prepared to use initiative and innovation only to find it all falls. That creates extra negativity in the community. Expertise is a vital part of it. People must be able to identify what is a good project, where the market is and be very clear on branding. All of those issues do not go away.
I am reminded of the two young Collison brothers. I do not know if Members have been following their story but they won the Young Scientist of the Year. It seems they could not find an Irish company to engage with them so an American company did so for $3 million or $4 million and also took the two young brothers to America. I read in the newspaper during the week that they were offered $800 million for their project which they refused because they said they had €40 million in the bank and that they did not need the $800 million straightaway. These two young people are not even 30 years of age. I am not blaming anybody in Ireland but one must ask how the American company saw the potential and what agency should have seen it in Ireland, in particular in a national context which that would have been. In a local context, there is even a greater danger that we will miss the potential. That is why we must be very sure the effort we are making now is almost success-proof. The disillusionment which follows the closure of the little shop I mentioned can be absolutely heartbreaking.
What happens if something like this, which replaces the enterprise boards, fails or is not seen to deliver? I am not blaming Government because we have heard it said so often that it is not the job of government to create jobs but to create the environment in which to create jobs. At the same time, this is one of the steps towards helping businesses. I did not know the statistic until the Minister of State gave it today but 98.5% of all firms are small enterprises. That is a huge figure. They are also responsible for 650,000 jobs. What we are saying here is that the small firms are the lifeblood in that area of the economy and that is why we must tread very warily and cautiously but that does not mean we should not be enterprising and innovative. I would be the last person to suggest that.
Did the structure draw on a model anywhere else? In other words, are we starting from a greenfield-type situation or did another model exist? If a model existed and if we saw how it operated and succeeded, that would be very important.
In the future, small businesses, even businesses employing four or five people, will be exceptionally important. We should refocus on indigenous crafts and those types of businesses. Is it not particularly interesting when one sees a firm coming up with new food products drawing on traditional methods and indicating why it is wholesome, etc.? That is something we should bear in mind as well as the person who works in wrought iron. All of those things create jobs. Small towns will not get big industries in the future. Indeed, if they get big industries and if they close or go to eastern Europe, a terrible vacuum is left.
Will the Minister of State keep an eye on the bureaucracy? The last thing a young person wants is excessive and unnecessary bureaucracy. That does not mean one automatically says someone has a good project but people must be encouraged. Our job is to provide them with information, give them case studies and be available to them. I think Senator Cáit Keane made the point about knowing where to go. One needs to know where the office is and to whom to go. I am a little concerned that because the local authority will have a central role in the LEO concept and because it is caught up in rates, motor taxation, recreation and so on, it will not be evident that one is coming into an opportune place. That is my biggest fear. I can see that there is much detail in the legislation but I hope this will not be hidden in a back office in a county building.
We have said enough about the banks in the past but there is something radically wrong in a state which has put billions into the banks that it is still not clear whether seed capital is available to small businesses.
We are told by the banks that is the case but we must examine that more closely, and this model in particular will require that understanding and co-operation from the banks. We are either out of recession and are on the way up or we are not. I like to believe we are out of recession and on the way up but if we are on the way up, the partnership of the banks is required. The old days of saying "No", ignoring people and putting unnecessary pressure on them are gone. I am not suggesting the banks should automatically give money to people, nor am I suggesting they should not run their business properly but there are steps before that where the banks could have assisted. In the old days, so to speak, if one went into a bank one sat down and had a chat with the person involved. One had to tell them what one had for breakfast and so on but the point is that they were seen to be supportive. This model will require that, and Senator Feargal Quinn put his finger on it when he said that cash has to be an ingredient of this model from wherever it comes.
I wish the Minister well with the model and I am delighted with this debate in the Seanad. It has proved once again that we have people in the Seanad who can discuss these matters as practitioners, and what we must be at the moment is practical.
I welcome the Minister to the House to discuss this important and welcome County Enterprise Boards (Dissolution) Bill. I second what Senator Ó Murchú said. We heard earlier from Senator Feargal Quinn. When I started my business he was one of my mentors in that I was living in the Duke of Leinster's country house in the stable flat of Carton, in Maynooth, from where I was working on my chocolates out of the kitchen. I went up and knocked on the door of Superquinn in Lucan where I met Feargal Quinn, who was not a Senator at that time. That is the reason I started down the path I took and believed in myself. I wonder how Seanad Éireann attracted such a brilliant man who does not need to drive in here from Howth every day. He has a very important Bill before the House later today yet he took the time this morning to come into the House to give us many important ideas and insights. I pay tribute to him in that regard.
On the dissolution Bill, I congratulate Julie Sinnamon, who was recently elevated to head Enterprise Ireland. I have known Julie for years. She is a superb individual. I welcome that the enterprise boards will be known now as LEOs, local enterprise offices, which is easy to remember, and will come under Enterprise Ireland and the local councils. We all know that Enterprise Ireland is brilliant and the way it has its finger on the pulse not only of medium size businesses but also in terms of internal and international investment, in addition to the technological sector, but to micro-manage the small businesses of Ireland is a lot to ask of it. I was glad to hear it repeated that over 95% of the businesses in Ireland are the businesses we are discussing this morning but in terms of the county enterprise boards, now LEOs, the Minister will agree it is vitally important that we get this right. He is our champion here in the Oireachtas but has he had discussions with Julie Sinnamon and who will she get to champion the 31 LEOs? This is a major evolution. It is a time for reform, and I am pleased to hear that the staff of the enterprise boards will be transferred into the new LEOs but in my county of Kildare there has been a great deal of unhappiness and uncertainty about what would happen. I received some phone calls yesterday and this morning and people are waiting to hear the outcome of the discussions today and what it will mean for their future. I would like to see those good people in all the enterprise boards upskilled, trained and championed by the new person in Enterprise Ireland.
People think my business is in good shape but mine is a medium size business. I hope this year to have a turnover of €20 million, and I have over 100 employees, but the challenge is to keep up with the times and the evolution in technology, particularly e-commerce where there are huge opportunities for a business like mine, but there are even bigger opportunities for small entrepreneurs throughout Ireland who have ideas. I had a meeting last night with a group of English entrepreneurs who already had a successful e-commerce cycle and have started a new one. I was terribly jealous but I was also shocked by how little I knew. I have two persons working in my company who specialise in the web, Facebook and social networking, and I thought we were ahead of the times. My point is that we must make an effort to not only form the LEOs within the councils but to make them edgy and upskill the people who will run them to a level where we might have to avail of international expertise and recognise that every six months we will have to push ourselves to keep up with international best practice.
In terms of Kildare and Naas, we have a wonderful new shopping centre out of town where one of the biggest English multiples has taken root. We have an Aldi located next door and all the local shops have joined them in a lovely centre. I am not a great shopper but I called in there last Sunday and the car park was depressingly packed. Naas town is dying. The council had to drop car parking charges last week. This area probably comes under the remit of the Minister, Deputy Hogan, but we are talking about service industries and retail and we should try to keep the town centres alive for some of the fledgling businesses. In that respect I ask the Minister to examine the issue of car parking.
The Minister of State is in the Department of Jobs, Enterprise and Innovation but we need to join the dots, so to speak, at the Cabinet table. I refer to education, starting with transition year. My daughter who is in first year loves business. She wants to be a business person but she does not have a clue about the challenges. By the time children get to transition year we should start showing them what the LEOs are about and how easy it is, that is once we hear about the removing of red tape and bureaucracy about which other Senators pleaded earlier with the Minister. Can we link the Minister for Education and Skills, Deputy Ruairí Quinn, the Minister for Arts, Heritage and the Gaeltacht and the Minister for tourism to the LEOs? Representatives of the Department of heritage were in Buswells Hotel last week. Most Senators called over to meet them. They have dropped the budget from €22 million to €7 million. We continue to talk about saving €20 million if the Seanad is abolished, which is a lie, but what about the €17.6 million we give to the European Space Agency programme? I ask the Minister to speak to the Minister, Deputy Hogan, get back that €22 million and put jobs back into local communities. I am making my point in a roundabout way but construction workers who do not have to upskill can work on restoring important buildings in the community. Tourists are being brought into the country in much greater numbers as a result of The Gathering, and there are more plans for the future. However, with tourism comes a chance for young entrepreneurs to think about getting into craft, artisan food, services, hairdressing, beauty and other franchise ideas. Tourism generates hope in rural communities. The Minister should not be alone in his Department. Other Departments must feed into his and help him.
I second what Senator Quinn said about crowd funding, which is in its infancy in this part of the world. I have been a member of Kildare County Council audit committee for three years. I have never been a councillor. I had nothing to do with councils and when I went into the council I did not have a clue about the level of responsibility, the challenges they face on a daily basis and how much they have to manage.
I, too, second the concerns expressed about LEOs going into county councils. The situation must be managed - whether by the Minister or Enterprise Ireland - to ensure there is an environment, culture and appetite created in the councils so that the LEOs are given a separate identity. I welcome the newness of and the enthusiasm to evolve the LEOs, but the councils have their own cultures, which is a worry.
On the LEO staff who are moving from the enterprise boards, has the Minister considered putting in a performance management system? For example, were I a new LEO member of staff who came from a county enterprise board my remuneration would change. However, I would want the Minister to enthuse me, to give me some targets and to tell me that if I can find five entrepreneurs in my county in the next two years, I will get X, Y and Z. Matters should cascade down from Enterprise Ireland to the 31 LEOs. Let us have some fun, set targets and pull in the right direction.
With regard to bureaucracy and red tape, I am not a great business person - thank God I became a Senator because I now have someone who is much better than me at being the CEO - but I am a definite, mad, crazed entrepreneur. I love barbed wire fences and big brick walls because I will get through them if there is a sale on or an opportunity on the other side. I have accountants, technical people and scientists - the whole nine yards - working for me so I am fortunate. However, since my journey's beginning I have detested red tape and bureaucracy. There are so many people like me who are madly enthusiastic - they just want to be let out of the traps and go - and have ideas. Most of the other Members have spoken about the fact that we cannot have the same amount of red tape and bureaucracy for a large business and a small business, but that is the position. The Minister has the power and I ask that in his deliberations with Enterprise Ireland, he makes it easy for the people who want to make a change. I ask the Minister to consider a few incentives for new entrepreneurs. For example, perhaps there should be different capital gains taxes for people who have run a business for five years and manage on an exit clause and sell their business.
Job seekers allowances and failure are two subjects that people are scared of. People have told me they are taking a big chance because they know so many businesses fail and they worry about whether they will lose their job seekers allowance or whether they will succeed. When I tell them that they will get there, they respond that they have nothing to fall back on. We need to join the dots and put in place a protection mechanism around people who are willing to take a chance. To try to encourage us, the fear of failure must also be removed. That is a huge barrier to entry for many entrepreneurs. I thank the Minister for listening to me.
I welcome the Minister. I always enjoy meeting the Minister around the House and I know that his heart is in the right place on this Bill. The Minister mentioned that there will a network of 31 LEOs across the country, so there will be a busy role for the Minister for Transport, Tourism and Sport, Deputy Varadkar and I hope that he has 30 other fellows ready to assist in that task.
I sat on the Culliton review of industrial policy. Our worry at the time was that there were too many agencies and bureaucrats involved, which is a fear that others have expressed in regard to the Bill. After we finished the report I was asked what was in it and I responded by saying that among other things, the report recommended a reduction in the number of agencies. There has been confusion between the agencies and the entrepreneurs. As Senator Quinn mentioned, the number of start-ups is down by 21% in 2012 compared to 2011. There is too much managerial jargon and talk. The agencies spend too much time talking about themselves, and they would not know an entrepreneur if they came up and bit them. We found that tendency in the Culliton review. We must get the entrepreneurs first and let the agencies take a back seat. Perhaps they should have smaller public relations departments.
I am sure that the Minister will agree that when we use construction as the instrument of development we are crowding out industry. Industrial employment was static or even in slight decline in the first seven or eight years of the previous decade, which has been pointed out by people such as Chris Horn. The fastest growing economy was shrinking its industrial sector - the sector the country relies on for exports. We must see that the road to economic growth is not through larger public or construction sectors because we have tried that; neither is it through the banking system that we have. I sat on the Committee on Finance, Public Expenditure and Reform when the bankers came in. I have no doubt that they would do the same all over again. They are not interested in start-up enterprises. They were simply bubble housing lenders. The Governor of the Central Bank said that he is powerless to prevent reckless banking. Item 27 on the Order Paper, which is the Financial Stability and Reform Bill 2013, is to try and separate utility banking from casino banking. The matter has gone to Europe, but the Department of Finance does not seem to have the banking expertise - I think that there have been staff changes - to send a document on the topic. We will get nowhere with the present banking system - it just wants another property bubble.
The Ulster Bank chief executive was the most forthcoming witness at the committee meeting. He admitted that an industrial bank in the north of Ireland had been transformed into a property bubble bank in the Republic. The banks' corporate culture will not allow them to get back to being interested in small and medium enterprises and start ups. Without a functioning banking system, I do not know what we can do. In addition to the capital rules in the Bill, as the property bubble threatens again in some places, we must have much stricter rules on loan to value and for the percentage ration to be brought down to below 80%. Some countries have gone down to 70% where they have seen a property bubble developing. We must also have debt to income rules in the property sector enforced. AIB provided an example in which somebody owed it €340,000 but whose income was €34,000. We asked whether the person who gave the loan still works in the bank and whether they could be removed as a danger to society.
We need a new banking system. I do not whether there remains an industrial credit company, which is how governments in the past have tried to get banks to focus on industry as the Minister would want them to, and to get away from the property bubble and the fixation on property. When the Minister for Finance, Deputy Noonan was here he spoke about having negotiations between the Department of Finance and banks from outside the country that would know something about industry and might channel some funds in that direction.
Sheltered sector services have always been a problem. We pay too much for electricity and gas, and legal services in particular. That distortion in the economy means that people want to go into those sectors and not into the sectors that the Government is assiduously promoting. We need to look at tax and welfare rules, the Sunday payments that Senator Quinn mentioned and the need for fewer regulations. It is not just subsidies and hand outs that make a business - there must be market expertise.
As a result of the difficulties with our public finances, we have shrunk consumer expenditure by about a quarter since 2008, which is, as the Minister knows, part of the reason why there are so many boarded up shops around the country.
The Fine Gael press office issued criticisms - I exclude the Minister from this matter - of Senators Crown and Quinn. Senator Quinn will be back this afternoon to debate upward only rent reviews and making a positive contribution, as he has always done. I deplore some of the statements that the Minister for Jobs, Enterprise and Innovation, Deputy Bruton has made on the issue. Senator Quinn is a genuine man who will help the Minister and the rest of us to develop this economy. The conduct of some of the Ministers and the Fine Gael press office is contemptible. We try t make a contribution in this House. I am trying to get a better banking system and a more sensible mortgage system. We have proposed legislation - I believe we are ahead of many Departments in doing so - because we all want an environment in which new enterprises can operate. That is what the Minister wants and we commend him on that approach.
One of our best entrepreneurs - I heard Senator Ó Murchú refer to the Collisons - is Michael O'Leary.
When Mr. O'Leary joined Ryanair, it was carrying 1 million passengers per year. This year it will carry 85 million. Ryanair's operation in the British market is twice as big as that of British Airways and only 8% of its business now relates to Ireland. The airline is bigger than counterparts such as Iberia in Spain and Alitalia in Italy. The attitude towards Mr. O'Leary is not that he is a great entrepreneur and let us try to learn from his example. Rather, and with the exception of the 85 million who travel with his airline, the most prevalent attitude towards him is one of begrudgery. We should leave personality out of it. This is a guy from Mullingar who did not invent aircraft, small airports or the Internet but who combined the three to build the most profitable and biggest airline in the world. I celebrate his entrepreneurship and the kind to which Senator Mary Ann O'Brien referred.
Sometimes when we discuss this matter, one would think that jobs are created by committees and stakeholders - I hate that word - but in reality they are created by entrepreneurs. The latter may be awkward characters whom people do not like but they make things happen. I am concerned with regard to the massive emigration of young people out of the country. Some 63% of emigrants are graduates and they are using their entrepreneurial skills in Canada, New Zealand, the United Kingdom and Australia rather than here. This constitutes a huge loss of talent.
The banking system is probably worse now than was the case five years ago. It was bailed out but it has not oriented itself towards the goals the Minister of State and I share. The banks do not have the necessary expertise at their disposal and they certainly are bereft of economic expertise. They are dilly-dallying and annoying the Governor of the Central Bank who is trying to regulate the sector in the interests of ensuring an efficient economy. Without a home market and good banks, small and medium enterprises face an uphill struggle. As is always the case, we in this House will support the Minister of State because he is a constructive and creative individual. However, far more radical reform is required in the banking sector, within the Department of Finance and in the area of banking regulation. In light of all that happened in 2008, it is bizarre that the Government views the abolition of this House as a priority. There is a need to refocus and we will be with the Minister of State all the way in that regard.
I thank the Minister of State, Deputy Perry, for bringing this very important Bill before the House. The county enterprise boards, as we know them, have served the country extremely well. However, everything must change and we must move on. The boards will be replaced by the local enterprise offices, LEOs, and this well be of assistance in creating more jobs in this country.
When it came to power, the major issue for the Government was jobs. As the Minister of State pointed out, it is amazing that 98.5% of all firms are small and that they employ in excess of 650,000 people. We have all seen headlines about big companies such as Google, Facebook, Microsoft, Intel, etc. which employ large numbers of people. The majority of people are employed by small businesses, however. The changes the Minister of State is bringing forward in respect of the enterprise boards is very welcome. Enterprise Ireland could not deal with local businesses in the past because it was more geared towards attracting international companies. I welcome the fact that it is now going to have a say in this regard. Previously, county and city enterprise boards could not deal with companies which employed more than ten people. That was a silly rule, particularly as all companies need to grow. Even while it is growing, a small company may still need the assistance of a local enterprise office or board.
Members opposite have stated that replacing the county and city enterprise boards with the local employment offices will not work. I am of the view that it will work. As previous speakers indicated, businesses rely on those with entrepreneurial ideas in order to thrive because it is from small acorns that mighty oaks grow. Google, Facebook, Microsoft and Apple all came into existence as a result of one to two people coming up with particular ideas. Consider how those companies have developed in the interim. Those who have ideas must be encouraged at every stage and the requisite supports must be put in place, particularly in light of the statistics relating to the number of businesses which fail within the first two years. We must ensure supports continue to be provided because one never knows how big a business might become. It does not matter how big they might become, however; it is the fact they are prepared to pursue their ideas to serve the country and employ people.
The number of people on the live register dropped again by 2,000 this month. This is the seventh or eighth month in a row that there has been such a drop. At present, the Government is creating more than 700 jobs per week. Those jobs are badly needed. Senator Barrett referred to young graduates leaving the country, and we do not want to see that happening. An amazing statistic emerged last week to the effect that while more than 100,000 young people have emigrated, more than 60% of them left full-time jobs to do so. These individuals may have made a conscious decision in this regard and they might have been of the view that they would be better off financially elsewhere. They might also have been of the opinion that they could gain experience in a foreign country while they are young and return to work here in the future.
Will the Minister of State clarify whether the new local enterprise offices will be able to make decisions in respect of grants, supports, etc.? Senator Barrett indicated that he does not like the word "stakeholder". Will the new local enterprise offices include involvement from local chambers of commerce, unions, county councillors, county managers and so on? What will be the make-up of the boards relating to these new offices?
The digest relating to the Bill indicates that there are 35 separate websites for the various county and city enterprise boards. When the legislation is enacted, there will only be one website. The same supports will be available in every county and people will be able to see that by going onto the website. When establishing a business, someone with an entrepreneurial idea may not know what he or she needs. There are issues relating to planning, water, wastewater, roads, and so on that must be dealt with. County councils have the expertise to assist people in this regard. A person who requires assistance will be able to go to his or her local enterprise office and the director of services or a member of his or her staff will be contacted to discover what supports can be provided.
The Bill before the House is just one piece in a larger jigsaw. In that context, the Minister of State's Department should be involved in discussions with the Department of the Environment, Community and Local Government and the Department of Justice and Equality in respect of an ongoing issue which has often been raised in this House, namely, commercial rates. Perhaps we could use the legislation to provide a helping hand to start-up businesses in the context of getting their operations up and running. As stated earlier, for financial and other reasons, many businesses fail within the first two years. What we are engaged in here is a streamlining exercise. In other words, we are bringing all the expertise together. The staff of the county enterprise boards are not going to be displaced. They will be brought within their local authorities and will work for them. The expertise will, therefore, move with them to those authorities, which is extremely important.
I commend the Minister of State on bringing forward this vital Bill. As stated, in the past the enterprise boards could not deal with companies which employed more than ten people. The legislation is going to help improve the lot of many people. The digest relating to the Bill states that it will encourage more women to become involved in business. Many of the most successful business people in this country are women. I compliment Senator Mary Ann O'Brien and Senator White on the success of the companies they established and on the number of people they employ. Both Senators proceeded into business on the basis of their entrepreneurial ideas. I presume they receive support from Enterprise Ireland and other State agencies in setting up their businesses. The Senators' businesses have progressed in the interim.
It is important that the Bill should be supported by Members on all sides of the House. The digest refers to the commitment in the programme for Government to the effect that:
We will merge local enterprise and job support functions of local, regional and national agencies into a single business and enterprise unit within Local Authorities. This will allow streamlining of local job creation and support functions, increased shared knowledge capability and resources while saving on administration costs.In the context of the cuts we have been obliged to make under the troika programme, we have been obliged to reduce administration costs. Administration costs are a major factor for local authorities, enterprise boards, Leader companies, etc.
If those costs were streamlined more money would be available to assist start-up companies. It is important to be aware of what is happening in the real world. The enterprise boards should be under the remit of the local authorities, as this area is part of what constitutes local authority reform. Legislation on such reform, including the removal of town councils, was passed in this House. Bringing more power back to the local elected members is part of this legislation. I compliment the Minister of State on bringing this Bill to the House and I will be supporting it.
I welcome the Minister of State to the House and warmly welcome the publication of this Bill which, as he will accept, is long overdue. I raised at the Joint Committee on Jobs, Enterprise and Innovations on several occasions the need for this legislation to be put in place as soon as possible. Obviously there was uncertainty around what was going to happen and the city and county enterprise boards wanted the issue progressed, as we all did, to make sure that the proper supports were there for entrepreneurs. I commend the Minister of State on bringing forward the Bill.
I do not share the concerns expressed by other Members regarding the role of local government. As someone who served on a local authority for seven years, was a member of the county development board of Waterford City Council and a member of the city enterprise board, I believe local government is clearly in tune with the needs of the economy generally and of enterprise development and entrepreneurs. Senator O'Neill pointed out the role local authorities play in supporting entrepreneurs once they establish businesses. We will see the marrying of these new socioeconomic committees with the local enterprise offices, LEOs, and local government playing a more practical role in supporting business, entrepreneurs and economic development generally in their local authority catchment area. I have every confidence in local government both in terms of the local elected representatives and local authority management in this transition period. It is the right step forward, a positive one, and one that I welcome.
I believe the Minister of State would also agree that this must be part of a holistic approach because practical supports for entrepreneurs at an early stage are important but there are other practical steps the Government can take such as addressing the issue of upward-only rents. Senator Quinn has a Bill dealing with that issue which will be debated this week or next week. A more progressive rates system dealing with the cost of doing business and the consideration of energy costs are issues that need to be part of the overall solution, the collective offering to support entrepreneurial activity and new business start-ups. A significant lift would be given in this area if we can get a lift in our domestic economy. If that happens, we would see much more come from the domestic sector and the small and medium enterprise, SME, sector.
Local enterprise development is the engine of our economy. Some 99% of all enterprises are in the small to medium-sized enterprise sector and 78% of all employment in this sector. That shows the importance of the SME sector. While the focus of public representatives can often be on foreign direct investment, which is also important, we need to put much more emphasis on supporting the SME sector, which is the bedrock of our national, regional and local economies.
The existing county enterprise boards have provided vital support and it should be noted that the average cost per job supported was €6,000, which is half the cost of Enterprise Ireland and IDA-supported jobs. That speaks for itself in terms of the record of enterprise boards in the past. The county and city enterprise boards have succeeded in supporting enterprises in areas where other State agencies have failed. I have seen that in my local area where many businesses would not have got support from Enterprise Ireland because perhaps they were too small or because they were able to get grants, be it feasibility grants or employment support grants, from the enterprise boards in the areas in which they wanted to set up and they are now viable businesses creating jobs. We should acknowledge all the good work that has been done by the city and county enterprise boards up to now.
However, local enterprise development could do more as part of a seamless State-wide approach to enterprise development. The use of local authorities as the delivery body makes sense in maintaining a local focus and accountability. The Bill envisages that the new LEOs will be scrutinised. Accountability in that respect is back to the manager and that makes some sense, but there must be democratic accountability also in terms of the local elected representatives.
The types of change envisaged in this Bill are not without their challenges. I hope the Minister of State can provide some clarity on a number of issues, especially the relationship between Enterprise Ireland and the new LEOs. As outlined, the LEOs will be accountable to Enterprise Ireland through a service level agreement. Will the Minister of State outline how the relationship will work between Enterprise Ireland and the new LEOs, how it will play out?
Senator O'Neill spoke about the limitations of the city and county enterprise boards in the past in terms of being only able to support companies which employ up to ten people. There is an opportunity to have a more seamless transition between Enterprise Ireland and the new LEOs. That will provide opportunities because there needs to be support from the initial business idea through the start-up process and growth to exports and through to the employment of in excess of ten people. The new LEOs and their relationship with Enterprise Ireland offers us opportunities to deal with some of the challenges the enterprise boards had in the past. What plan has the Minister of State to make that a reality? It is good to have it as an aspiration but how can we make it a reality? What links will there be between Enterprise Ireland supports and those available at the LEOs?
I referred to the relationship between the local authorities and the LEOs, the issue of accountability and the role local elected representatives have in making sure there is accountability. We are talking about taxpayers' money funding business through grant supports and so on and we need to make sure there is maximum accountability back to the taxpayer. Will each LEO produce an annual report benchmarked against its service level agreement? It would be important for scrutiny, oversight and accountability - which are buzz words that the Government uses - especially in the context of political reform, that we have maximum accountability. It would not be beyond the scope of the LEOs to produce annual reports that would benchmark what they have done against the service level agreements they have with Enterprise Ireland.
Regarding local authorities, a concern has been voiced regarding their capacity, focus on enterprise and reputation as being a cost centre for business. I do not agree with that and would ask the Minister of State to respond to some of the criticisms around the role of local government because that has to be challenged. I know there was a tug of war within Government between the Minister, Deputy Hogan, and the Minister, Deputy Bruton, regarding the place and the role of local government. I am pleased that the view of the Minister, Deputy Hogan, won out on this one. Concerns have been raised with me by some people, but I do not accept the proposition as put forward. It is important that the Minister of State clarifies the role and importance of local government here.
What step does the Minister of State intend to take to build the capacity of local authorities to develop an enterprise culture? Will local authorities be able to provide additional support to LEOs and access EU funding for enterprise development. This currently happens in the North, especially in Belfast, and we should examine best practice where we can. Would the Minister of State and the Government be open to considering the benefit of voluntary enterprise forums made up of representatives of local enterprises, support organisations and trade unions to assist the LEOs in their work and to develop an enterprise culture within local authorities? Such bodies would provide the types of skills and experience that existed on the previous county enterprise boards. When we have people willing to come forward and give their expertise on a voluntary basis, we should accept it.
One of the issues raised with me by a number of trade unions is one concerning the grants given to businesses. It is important that if a company receives a State grant it is in full compliance with labour laws and employment rights. In situations where companies are not in compliance, they should not get Government grants. If they are found to be in serious breach of employment laws, instances of which we have seen in past, the State should be able to claw back the funding that was given to those companies. We have to make sure that companies which avail of taxpayers' money are fully compliant with labour law and employment law in this State, which unfortunately has not always been the case.
This is one of the areas in which my party will table amendments if the Government does not see fit to include such provisions in the Bill.
I welcome the Minister of State to the House. As a former member of a county enterprise board, I applaud the great work the boards have done over the years. There is much to be said for the county enterprise board structure that is in place at present. There is cross-party and cross-community involvement on the boards. I once attended a county enterprise board meeting at which two projects from my own area were being considered. The members of the evaluation committee proposed to fund the first project because they thought it was viable, but they did not propose to fund the second project because they felt it would not be viable. I had a different viewpoint. I do not have any skills in this area, but I can spot a good businessman when I see one. I suggested that the project they were proposing to fund would not work, and that the project which they were not proposing to fund would work. They took my viewpoint on board, which was fair enough, and I was right. The first project did not work. They funded the second project on the strength of my contribution and later it won the enterprise of the year award for that year. I hope none of this will be lost when the new local enterprise offices are put in place.
I will be interested to hear the Minister of State's response to Senator Ó Murchú's question about what the new local enterprise offices are modelled on. Are they based on a model that is used in another country?
We most certainly have to deal with bureaucracy. People are frustrated by the forms they are required to fill out in order to apply for anything. The same thing applies to the Leader programme, etc.
Senator O'Neill spoke about new businesses that are being set up. I have repeatedly said that the hearts of rural towns are dying as a consequence of the bad planning of the past. When people are finished shopping in out-of-town developments like Tesco and Aldi, they turn around and go away again. The Minister of State knows my friend who owns Super Valu in my home town. He did not want Aldi to come to town because it was planning to build outside the town. He said would not object if Aldi was planning to build right beside him because it would be a progressive development. If planners took such a positive attitude, we would not be in the state we are in at the moment.
It is clear that IDA Ireland is not putting an emphasis on bringing work to towns like Roscommon, Ballaghadereen, Boyle and Strokestown. It has no interest in towns the size of the Minister of State's home town of Ballymote. It is quite true to say that when one is in Dublin, Galway, Limerick, Cork and a few other urban centres, there is no recession. Outside of those areas, rural Ireland is dying. Everybody is coming here to Dublin for work. We are creating 3,000 jobs a month, which is very much welcome. I ask the Minister of State to try to do something to ensure those jobs are spread around the country so that people do not have to emigrate, or migrate to the likes of Dublin, for work. Perhaps, as a pilot project, the Western Development Commission could examine the rural town centres that are dying and see whether there is something it can do. I know it is interested in anything that might promote employment in rural Ireland. The Minister of State might ask it to get involved in this area.
The generous employment grants provided by county enterprise boards to incentivise small and medium sized enterprises to take on people are welcome and necessary. The Minister, Deputy Burton, recently acknowledged in the House that not many people know about the JobsPlus initiative she launched some months ago. Perhaps the Department of Jobs, Enterprise and Innovation could start to promote this scheme, whereby an employer who takes somebody off the live register gets half of that person's social welfare payment for two years. It would offer a huge boost to an employer who might be made aware of it. The new structures need to inform people of these schemes.
I wish to mention another idea that I brought to the Minister of State's attention at one stage. It has not moved as yet. The back to work scheme has not gone away. It is still there. I know many employers who started out on back to work schemes. A friend of mine who started out on a back to work scheme is now employing 50 people. Given that employers need capital, the benefits of cash being paid upfront should be considered in the context of such schemes. If a man is prepared to set up in business as a self-employed person, perhaps 12 months of his social welfare payment could be front-loaded to him to help with the capital costs he might need to meet. I await the Minister of State's response to these ideas.
Cuirim fáilte roimh an Aire Stáit. I respect the Minister of State, Deputy Perry, because he comes from a small business background and he understands the difficulties such businesses are facing. It is fair to say we are living in extremely difficult times. At a time when small business owners are experiencing significant difficulties, I find it somewhat ironic that we are deciding to shrink the State services available to support enterprise. We should be expanding them, or at least holding what we have. In theory, this Bill is all about shrinking the services that are currently available.
The county enterprise board structure has served this country well since it was established in 1993. It has supported some 33,000 jobs and provided various training, mentoring and other supports. Under the structure that has been in place since 1993, IDA Ireland looks after companies interested in foreign direct investment and Enterprise Ireland supports companies with between ten and 100 employees. The enterprise boards operate throughout the country on a county basis. Shannon Development and Údarás na Gaeltachta have defined roles in specific areas. The county enterprise boards have served the country well. Until now, they have had the autonomy and the scope to be able to make decisions at local level. The links between the enterprise boards and local authorities have never been stronger. That is certainly the case in my own county, and I assume it applies in every other county, because elected councillors have always sat on those boards. I know that since 1993, the chairman of the Donegal county enterprise board has always been the Donegal county manager at local authority level. The connection could not have been stronger.
I would like to make a number of points about this proposal. I feel it is the wrong way to go for a number of reasons. Under the new structure that is being put in place, local enterprise offices will be established and the county enterprise boards will be discontinued. There is no defined plan for how all of this will work. There is no plan for how the changes will be implemented. We are moving from a proven track record-based system to a system that has not been proven at all. While I agree there is a need to re-energise and reinvigorate the county enterprise board system, that does not mean the system should be discontinued or the option of reforming it should not be considered. The county enterprise boards have been self-managed. Decisions have been made on a local basis. We are moving the functions of the county enterprise boards to the Department of Jobs, Enterprise and Innovation and Enterprise Ireland, which have no managerial experience in dealing with county enterprise boards. Enterprise Ireland has traditionally been dealing with projects with ten or more employees. Under this plan, it will try to provide support to small organisations and employment projects as well. I cannot see how it will be able to streamline itself to work efficiently and effectively, particularly in the early years. The county enterprise board structure was democratic in the sense that the board comprised local authority members and representatives of the trade union movement, employer organisations, other State agencies and local businesses. All of them gave their time on a voluntary basis to ensure the county enterprise boards could fulfil their roles in the best way possible.