Good afternoon. I ask everyone to turn off all mobile phones and devices or put them on silent mode. Before we begin, I wish to explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses make to other persons in their evidence. Witnesses are protected by absolute privilege in respect of the presentations they make to the committee. This means they have an absolute defence against any defamatory action for anything they say at the meeting. However, witnesses are expected not to abuse this privilege, and it is my duty as Chair to ensure this privilege is not abused. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative they comply with any such direction.

I advise members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex to participate in public meetings. In this regard, I ask members participating via Microsoft Teams that, prior to making their contribution to the meeting, they confirm they are on the grounds of the Leinster House campus.

Members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative they comply with any such direction.

Today marks the second of two engagements around the cost of financing business in Ireland in advance of the upcoming budget with a focus on spending and taxation measures. I welcome witnesses from the Department of Enterprise, Tourism and Employment: Mr. Gary Tobin, assistant secretary and head of the economics, competitiveness and climate division; Mr. Dermot Mulligan, assistant secretary, Irish enterprise division; Mr. Ross Church, principal officer, small business retail unit; Mr. Jonathan Patchell, principal officer, state aid and finance for enterprise unit; Ms Yvonne Hayden, assistant principal officer; and Ms Pamela Malone, assistant principal officer, state aid and finance for enterprise unit. The committee welcomes the opportunity to engage with the witnesses. I thank them for being here.

I invite Mr. Tobin to make his opening remarks.

I thank the Leas-Chathaoirleach and committee members for the invitation to be here today.

The global economic environment is becoming increasingly uncertain, reflecting heightened geopolitical tensions, trade fragmentation, supply chain disruptions and growing economic security concerns. Ireland's openness to trade, foreign investment and global value chains remains a key competitive strength but increases exposure to external economic and geopolitical shocks. Access to finance remains an important issue for many Irish businesses, particularly SMEs and microenterprises. The Department of Enterprise, Tourism and Employment has sought to address financing gaps through a range of loan and guarantee schemes that support business investment, ease financial constraints and ensure that viable businesses can access appropriate sources of finance at different stages of their development. These interventions have helped businesses to navigate periods of economic uncertainty, invest in productivity enhancing measures and strengthen their long-term resilience. The availability of affordable finance continues to be an important component of supporting enterprise activity, competitiveness and employment across the economy.

We are continuing to strengthen the finance support ecosystem through measures such as the increase in Microfinance Ireland's lending limit, which has seen strong uptake. In addition, we are working on an expansion and extension of the growth and sustainability loan scheme, reflecting the strong demand from businesses for affordable finance. Collectively, these initiatives are helping businesses to access the finance they need to invest in productivity, enhancing reforms, competitiveness and decarbonisation, supporting a stronger, more resilient and sustainable enterprise base. Alongside debt finance, access to equity finance remains critical for innovative and high-growth enterprises. The seed and venture capital scheme has been instrumental in developing a strong pipeline of innovative, high-growth Irish companies, and the new €250 million cycle will leverage significant additional private investment into innovative Irish SMEs. Building on the success of the seed and venture capital scheme, the Department is now examining what needs to be done for businesses at the next stage of their development – the so-called scale-up stage.

Enterprise Ireland continues to support the development of a competitive, productive and resilient indigenous enterprise base. A key focus of its strategy is supporting firms to grow and scale internationally through a combination of grant, equity and advisory supports that enhance productivity, competitiveness and long-term business sustainability. Enterprise Ireland is also progressing the delivery of start-up Ireland as a strategic national initiative to strengthen Ireland's start-up ecosystem, including the development of a new national accelerator programme. This work is intended to support the growth of high-potential, globally scalable enterprises and complements our wider enterprise strategy to help firms start, grow, scale and compete internationally. The Department continues to focus on improving the overall supports ecosystem for SMEs. The national enterprise hub is providing a single point of access to business supports, helping enterprises navigate the range of services available across Departments and agencies. Engagement with the hub has continued to increase, reflecting demand from businesses for simplified access to information and support.

The Department is also working with Enterprise Ireland, the local enterprise offices, LEOs, and local authorities to reduce administrative burdens on businesses. Recent work to streamline LEO grant application forms has significantly reduced information requirements for applicants, while further reforms are being examined to improve consistency across services and enhance the responsiveness of support. From a competitiveness perspective, as of 2026, Ireland is ranked as the 7th most competitive economy in the IMD world competitiveness rankings. Ireland improved across all competitiveness trends, particularly under business efficiency and economic performance. Ireland’s ranking for infrastructure worsened from 17th to 19th in 2026, whereas Government efficiency remained stable at 5th place for 2025 and 2026. It is important that we do not take our competitive strengths for granted and that we continue to progress on those areas of weakness.

In recognition of the challenges facing Ireland, the Government published a whole-of-government action plan for competitiveness and productivity last September. This action plan contained 85 actions for enhancing Ireland’s competitiveness and productivity performance, with 26 of these identified as priority actions. There are a number of key actions from the action plan which have already been delivered or are due for completion in the coming months. In addition, the cost of business advisory forum was established and held its first meeting in June 2025, delivering on a commitment set out in the programme for Government. The discussions focused on addressing the core issue of reducing and curtailing the costs for business. The forum brings together businesses of all sizes across sectors, including retail, tourism, agriculture, and professional services. Over the last year, it has facilitated solution-focused dialogue between enterprise representatives, policymakers, and regulators focusing on steps to mitigate business costs and reduce regulatory burden. The forum’s final report is currently being finalised and will be presented to the Government in the coming weeks. Following its publication, the forum members expect to receive a formal Government response and have agreed to reconvene in approximately six months to review the implementation progress against the agreed actions.

In relation to the annual budgetary process, officials in the Department maintain regular engagement with officials in the Department of Finance, in addition to the engagement that is held at ministerial level. The Department prepares an annual pre-budget submission focused on tax measures, which informs discussion between the Ministers and their respective Departments. The Minister for enterprise has made clear that his central priorities are to incentivise work, assist Irish businesses in managing economic uncertainty and drive innovation and entrepreneurship. These priorities will be reflected in our pre-budget submission that is currently being prepared. The Department also engages with the Department of public expenditure to set out an expenditure bid within the preset parameters outlined in the summer economic statement. The bid relates to current expenditure only and is followed by a series of explanatory meetings and bilateral ministerial meetings to reach a final settlement in advance of budget day. Capital expenditure ceilings are already agreed through to 2030 under the national development plan, NDP.

I acknowledge that the overall budgetary package will have to be considered in light of the fiscal parameters set out in the summer economic statement, which will be made clearer over the next while. Ultimately, tax and spending measures in budget 2027 will be a matter for the Ministers for Finance and public expenditure.

I thank Mr. Tobin very much. I will open the discussion to members to ask questions.

I thank the witnesses for coming in. Some of them have probably been here many times. Some of them might be here for the first time. Either way, I thank them for coming to the meeting. I will jump through a few areas, ask questions quickly and try to maximise my time, that is, if I can stop myself from talking too much. We are talking about the cost of financing business in Ireland. What do the witnesses see as the key issue for the typical SME that has 30 or 40 to 150 employees? What is the key challenge?

There are a range of challenges. Different companies and businesses face different challenges. SMEs face very different challenges than large companies. That said, the cost of doing business is an issue for many.

Does that mean energy costs, or is it finance?

The cost of doing business advisory forum has been meeting for the past year. It represents a large group of business organisations, big and small. It has identified five or six key issues.

That forum has been meeting for a year. There is a report due out from it in a few weeks, is there?

The report is due out before the summer break. It has identified energy costs, insurance, the legal system, the regulatory burden, bank financing-----

To focus on finance, we have the cost of financing and interest rates. What about access to finance? Is that a barrier to doing business in Ireland? Are the banks pulling their weight?

I will hand over to my colleague Mr. Mulligan in a moment. In the past few weeks, the Department of enterprise commissioned an ESRI study in respect of the persistent financial challenges facing SMEs. It identified four key issues. First is a low demand for bank credit. Irish SMEs are significantly less likely to look for bank loans than their European counterparts. Second is a heavy reliance on trade credit. Firms in Ireland depend more on trade credit than those elsewhere in the euro area.

So we have more debtor days.

There are also higher borrowing costs and, finally, declining rejection rates but hidden constraints. What is meant by that is that formal loan rejection rates have fallen but that there may be high costs discouraging firms from applying for credit in the first place.

It might be the culture of the banks. They are closed for business so people do not even bother going to them. Could that be something we are seeing? I worked in the industry with SMEs and was a corporate adviser. Banks are not the same as they were previously. They put up every possible barrier in order that people do not even bother going to them. Is there a danger of people being pushed towards private equity?

There is clearly a scarring effect from the global financial crisis. Many Irish companies got into debt, and it may have taken them a long number of years to clear that debt. There is a reluctance to take out new debt, even if it is for legitimate purposes such as increasing productive investment capacity.

It is fair to say that there are mixed signals emanating from some of the research. That research indicates only 5% of SMEs did not seek external finance due to the cost of borrowing. That was a surprise to us.

Yes, because interest rates are not exactly-----

Yes. Only a small number of SMEs are looking for bank lending, whether or not that is related to the Deputy's point that some people have given up and are not bothering to try to borrow. We probably do not have a dynamic lending market in Ireland. As Mr. Tobin says, it is partly the case that there is not the demand because businesses do not want to take on debt. They were in a debt situation before and do not want to go back there. The banks came through that experience as well and it was painful for them.

One of my fears is that even when companies are doing well, their first instinct is to opt for private equity from abroad. They seek investment, and the ownership leaves Ireland. Do the witnesses concur? If the banks are not doing business, the only way businesses can get money is from the US. Everybody is going straight to the US.

That is one of the concerns we have. It is behind our attempt to think about how to support SMEs to scale within Ireland in order that they do not have to go abroad for funding. Sometimes, if you go abroad for funding, the headquarters moves abroad as well. Sometimes the private equity firms encourage you to move your headquarters.

Linked to that is tax. What is the witnesses' view on entrepreneur relief? You can only use it once, essentially. You hit your level, so you are encouraged to sell your business as opposed to selling a portion and keeping going. Once again, ownership leaves the State.

On the positive side when it comes to entrepreneur relief, there is a reduced rate of capital gains tax, CGT, of 10% as against the normal rate of 33%. The problem, insofar as there is a problem, is the lifetime limit of €1.5 million. That was increased from €1 million in the most recent budget, which we welcome. There are what might be termed serial entrepreneurs, namely people-----

Yes, or even someone who wants to sell 30% of their business, take a chunk and go again. It is just that element of ownership in Ireland. I am talking about barriers to scaling more than anything else. PwC did a report on it recently, which was interesting and speaks to a lot of what I was doing. I do not want to overly focus on that.

From the perspective of things the State can control, we have put a huge amount of money in the national development plan to 2030. How has the witnesses' Department been fixed with the money? Will it spend all the money it is given? How are its targets going towards that?

In the national development plan we have got €4.7 billion.

Is that out of €154 billion?

I am not sure what the overall numbers are. We have €4.7 billion spread across all activities of the Department. About a quarter of that is for Irish enterprise in particular. It is more than that because it is not only our Irish enterprise programmes. We are focused on doing the best we can with that money. Financing enterprise is an important part of that. We recognise we need to do a lot in that space, including in the area of debt. We have lending. We have Microfinance Ireland for smaller firms, the growth and stability loan scheme for larger amounts and, on the equity side, we have the seed and venture capital fund that Enterprise Ireland runs.

Yes, the €250 million.

Yes, €250 million. We have increased the amount in that and that has been going well.

From my dealings with Enterprise Ireland, I know that it is very good on equity and grants. It is good to see more of that. That is what we really need.

There is €250 million in that latest round of seed and venture capital. If you look back-----

Is there any feedback to the Department on access to that and in respect of the bureaucracy involved? Is it open? Can people apply? Is it transparent?

No, we are not getting any-----

Pushback on it.

I am not aware that we are getting any criticism.

That is fine. I was just wondering.

In fact, we co-operate with venture capital funds in doing that, or Enterprise Ireland does, rather. It is all agreed together in a group with private sector venture capitalists. It has gone very well. We have spent €1.4 billion in 30 years for 600 companies. We have increased the amount going into it in recognition of how well it is going.

I am conscious of the time. The clock had turned red. Has it gone back again?

I will give the Deputy an extra minute.

I could spend another hour. That is the problem. We try to touch on so many things. One thing that is jumping out is the local enterprise offices, LEOs. The LEO in Kildare is very successful. I work closely with the office and have always heard good feedback, in general. Is that common across the county with other LEOs? Are they working well? Do they work similarly? Are there metrics to measure them from a performance perspective? That is ultimately where it-----

I will hand over to my colleague, Mr. Church, on that question. I will make a general comment first. The LEOs are working very well on the ground. We have increased the money that we are putting into the LEOs. Some €47 million will be provided this year for capital and there are running costs on top of that. That is recognition of that. Of course, we have a lot of different LEOs so there are differences in how they work. We are trying to standardise that through Enterprise Ireland. We are working through an agenda of reform, improvement and development with the LEOs. We have quite an elaborate set of metrics for Enterprise Ireland and each of the LEOs, as well as targets they have to reach. I will hand over to Mr. Church to give a bit more detail.

I thank the Deputy. One of the key things for us is that the LEOs are embedded within the local authorities. They know the issues and what is on the ground. However, we want to see more consistency. The Deputy asked about the key barriers for businesses. One is time. Consistency across the LEOs will save businesses time. On metrics, part of the reforms that Mr. Mulligan mentioned, which are being brought forward by the Minister, Deputy Burke, is around moving the metrics into something less output-focused and less based around numbers and more to do with outcomes. In that way, we are trying to see if a business does mentoring, whether the LEO can take the business by the hand and bring it towards a priming grant or get it to do an energy efficiency grant. We are looking for more value-added types of outcomes, rather than pure numbers. With Enterprise Ireland, we monitor all 31 LEOs.

I thank the witnesses for coming. I will follow up on Deputy Neville's point about LEADER. Who is in charge of funding LEADER? My county of Meath always seems to come out worst in a lot of these funding streams where per head of population we are the lowest in the country by a country mile. Why is that?

The Deputy's question is about LEADER. We have responsibility for LEOs, which are the local enterprise offices. LEADER is an EU-funded programme which I think supports skills training.

The Department of rural and community development has the overall picture on LEADER.

That is all right. What is the average time it takes for an SME to receive approval under the various State-backed loan schemes? Are the witnesses satisfied that the process is competitive compared with commercial lenders?

We do not have an average across all of them to hand. As a general comment, it depends on how much money is involved, how long it takes and what sort of due diligence the LEO or Enterprise Ireland has to go through. We recently went through an exercise with the LEOs whereby we have significantly simplified the application forms and the time taken. Mr. Church might say a few words on that.

I thank the Deputy. We went through every single LEO form and made cuts together with Enterprise Ireland. There were duplicated questions and duplication of information sought. Some of them have been reduced by up to 47%. As Mr. Tobin alluded to in his opening statement, there is more work to be done in that regard.

Specifically on turnarounds, and again coming back to what I said earlier about consistency and simplification, in the national enterprise hub, phone calls are answered, on average, within 30 seconds; live chat is, on average, responded to within 19 seconds; and an e-mail question or written question is responded to within 24 hours.

Given ongoing pressures on employers from labour costs, insurance and energy prices, would it be an idea for the Department to consider reductions in PRSI or other payroll-related costs in the budget?

The PRSI issues are a matter for the Department of Social Protection, in conjunction with the Department of Finance. We are very cognisant of the cost of labour and it is a key component cost, particularly for small and medium-sized enterprises and indigenous enterprises. We have to look at various things in the round. There is not just PRSI. We are also in the process of moving to a living wage. There is a Government commitment to introducing the living wage by 2029. That means that each year, there is a significant enough increase in the minimum wage in order to try to achieve that 60% target. We are also operating in a very tight labour market. A number of different factors have to be considered together. Ultimately, though, it would be a matter for Government Ministers other than ours to decide on PRSI changes.

If additional funding is not secured in the budget, which enterprise programmes will have to be scaled back? Do the witnesses know?

We always try to look on the optimistic side and hope that we will get additional funds. We will cross that difficult bridge when we come to it.

The witnesses indicated that the forum's report will shortly be presented to the Government. Can they give the committee an indication of its principal recommendations?

I am not allowed to, in the sense that it has not been published yet. I appreciate the Deputy's clever question. The forum has been meeting over the past ten months and has focused on a whole range of issues that are driving costs for businesses. As I mentioned earlier to Deputy Neville, there are a number of recurring themes that have been coming out through the course of the discussions. One relates to energy costs, legal costs and the costs of banking. Those are perhaps not so surprising. Perhaps we expected to hear that.

Some of the more interesting reflections included that an awful lot of small Irish businesses are incredibly time poor. They spend so much of their running their business that it can be 10 p.m. or 11 p.m. by the time they get around to doing the administration associated with their business. What a number of them said to us was that there was a lack of price transparency in relation to a number of utility-related bills, be they energy, water or telecom bills. It is not always straightforward for them to be able to shop around and see where is the best deal. That whole issue around price transparency and switchability was an interesting issue that came up and, I would imagine, will be reflected in the forum's report.

The forum was interesting because it was not just business groups and Departments talking to each other. It also involved regulatory bodies and, in particular, economic regulators.

As reflected in the contributions by the business groups, they sometimes believe that, when regulators think about consumers, they just think about ordinary citizens or private consumers. Businesses, of course, are also consumers, and it is important that, in their decision-making, regulators reflect on the interests of business consumers. There was an interesting dialogue between regulators and the business groups. Some of that will be reflected in the report as well.

There was considerable discussion about the regulatory and administrative culture in Ireland. There was a feeling that some parts of the public service seemed to work very well and that businesses found them very responsive, whereas in respect of other parts, decision-making was very slow and it took a long time to get an answer. Businesses felt there was a need for a shift in attitude in parts of the administrative system, particularly as it related to licensing and permitting. Without giving the game away, I hope that is helpful in providing flavour.

The September 2025 action plan contained 85 actions, including 26 priorities. How many have actually been completed, when are they all expected to be completed, and which have produced measurable reductions in business costs to date?

The action plan on competitiveness was published in September last year. We are bringing a report to the Government next week on some of the progress made, and we intend to publish a report by the end of the summer or in early September setting out the progress across all 85 actions. It will clearly set out how many actions have been completed, how many are in progress and how many are behind schedule.

In general, the progress has been very positive. The priority actions are largely on track. There are 26 top-priority actions. They have either been completed or are on track, and the vast majority of the other actions are also either completed or on track. We intend to publish the report in September, at which point the Deputy will be able to see it. We are still engaging with Departments to get the full detail on all aspects of the different actions. The Deputy will appreciate that, across approximately 15 Departments, it is taking a little time to obtain updates on all of them.

I thank Mr. Tobin.

Cuirim fáilte roimh na finnéithe chuig an gcoiste.

One of the issues this committee hears about frequently throughout the year, in its role as a budgetary oversight committee, is the country's over-reliance on corporation tax. The issues we are examining here are very relevant in trying to support and grow indigenous enterprise so that we have other sources of revenue, strengthen other parts of the economy and reduce over-reliance. The discussion of business costs is also related to this. As public representatives, we see middle- and low-income households struggling with everyday living costs. It is much the same for many small businesses. In effect, we have an economy in which price-setting is often driven by larger companies, for which the amounts paid for financial advice, legal advice, other services or energy may not be the primary concern. Likewise, for higher income households, such costs may not be their primary concern. Many of the issues faced by small businesses are also faced by people on low and middle incomes.

There was a comment recently about small businesses being time poor. Until recently, I had a neighbour who ran a small retail business that would shut at approximately 6 o'clock, but he would not get home until 10 p.m. or another such time because he would have three or four hours of paperwork to do after closing. That is quite common. It is an issue of smaller businesses being able to avail of grants, including research and development supports. People who are busy with their employees all day, running and working in the business, find it very hard to do the associated paperwork. Does Mr. Tobin have views on the research and development tax credit and how accessible it is to SMEs?

I will briefly talk about the research and development tax credit and, if I can, the enhanced reporting requirements from Revenue, which I am sure the committee has already heard about. That issue arose frequently at the cost of business forum that we were involved in. The research and development tax credit has been hugely successful in promoting expenditure on research and development. It was introduced in 2004, I believe. There is now a tax credit of up to 35%, and it is repayable-----

I am aware of those points, but I want to focus on the challenges faced by SMEs because there are some other topics I want to get to.

On the Deputy's point, it is very complex and complicated. A large company can hire tax advisers to help it complete the research and development tax credit forms and all the rest. It is much harder for a small company. This is reflected somewhat in the statistics relating to the tax credit. The vast majority of the credit is used by large companies because they are much better able to access it and have the advice to help them. There are a couple of things that we say could be done to help smaller companies gain access to the credit more easily. First, the research and development tax credit form and the whole process should be simplified. We have raised that matter with the Department of Finance. Second, we also believe that many small companies do not have the in-house expertise to carry out much of the research and development themselves, so they have to outsource it. There are, however, relatively strict outsourcing limits associated with the research and development tax credit as things stand. Right now, a company is allowed to outsource only up to 15% of its overall research and development expenditure, or up to €100,000, which is relatively small. There are also limits on the amount of work that can be outsourced to third level institutions. Many large companies will conduct all their research and development in-house, whereas smaller companies might go to their local university. There are restrictions on how much they can outsource.

That is a highly legitimate place to go for research and development. You could not go to a better place.

Absolutely.

I am conscious of time. What are the challenges relating to scaling up, and what needs to be done in this regard? This is also related to the ability to reinvest in a company. We know that, in certain sectors, we do not have the level of productivity we would like. One of the issues that arises in this regard is the ability to obtain finance and reinvest in a company through stock, equipment or additional capacity. What needs to be done to address those points?

I am very supportive of the idea of more employee ownership, which is very good for productivity. What are Mr. Mulligan's thoughts on that, and what can be done to promote it?

The Deputy will have heard me say earlier how important the SME scaling agenda was for us in the Department, although not just in the Department. The programme for Government clearly gives targets for increasing the number of large firms, including large exporting firms. We have certainly taken that on board in the Department. It is reflected in our statement of strategy and in the national development plan. We are examining what funding is required in this regard because much of this is about funding and financing.

I ask my colleague Mr. Jonathan Patchell to discuss the SQW report. The consultants were asked to describe the gap, and we are reviewing what proposals we can work with to try to meet it.

The SQW report was something we commissioned to look at the issue of the scaling finance for companies. One of the key findings was that there is a gap in the market over three to five years of about €1.1 billion, especially in some of the larger deal sizes. As we touched on earlier, we are keen to make sure there is scaling finance available in Ireland, so that we do not have companies effectively shifting to US headquarters, etc. We would like to-----

Sorry, can Mr. Patchell explain that €1.1 billion gap? What is that?

This is the consultant's estimation of the scaling finance gap in terms of the equity market in Ireland.

Is that not being met?

That is correct.

Yes, that is not being met over three to five years. As Mr. Mulligan said, one of the things we are looking at is how can we fill that gap. Public funding is part of the answer but would never be the full picture. Even if we look at the seeding venture capital, SVC, scheme that exists already with Enterprise Ireland, what we try to do is use public funding to incentivise private co-investment. That is the way we would go in trying to address this gap.

We would be looking at creating some sort of significant fund to support SMEs that want to scale into much larger companies. How do we do that? It will probably involve a mix of direct funding into companies and then indirect funding using the SVC model. We would put public funding in but that would then prompt VCs to come on board as well and there would perhaps be some fund of funds. We are looking at a number of proposals around this at the moment to figure out what the best way is, how we are going to get best bang for our buck in terms of public money, and how we can encourage private money into the sector. We have reviewed the public piece in terms of pension fund and insurance company holdings. We have looked at how we can encourage them to invest more in Irish SMEs. As the Deputy knows, there are large volumes of savings, pension fund holdings and insurance company holdings. We have been looking at what works around Europe. There are some models that have worked in other jurisdictions, and we are looking at what we can do here that would make sense. We have had a number of engagements with the pension fund industry and the various stakeholders to see how we can work up a proposal that might actually work. It is complicated work. It is going to be slow work, but we only need a relatively small percentage of the total funds to have a major impact, and it is a work in progress.

It is practically a market failure that the report has identified, and it will take a State initiative to fix it, albeit while attracting private finance as well.

It will not just be from us on our own. That €1.1 billion from the SQW report effectively describes the gap of the market failure.

In relation to some of the other points the Deputy made, the whole idea for SMEs with the key employee engagement programme, KEEP, as he probably knows, is that they can give shares, but hardly anyone is using it. The take-up is very low. We say that is because the scheme is too complicated. Similarly, the take-up of the employment investment incentive scheme, which is the old business expansion scheme, has been relatively modest in recent years. We think there are ways in which that could be simplified.

Regarding the issue of full employee ownership, Alan Cohen put forward an idea. He had a start-up company, and he sold it to the employees. I think this is structurally supported in the UK, but here it is not. It was not just a question of share options or whatever; it was full ownership because he did not want to sell it to a private equity firm as he thought that could be damaging to a company in which he put his blood, sweat and tears into building for 20 years. One of the things he found was that productivity increased. In fact, it increased in a lot of areas where the company had experienced productivity challenges for a number of years. It changed quite quickly once it was in full employee ownership, naturally enough, because they were able to solve a lot of these challenges when everyone was putting their blood, sweat and tears into it. It is economically really sound and good for scaling up for someone who wants to move it on to the next generation but does not want to go to foreign equity due to fears about what that could do to their company. It seems like a win-win. Has that been looked at beyond the existing schemes or has it been thought of yet at all?

I do not recall that anyone has raised that with us. If an entrepreneur tried to do that at the moment, the employees would be hit by capital gains tax. Our capital gains tax, CGT, rate at 33% is probably one of the highest in the EU. The benefit of KEEP is that there is a capital gains tax exemption but, again, it is quite a complicated scheme. There are certainly ways in which some of that could be simplified. I also wonder if the CTG rate at 33% is actually so high that if it was reduced, the yields might actually go up. That happened before when Charlie McCreevy reduced the headline rate. Economists refer to that as the Laffer curve. It is difficult to know for sure whether that would happen.

I have a few questions and parts of them were previously covered. We had ISME, Enterprise Ireland and Chambers Ireland here before us last week. A lot of the ideas and discussion we are having today overlaps with the discussions we had last week. It is about communication and working together. That is the main idea to improve business in Ireland and to improve this scaling and all the other stuff we talk about. Does the Department meet with ISME, Enterprise Ireland, Chambers Ireland and the representatives of the LEO bodies regularly?

Yes, we do. All of those groups would have been on the cost of business forum, but aside from that, we also have the enterprise forum in the Department of enterprise where all of those groups are represented.

There is also the retail forum.

There is a whole range of consultative groups.

Is the Department happy with the level of engagement that it has with them and that it knows what their thoughts are?

I think that we are because we talk to them almost on a weekly basis. Speaking frankly, the Leas-Chathaoirleach might have to ask them whether they are happy with the level of engagement. We do not feel that we could do much more engagement than we currently do with them. We view them to some extent as our client base and talk to them regularly to try to understand the different concerns that they have. They would all, for example, send us in pre-budget submissions, and we talk to them on an almost weekly basis.

That is important, and that there is no breakdown in communication. It is not just documents or emails; there are face-to-face meetings which are much more valuable.

As Mr. Tobin said, we have a number of forums where we meet all of those stakeholders and more. With practically every significant policy initiative, there is a full consultation on it in the Department. That is our way of doing business, and we receive a lot of real and practical feedback which is helpful from our point of view. In fact, we have so many forums that some have asked if we would reduce the number of meetings every year because we are nearly talking too much. I have had that.

I should have referred to meetings with outcomes and timelines, where there are specific dates that people are going to meet on so that it is not just a talking shop and there are outcomes. I am going to briefly talk about finance, which the witnesses have covered. Last week, ISME presented us with a summary of credit-advanced Irish-resident small and medium-sized enterprises. It was €37 billion in September 2015. It was €15 billion in September 2025, ten years later. Real estate has gone from €18 billion to €4 billion, and we all know why that is. That is the bulk of the deduction, but it has gone from €37 billion to €15 billion. If we take out the real estate which went from €18 billion to €4 billion, that is €14 billion off it, we are still going from €23 billion to €15 billion, which is a significant drop. I know the witnesses partly addressed it when they talked about the lack of appetite for risk and borrowing.

The economy has probably doubled. I know some of it is multinational based but even small businesses have expanded, such as business with fewer than ten retail units and so forth. Those have expanded hugely.

Deputy Neville alluded to the same point I will make. I have worked with and advised small businesses. A lot of it is that they are not bothering because they feel they are wasting their time. While I know there is Credit Review, which allows individuals unhappy with a bank’s decision to ask for a review, most businesses simply say that banks give people an umbrella when it is raining. When a person has a lot of cash, they will give them a loan. However, when they need a loan or want to expand, the banks will not give them anything. That is the mentality out there. There are two main banks. What would the witnesses say to small companies and business that have given up looking for finance? I appreciate some of it is cultural and there is a fear from what happened some 15 or 20 years ago.

As I said in response to Deputy Neville earlier, sometimes it is difficult to draw conclusions from the research and identify the causes. The data is the data-----

There is a gap in finance, however.

If it is a gap in finance, that is-----

By the way, that is not the full explanation for the drop in the levels of finance, but it is certainly a part of the picture, whether it is one third of the reason or whatever. Certainly, it is a factor because businesses tell me they are not bothered about going to the banks because they will not lend to them.

That is why, as part of our suite of supports in the lending area, we have significantly increased the money Microfinance Ireland has spent, for example. It lends €12.5 million every year. We have the growth and sustainability loan scheme, and we are working on a new phase of that. That has been successful in lending to business, through the banks and the Strategic Banking Corporation of Ireland, SBCI. Effectively, we are doubling the amount of money we are spending on that from €500 million. It has increased by another €500 million.

I was going to mention the SBCI. Last week, witnesses from the Irish SME Association, ISME, mentioned how it has been paused. That is an impediment. ISME had a problem with that, and I presumed ISME raised it with the Department as well.

We are starting it again. I will ask Mr. Patchell to say a few words in that regard.

The growth and sustainability loan scheme has been a success. It was launched in 2023 and was due to run until the end of June 2026, or until the full allocation had been lent, effectively, and that is what happened. Some of the lenders ceased lending earlier than planned because they had allocated all of their allocation. As Mr. Mulligan said, we are looking at expanding the scheme. That is actively being worked on. It will be finalised in the coming months.

The growth and sustainability loan scheme, through the SBCI and working with the on-lenders and the three banks, as well as two others from the current scheme, tries to incentivise SMEs to invest in productivity and sustainability. The loans are from €25,000 up to €3 million. There can be a term up to ten years, with loans of up to €500,000 available unsecured.

That is being reintroduced.

Yes, we are working to expand it.

When is that expected to be open with all the banks?

By the autumn.

I have a couple of other things. Enhanced reporting requirements, ERR, were alluded to earlier. That is a quick fix for small businesses. Various surveys show that this issue is the third-highest problem they face. Chartered Accountants Ireland carried out a survey in this regard, and a few other surveys have shown this huge problem as well. It is daft that businesses paying for someone’s mileage expense must do a return for each day on the same day to the Revenue Commissioners. The Revenue Commissioners will not allow businesses to wait until the end of the month to do a blanket return. That is frustrating. I have raised this issue. Do the witnesses agree that this reporting requirement should be allowed to be done on a monthly basis?

Yes. I do not understand what the benefit is for very small businesses to have to report to Revenue in real time on a daily basis and why they could not do it-----

In practice, people might say they will do all their expense payments at the end of the month. Some small businesses and employees live from week to week, however. They need that expense payment to be paid to them.

It is probably less of an issue for larger companies.

The problem arises with small businesses.

I asked about the Department’s engagement with ISME, etc. In the context of ERR and so forth, does the Department engage with the Department of Finance and the Revenue Commissioners regularly?

Yes. I spoke to Department of Finance officials about ERR last week.

Okay. What did they say?

They said they were looking into it.

They are looking into it and working on it.

In fairness, we have good idea engagement with them. It is a constructive relationship. Ms Hayden used to work in the Revenue Commissioners and I used to work in the Department of Finance. We have a good relationship with our counterparts.

I appreciate what the witnesses said about the local enterprise office, LEO, forms and the fact there has been a 46% reduction in one of those forms, but I still get complaints that some of them are seen as cumbersome and are very long. I wish to make that point. I know the witnesses are well aware of this issue, given their contributions earlier.

Another issue - I do not know whether it is relevant to the work of the witnesses – is financial literacy for business owners. I have seen this issue myself with small business. Often owners do not know how they are doing apart from the fact that the bank account is overdrawn or based on their account three or six months after year end telling them how well they are doing and whether they are making a profit or a loss. I brought this issue up with the LEOs in Wicklow where I live. Many small business owners do not understand simple concepts such as variable and fixed costs, their break-even number or stripping out VAT. For example, a small coffee shop owner says they have to pay tax of 50 cent for a cup of coffee costing €3, but that is not the case. The VAT element is charged to the customer. The real sale price, therefore, is €2.50, or whatever it is. That whole idea of financial literacy is a huge weakness. It leads to a lot of small businesses going bust that do not need to go bust. Do the witnesses have any thoughts in that regard?

If an entrepreneur wants to start a business, the key is to always encourage that and make it as easy as possible for them. They must not lose that spirit. Sometimes people might have a great business idea but they need that hand-holding. The LEOs, through their training and mentoring, provide that support. With the training and mentoring, as well as the start your own business training programme, absolutely anyone can start a business. The focus is on the fact that anyone can have a good idea, but some need a bit of hand-holding. That is what the LEOs are for. That local context is also key, whether it is in Wicklow or anywhere else.

Approximately five or six years ago when Covid started, a good grant was available whereby businesses could avail of a €5,000 grant to carry out a business plan. It was fully funded through the LEOs. A lot of small businesses availed of it. It was a grant to carry out three-or five-year business plans around cash flow and normal profit and loss projection. I do not know whether that grant still exists through the LEOs. A grant like that would get small business owners thinking of budgets and planning. I thought it was a useful tool at the time. It was brought in as a result of Covid. It was probably disbanded once Covid passed.

That support is there. That exists today. With regard to cash flow in particular, the advice, advisers and experts are available to help small businesses.

The €1.5 million limit was mentioned. It went up from €1 million in the budget. We are talking a lot now about our dependence on American multinational companies. That is the trend. We discussed this issue last week and we are discussing it again this week with the witnesses from the Department. The dogs on the street are talking about it. Other members present, including Deputy O’Callaghan, mentioned it. The increase to €1.5 million is still small when we think of what we would like to see for these Irish-based and Irish-owned companies to expand here. We have a lot of money in this economy. We need to diversify, lower our risk and invest in that scalability. We are all talking about it. Do we need to do more when it comes to the entrepreneurial relief lifetime limit of €1.5 million? Do we need to lower capital gains tax?

Yes. I agree again with the Leas-Chathaoirleach. We welcome the increase from €1 million to €1.5 million but it would be great to go further than that. There are also issues around the overall rate of capital gains tax.

I have a couple more questions but I will allow Deputy O’Callaghan to come in first.

A vote has been called in the Dáil.

The clerk has proposed that we give Deputy O'Callaghan two minutes and then we will suspend for the Dáil vote.

On the finance issue, the ESRI report is a little inconclusive. We are clear about the scaling up of finance. We have hard data there to show there is a gap and a market failure. Do we have a similar view of the financing more generally or is it inconclusive? I know the Department is undertaking more initiatives, but this is a matter that comes up a lot for small businesses. What is the next step? In many ways, you cannot do better than a piece of ESRI research. The summary of that research is quite clear in stating that there is an issue here. No one is disputing that. In a general sense, where to next on the financing issue?

Sometimes these surveys and bits of research are done at a particular point in time. The research may have been done, for example, towards the end of the growth and sustainability loan scheme, GSLS, or as it was tapering down. It will start again. I would always be conscious of that.

We recognise that we do not have a dynamic financing environment and we need to do whatever we can to support businesses that need funds. That is why we have expanded Microfinance Ireland, MFI, and the work it is doing for small businesses. It is why we have added another €500 million to the GSLS. We are looking at other ways to ensure we plug any gaps or, if there is any market failure, we try to plug it. The LEOs work. We also have a whole suite of grants from Enterprise Ireland, whether they are for pre-seed funding for very small companies, seed funding, start-ups, high-potential start-ups and scaling companies. We have a range of measures and instruments by which we try to ensure that finance is not as significant a barrier as it otherwise would be. We are all the time reviewing what is going well, more of what is needed and what is not so much in demand. We are trying to be as dynamic as possible to respond to market conditions. Those conditions are quite difficult at this time. The past 12 months have seen a deterioration in the marketplace is terms of funding. That means that we then-----

Why is that the case?

Global economic conditions and some of the crises that we are all aware of have affected matters.

A vote has been called in the Dáil Chamber. I propose we suspend the meeting for ten to 15 minutes to allow members to take part in the vote. Is that agreed? Agreed.

Regarding budget 2027, are there any particular reforms the Department is hoping to propose? We have not seen its submission yet. I am guessing it is not completed.

No. We are still in the process of putting it together. It is fair to say that we are appreciative of the fact that budget 2026 was very positive in terms of business, with a reduction in the VAT rate for hospitality while the research and development tax credit was increased from 30% to 35% and the lifetime limit of the entrepreneur relief was increased. We would certainly like to see further enhancements to the research and development tax credit. I do not think that would be a surprise to anyone. We mentioned the outsourcing limits. It might be useful to help small companies access the research and development tax credit. The Department of Finance published a research and development compass over the past number of months setting out a possible way forward on the research and development tax credit. We would like to see moves on some kind of an innovation tax credit. The committee is probably aware that in order for something to be regarded as research and development, it has to be new to world whereas, for some companies, processes or research that leads to new to firm innovation can be as important, if not more important.

In certain other countries, there are innovation tax credits, which are related to research and development. We think this is an area that should certainly be explored.

On that point, there was a scheme years ago, because I worked for a company that did this, but I do not know if it still exists, whereby if a firm had a unique, innovative process and a separate company was set up to own and develop that machine, the dividends were tax-free. Does that scheme still exist?

That I do not know. It is certainly interesting, though, and I will certainly look into it.

It existed 15 to 20 years ago.

There are the accelerated capital allowances, particularly for something like energy-efficient equipment. There are certain accelerated capital allowances already. We think this is an area that could be expanded to try to help companies to overcome some of their energy costs in future.

Are we doing enough to get to the zero-carbon emissions target? Apart from the climate element of it, China has proven the value of investing in renewables. It is one of the reasons why its manufacturing base is so cost-effective. Renewables reduce costs in absolute terms, apart from the climate reasons.

We have a €300 million environmental aid fund. A lot of money is being funded through Enterprise Ireland for companies to decarbonise. There is, however, always more we can do. If there are ways in which companies could invest to reduce their energy costs and decarbonise, that could be very positive. If we think about an area like the hospitality sector, businesses there tend to use a lot of energy because they need ovens at high heat and all of that, and often these are gas-powered. If there are ways such enterprises can use energy in a more environmentally friendly way-----

Solar panels would be one.

Absolutely.

Small businesses in the hospitality sector that have solar panels with batteries have reduced costs hugely.

The LEOs have the energy efficiency grant. Mr. Church might say a few words about that.

This was a departure for the Department and for the LEOs because we expanded who could get the grant. Any business in any sector with up to 50 employees can get the energy efficiency grant. This can be used for LED lights, getting more efficient fridges and dishwashers, etc., things that have high energy use and are driving up electricity bills. A grant of up to €10,000, or up to 75% of the cost, is available through the LEOs. Typically, most LEO grants would be up to 50% of the costs, but this is a more attractive offer of up to 75% of the costs, with the €10,000 limit. This has proved to be very popular. In its launch year, I think there were 35 or 36 grants, while 715 small businesses got that grant last year. It does bring about a real reduction in energy bills.

Is this taking off because, again, going back to businesses being time poor, as was alluded to earlier, if it involved more paperwork, it might not be worth the bother? Is this an issue in respect of these energy grants?

As I said earlier, this would have been subject to a reduction in the number of questions being asked, so it has proved very popular. Before businesses get the grant, they get a free consultancy to tell them what they could do. Businesses are no different to domestic consumers, in that they would not know how to install solar panels if someone gave them to them. There is this consultant for businesses who can advise them to look at their lighting, heating and refrigeration.

Is that a part of the grant?

Yes.

Okay.

This has proved very popular and has taken off. There has been a budget of about €6 million for it, and last year we and the LEOs spent all of it. We expect the same to happen this year as well.

I have one more question on a separate matter. Going back to the financing, and to something we discussed about a year ago that has not developed or changed much since, the Irish Stock Exchange is under pressure because not as many companies are listing, and some companies are delisting. This might be a little bit outside the witnesses' brief, but do they see anything more we could do to encourage Irish companies to register on the Irish Stock Exchange and raise finance through it?

There is probably a bit of a chicken-and-egg aspect in this situation. Companies will tend to go and list where they think they can get the money. If other companies have left the Stock Exchange and gone elsewhere, I think it is a difficult one to turn around. The Department of Finance is probably to the fore in the development of the Stock Exchange. It would, though, obviously be to the benefit of Irish enterprise to have a dynamic and active Irish Stock Exchange, so we would be supportive of that in any way we can. It is probably one of those things that is not that easy to solve.

Those are all my questions. I thank the witnesses for being here.