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Fine Gael Business Forum Report 2010


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Fine Gael Business Forum Report 2010

  1. 1. Fine Gael Business Forum: Working Together
  2. 2. Message from Enda Kenny TD, Leader of Fine GaelThe Irish nation is currently enduring a deep recession caused by the boom busteconomic decisions taken by this Government. While most of our EU neighboursreturn to economic growth our business community continues to feel the effect ofrecession with increasing numbers of insolvencies, lays offs and pay cuts. Theexperience of every country has been that small businesses drag economies out ofrecession. For this reason I saw it necessary to take my economic team around thecountry to hold a number of business forum meetings to hear the views, concerns andideas of our talented business leaders. No political party has ever undertaken thissimple exercise before. Under the auspices of our business forum committee oureconomic team and I met with over 1,200 business leaders in Dublin, Waterford,Cork, Galway, Limerick and Athlone.Fine Gael’s approach to the economy has been consistent on one central aim; the needto promote job creation and retention. Bailing out banks and budget cuts without anemployment plan is an inadequate response to the crisis the country faces. Politicianscannot create jobs by themselves but need to implement policies to make it easier forbusinesses to invest, hire more staff and look to the future with confidence. The onemessage we heard loud and clear from our businesses was that they need a break.Government imposed charges and taxes continue to drag down business activity bypushing up costs. Consumer confidence is in a tailspin and our businesses continue tolose out to their cheaper rivals north of the border and overseas.The Fine Gael’s economic plans contain the ideas to promote job creation andbusiness. It was informed by the views and opinions of the business leaders we metaround the country. One of the central policies of our recent alternative budget wasthe Jobs Tax Cut which would lower crippling labour costs by cutting both rates ofemployers PRSI. It has the added advantage of benefiting 175,000 Irish businessesand their 1.7 million employees and avoids excluding large sections of the economywhich has blighted the Government response.Ireland’s most valuable resource has always been its people. We are a hopeful,innovative and confident people and this is best seen in Irish businesses. With the 2
  3. 3. right Government in place, pursuing the right policies I firmly believe Ireland canonce again be held up as an example of a model economy achieving full employment.Working together with the business community we can make this aim a reality. 3
  4. 4. Summary of Concerns & Ideas Raised by Business LeadersLabour CostsA common theme raised by businesses leaders in all cities was the issue of labourcosts. This can be broken down into three broad areas: • Minimum Wage: Many businesses perceived the minimum wage to be a drag on their cost competitiveness. The minimum wage in other areas such as Northern Ireland was used an example of Irish business having to compete with lower cost economies. Fine Gael’s view that it was not appropriate to lower the minimum wage as there are other options to be exhausted first in order to lower labour costs. • Social Partnership: A reoccurring comment from many small business owners was their anger of the social partnership process which they claimed they were mostly excluded from and as a result had unsustainable pay increases forced upon them. • Competitiveness: Concerns about labour costs reflected a broader concern about the general lack of competitiveness in the Irish economy. High costs imposed by Government pushed up business costs and end prices.Council RatesVery strong concerns were raised by businesses and their representative bodies aboutlocal authority business rates. Businesses, unlike domestic households, pay additionaltaxes to their respective local authority. There was a worry among businesses thatCouncils would simply increase their business tax to plug the gap in their financescaused by decreased Government grants. Fine Gael has committed to freezing localbusiness rates in Councils for the next number of years and reducing them wherepossible. Many businesses expressed the opinion that rates should uniformly drop inline with decreasing inflation and business activity. Fine Gael Councils, such asFingal County Council, have dropped their rates by as much as 10% for the comingfiscal year. 4
  5. 5. Banking and CreditCredit is still not getting to small business. Fine Gael heard first hand stories in everycity visited of small businesses being turned down for credit, having difficultyextending overdrafts and accessing banking services. There is no evidence that thecreation of NAMA has had any positive effect on business lending. Meanwhile,employers continue to lay off people in order to cut costs as much as possible in orderto simply survive through the recession. Fine Gael’s plan for a new WholesaleNational Recovery Bank remains as necessary as ever in order to provide a creditstream to businesses via the existing commercial bank network.Public Sector TenderingA perfect example of Government not reforming its structures or procedures to helpindigenous small businesses is in the area of public sector tenders. Even though it isworth €15 billion to the economy the public tender process is almost designed toexclude smaller Irish suppliers. The tender packages are not broken down into smallercontracts and larger companies continually win out over their smaller rivals. This, aswas pointed out during our event in Cork, was preventing many small companiesfrom growing into medium sized companies. Businesses suggested that Governmentcreate smaller tender packages or place new conditions on the requirement tosubcontract sections of a successful tender contract.Red Tape & Duplicated RegulationAn area that continues to prompt the ire of small business is that of duplicatedregulation and unnecessary red tape. Most Irish SMEs have very limited staffresources and cannot afford to waste staff time on multiple forms and surveys issuedby a myriad of Government Departments and Agencies. 5
  6. 6. Education Quality ConcernsEngineering and computer companies in Dublin and Cork expressed deep concernover the quality of graduates emerging from Irish universities. One Dublin basedengineering company went as far to say that they hire all their skilled staff fromabroad. The lingering perception that Irish science, engineering and computergraduates cannot compete with their foreign counterparts should be matter of urgentconcern for the Government. The quality and flexibility of an indigenous labour forceis a key component to wider economic competitiveness.Political LeadershipThe lack of political leadership within Government is a great concern to Irishbusiness. It was an opinion that was raised in all locations visited with the Fine Gaelbusiness forum. A vacuum of leadership at the highest levels of Government has adirect impact on consumer and business confidence. There was a strong dire amongthe business community for a new reinvigorated political leadership who would takethe smart decisions to restore the economy back onto a sustainable footing.Consumers want to spend and businesses want to invest but as long as they seeGovernment floundering from one crisis to another they will not look to the futurewith confidence.Rent ReductionsCommercial rents have not come down in line with nearly all other costs. Until veryrecently upward only rent reviews continued to hammer businesses which arestruggling to survive. An accountancy firm in Galway stated that they had to reducelabour costs because they couldn’t lower their rent costs as a way of cutting generalexpenses. Businesses want immediate Government action on rent reviews bylandlords to give some relief, especially those businesses in the retail sector. 6
  7. 7. Lack of transport and communications infrastructureThe lack of proper transport and communications infrastructure was another commontheme among locations but was especially acute in the South East of the country.Ireland has some of the slowest broadband speeds among other developed economiesin the OECD. An advanced telecommunications network is the lifeblood of any‘smart’ or developed economy and our deficiencies are holding back Irish business.Despite a decade of heavy investment in road infrastructure our major towns andcities still suffer from chronic road congestion.Energy CostsIrish businesses are keenly aware that they pay some of the highest electricity costs inEurope. They were burdened with unprecedented energy price increases during 2007and 2008 yet prices remained high following the collapse in world oil and gas prices.Many felt that the nature of the Irish regulated energy market is not working in thebest interests of either business or the home owner and that major reform was needed.Social Welfare PaymentsSome employers offered the view that they could not entice more workers to work forthem as they could not compete with social welfare payments and additional benefits.Others employers reported that they had employees who had been reduced to a shorterworking week not wishing to return to a full working week as they would losebenefits. There is a need to reform the social welfare system so that is avoids makingpeople dependent on the State but encourages employment or training instead.Public Service ReformBusiness leaders were eager to see reform of the public sector as a way of improvingits interaction with business. Outdated opening hours, closed telephone lines and 7
  8. 8. duplicated red tape and business inspections drag down the efficiency of business.Many were angry at their taxes being wasted by Government using examples of FAS,PPARs and banking bail outs.Imposition of the Carbon TaxA very real concern in areas in the west and midlands was the imposition of a carbontax and how that would affect solid fuel businesses operating here. One such businessspeaking at the Limerick meeting declared that he would have to move his business toNorthern Ireland because he would not be able to compete with suppliers notburdened with the tax. Other businesses located in rural areas were concerned that theincreased prices for petrol might suppress business activity further in rural areas.Lack of effective local governmentFrustration, annoyance and a loss of confidence was expressed when the issue of localgovernment was brought up in the Shannon and Western areas. Businesses werefrustrated with the large number of regional development agencies and localauthorities all talking and producing reports but failing to promote any meaningfulchange. The system of local government produced local politicians with very littlepower to introduce policies to promote their own localities. This issue was stronglydebated in Limerick where people expressed annoyance that the same problems beingdiscussed by their local agencies decades ago are still being discussed today. Businessleaders stated that for all the talk of proper regional development there was very littleaction or progress.Promoting TourismThe tourism industry was strongly represented throughout the business forum tour.Hotels, restaurants and travel companies all expressed the view that Government wasnot doing enough to promote tourism. They argued that a strong and vibrant tourism 8
  9. 9. sector would boost local economies across Ireland. Strong criticism was directed atthe manner in which failed hotels in ownership of banks were being kept open untilthe property market recovers and thus driving away business from viable familyowned hotels. The continuation of the tourist ‘exit’ tax was also highlighted as anattack on the tourist industry.Renewable Irish EnergyMany small energy companies attended the business forum to communicate to FineGael how Ireland is continually failing to take advantage of our ample naturalresources to produce energy. An owner of a two wind turbines, one located in theNorthern Ireland and the other in the Republic, told how his Northern Irish turbinemade a small profit while his other turbine was struggling to break even due toinsufficient Government supports to get the industry off the ground. Ireland importsover €6 billion worth of foreign fossil fuels every year and if this amount wasreinvested in Ireland it would provide a huge economic stimulus. There was supportfor Fine Gael’s NewERA stimulus plan that proposes to build next generationinfrastructure for communications, energy and water services. 9
  10. 10. Message from Denis Naughten TD Chair of the Fine Gael Parliamentary Party Economic and Business ForumFine Gael is a political party that encourages initiative, innovation, investment andself-reliance. We stand for a vibrant, competitive economy. To that end, we believeGovernment policy must encourage initiative and reward hard work, thus drivingeconomic activity and creating jobs.The real risk for our economy is the complacency of the current Government which iscontinuing its mantra that solely addressing the public finances will lead to growth.This will not get people back to work but will prolong our deep recession.We must innovate or we will stagnate. And while science and technology will play akey role in this drive to change, innovation is not just about the smart economy, it’salso about thinking smart.We have to think smart and we have to use what is available to us.For example, the State-owned broadband network is currently owned by a myriad ofState companies and agencies. By bringing its elements together and building anational high speed broadband network we can create thousands of jobs and takeadvantage of all the benefits to the economy that will bring.We also need to change the way tenders are issued by the public sector to encouragepublic sector bodies to tender ‘the problem’ and invite solutions from tenderingcompanies. This approach promotes innovation and can lead to significant savings if acompany identifies a cheaper service or solution to the problem. Government shouldnot assume it has a monopoly on knowledge, ideas or solutions.Fine Gael has published targeted plans to support small business, which focus on 4priority areas: tax relief, credit, costs and getting Government working for business. 10
  11. 11. Targeted Tax Relief • Fine Gael Jobs Tax Cut: To give businesses and their employees a much needed boost Fine Gael has proposed cutting both rates of employers PRSI. This will have the effect of reducing average pay costs by 2.5%. Furthermore, Fine Gael proposes no increases in Corporation Profit Tax or marginal Income Tax rates. • Reduce VAT: In our Pre-Budget submission, Fine Gael proposed to introduce a temporary "stimulus" by cutting the lower rate of 13.5% VAT to 10% until the end of 2010. We still believe that a 12 month reduction is warranted. • Abolish the Travel Tax: Fine Gael proposes to abolish this new tax, which acts as a disincentive for tourists to come to Ireland and will do further damage to our struggling tourism sector, leisure industry, hotels and restaurants.Get Credit Flowing • Get the Banks Lending: Fine Gael will establish a new National Recovery Bank that will use the facilities and staff of existing commercial banks to provide a credit stream to business and individual customers straight away. • Prompt Payment from Government: Businesses are suffering because creditors will not pay their bills. Among the worst offenders is the Government and its agencies. Fine Gael will honour this commitment and will extend it to all government agencies, local authorities and State-owned companies.Curb Costs • Cut Red Tape: Fine Gael will reduce the costs associated with red-tape by 25% by 2013 using a best practice solution that has worked successfully in the United Kingdom, the Netherlands and Austria. • Reduce Energy Costs: The Government’s regulatory system for energy is flawed. Businesses in Ireland continue to pay more for electricity and gas than their UK counterparts. Instead of fixing prices, the Commission for Energy Regulation (CER) should set a price ceiling. Greater transparency should be 11
  12. 12. introduced into the pricing decisions with more input from groups representing business and vulnerable people. • Reduce Government Charges: Cut all government charges by 5% in line with deflation and cuts in pay and welfare. Fine Gael has consistently highlighted the unacceptable situation that while costs are lowering in the economy Government controlled charges remains high or are even increasing.Getting Government to Work for Business • Restructuring Public Tenders: Irish public contracts are worth €15 billion a year to the national economy. Yet this procurement system works against small Irish companies as a massive proportion of the larger Irish contracts are awarded to non-Irish companies. The resounding message from business owners who attended the recent Fine Gael business forum was that restrictive, inflexible and expensive public procurement procedures are excluding Irish businesses from even entering procurement competitions. • Redraft Employment Law Compliance Bill (NERA): In its current form, it will criminalize employers severely reducing employment creation. In addition, Fine Gael wants to overhaul the Joint Labour Committee System and Employment Regulation Order System which are out of date and costs us jobs in the catering, hotels, retail and other sectors. • Supporting the Agri-Food Sector: The agriculture and food industries are often over looked when talking about the SME sector. Fine Gael has proposed an overhaul of the myriad of State departments and agencies currently involved in food safety inspection and regulation with a view to establishing a single food monitoring body. • Supporting Innovation: Fine Gael will implement its NewERA economic strategy to build much needed broadband, water and renewable energy infrastructure. Furthermore, we want businesses to be able to offset Research and Development expenditure against employer’s PRSI and extend the ‘look- back’ period. To facilitate innovation in small business Fine Gael also wants a Government funded National Internship Programme (NIP) and subsidies for employers who put staff on short time to avoid lay offs (WorkShare). 12
  13. 13. The message which Fine Gael is hearing from business people is clear. Unlike thebanks they don’t want ‘a bail out’ but they need ‘a hand up’. And that is what you canexpect from the next Fine Gael Government.At its peak over 800,000 people were employed by small and medium sizedbusinesses in Ireland. These are valuable jobs in every village, town and city inIreland. This sector contributes billions to the economy in taxes and PRSI, but isbeing very badly hit in the recession.These businesses are dying quietly. While every job lost is a hammer blow, unlike inlarger companies whose troubles are headline news there is no national outcry when asmall business shuts its doors for the last time. Yet this is happening every day andthe number of jobs being lost continues to grow.All of us have to change the way we do things, and Government is no different. FineGael recognises the value of small business to Irish society and we are working to puttheir needs, and consequently the jobs of those who they employ, at the top of thepolitical agenda. 13