Jobs & Enterprise
A new dynamic for Irish enterprises and for the economy
Irish Enterprise and the Economy
‘Enterprise’ enables the economy to serve the needs and meet many of the aspirations of the Irish people. Aontú seeks to attract and retain Foreign Direct I while affirming, supporting and rewarding Irish companies in creating jobs and generating exports. Aontú celebrates Irish enterprises that are sustainable and make the best possible use of our natural resources. Equally, we support those who build Ireland’s capabilities to engage with the opportunities of the global digital economy.
All of this requires identifying and addressing those factors relating to Ireland as a hub for Foreign Direct Investment (FDI) as well as those that are holding back our Irish companies.
Foreign Direct Investment
Foreign Direct Investment (FDI) is a crucial component of Irish enterprise policy. FDI accounts for just over 10% of total employment, much of it in high-tech, knowledge-intensive sectors employing our young graduates. FDI generates some 65% of our exports which is vitally important to a small trade dependent economy like Ireland.
Aontú acknowledges FDI policy as a success story. It has brought employment and higher living standards to many people around our country. It’s important that the state safeguards FDI and all of the hard work invested by the IDA over the decades attracting MNC to our country.
Corporate Tax and Multinational Companies
Corporate Tax (CT) accounts for about 15% of total tax revenue. Nonetheless, Multinational Companies (MNC) pay 80% of CT, contributing to the funding of our public services. These are all important measures in terms of our national welfare.
The reality underlying all of this is that MNC’s are mobile. They operate within a highly competitive environment, both within the EU and globally. They have options in terms of where to locate.
That, of course, works both ways. We in Aontú will pursue a sustainable strategy to continue to attract FDI into Ireland and to work with different stakeholders, including our third level institutions and local democracy to engage with MNC.
The Management of Foreign Direct Investment
We are also realistic. There are important FDI policy challenges that must be confronted and resolved in the national interest. In particular, the importance of supporting our domestic companies, fairness in taxation and, also, mitigating our vulnerability of the economy to the impact of external “shocks” on FDI. Over dependence on individual MNC carries risks.
There are also other issues that need to be better managed.
Currently, FDI inflows are primarily drawn to Dublin. This has exacerbated pressures on infrastructure in the capital from housing to road traffic. The resulting dysfunctionality within the housing market has created enormous problems of affordability for young families. It’s also a humanitarian crisis in terms of homelessness.
It is also an enterprise crisis in the making. That’s important for existing companies and for our capacity to attract and retain companies into an uncertain and volatile future. The lack of housing acts as a break on balanced development not alone in Dublin but across the country. It contributes to wage inflation and undermines our international competitiveness.
Ireland is moving towards becoming a ‘City State’, with Dublin increasingly semi-detached from its national hinterland, not unlike London. Aontú believes this phenomenon has not been properly recognized let alone addressed. A continuation of existing trends would undermine and subvert our cohesion as a country. It is intrinsically regressive. We will press for more balanced national development, one which relieves pressure on our major cities and which benefits the whole country. There are now three Ireland’s; Dublin, a sprawling commuter belt and regions under significant pressure. Aontú opposes this fundamentally. We believe in one Ireland.
MNC’s make an important contribution to Irish enterprises in communities across the nation. It’s important to acknowledge this contribution. At the same time, Aontú is clear that the links between FDI aided companies and Irish enterprises could and must be significantly enhanced. We will advocate strongly for policies that strengthen these links, both operationally and strategically.
EU Pressures on Ireland’s Business Model
There is also a wider and pressing reality that Aontú believes must be addressed. Ireland’s industrial and enterprise policy, our “Business Model”, is over-dependent on ‘bargain basement’ effective CT rates. This leaves us exposed to EU and international pressures aimed at greater tax harmonization and preventing unfair competition for FDI. These pressures will inevitably increase in post-Brexit Europe.
The debacle of Apple Inc and the pressures being exerted by the EU on Ireland’s CT regime all leave Ireland vulnerable. Aontú are especially conscious of EU pressures to remove the national veto on taxation. CT rates that are excessively low, that may even be close to zero, mean that MNCs are not contributing their fair share to the economy. This is not acceptable. It has also invited criticism from larger EU member countries, including France and Germany, to target Ireland’s CT regime, directly and through the Commission.
Aontú is the party of Irish political and economic sovereignty. We believe Ireland’s success in attracting FDI from outside of the EU benefits the wider EU. Also, compared with the dominant EU states, Ireland has a small population. Our location on the periphery puts us at competitive disadvantage compared with countries located at or adjacent to the EU “core”.
In addition we have ceded our monetary and much of our fiscal autonomy to the EU. It is imperative, therefore, that we retain our limited policy instruments in the interests of our country. Aontú will defend Ireland’s right to determine economic and tax policy 100%.
However, the Irish political establishment is itself one of the largest threats to Ireland’s tax sovereignty. Had the establishment opted in the past when it had the opportunity to do so for an effective rate of CT at 12.5 it is unlikely that Ireland would today be in the international crosshairs.
Building Competitive Advantage
Ireland’s FDI exposure must be tackled by developing key competitive advantages in areas other than our CT. This means significant infrastructural investment in Housing, Information and Communications Technology, Broadband, Roads, Rail, Sustainable Energy, Research and Development, Education and in healthy living environments will help reduce our dependence and move us towards a more sustainable strategy to build national competitive advantage.
Aontú believes we should go further and manage our national physical infrastructure in the same way as we now manage our financial reserves, debt and investments. These investments will in turn boost indigenous enterprise and the wider economy while also significantly enhancing the lives of Irish people and, in particular, rural Ireland which is increasingly being left behind.
Indigenous Enterprise, still the Poor Relation
FDI is widely seen by Government as the glamorous domain of state enterprise policy. Small top Medium Enterprises (SMEs) and micro-enterprise are the worthy but ‘poor relation’. Currently, indigenous SMEs are represented by a Junior Minister without the necessary clout to press forward proactive innovative policies. This stale mind-set is not acceptable. The results of the Irish SME Quarterly Business Trends Survey for Q4’18 indicate that 9 out of 12 ‘confidence indicators’ show declines, on a par with the previous quarter.
Aontú believes that the time has come for SMEs to have a Cabinet Minister with a separate Department to ensure that indigenous industry receives the priority it deserves.
Both Indigenous Enterprise and FDI will benefit from improvements in National Infrastructure. However, our SMEs benefit even more. SMEs are distributed more evenly throughout the state than FDI and, as a result, suffer more from the current imbalanced distribution of infrastructure. Road, Rail, Energy and Water all play a role in the location of businesses. They need significant investment and new innovative support.
The prevalence of Post Offices, Schools, Garda stations and other state services determine footfall in regional and rural areas. They are also vital elements in the social infrastructure. While change is a necessary part of development, allowing the social infrastructure to wither on the vine demonstrates a failure to understand the importance of these institutions and to re-imagine their functionality.
The uneven distribution of Broadband throughout the state underlines, more than most other factors, the disparities that exist between enterprise and locations.
The National Broadband Plan
The National Broadband Plan (NBP) is a national failure. The current government is simply not able to manage large infrastructural projects. The failure to manage the cost of the National Children’s Hospital is mirrored in a similar failure to manage the NBP. Between them, these failures will cost the Irish people billions of euro. The projected cost of the National Broadband Plan is now anything between €500 million and €3 billion. The procurement process started in 2012 and has still not been completed. The technology is moving faster than procurement and, as a result, a number of private sector firms are already making provisions for broadband supply into much of what was covered by the NBP.
The stark reality is that expenditures to date are “sunk costs”. It is necessary to start again. Tenders should now be sought for far smaller geographic areas. This would allow more firms to compete. Solutions should be tailored to both topography and demography. State infrastructure should be used where at all possible.
An efficient national broadband supply is crucial to the growth of our economy. A 2018 Ofcom report indicated that the adoption of broadband and speed improvements to UK GDP resulted in an annual increase of 0.47%, or a rise in GDP of 6.7% over the fifteen years of the study.
Increase in the Cost of Doing Business
Labour costs are increasing in Ireland, impacting on our competitiveness. A major cause of wage-push inflation is the dysfunctionality that has been allowed to build up in the Housing market. Wage inflation will continue as long as the current government fails to deal with the underlying imbalance of the demand for, and supply of, housing.
A related cost factor is Commercial Property rent inflation. This is having a serious impact in many areas of the country. Currently rates for empty commercial sites are set by local councils, but are set low enough to leave owners under little added pressure to find new commercial leaseholders. An increase in the rates for empty commercial premises, and a minimum set at government level albeit applied by local councils would see a drop in rent amounts as owners are encouraged to lease out their sites to avoid paying the increased vacancy rates. In turn these sites then become locations of viable enterprise and re-energise local areas.
Congestion is now near crisis proportions. This imposes multiple, and very real, costs. Dublin is the most congested city in Europe. This is paid for through extra fuel and labour costs, as well as time wasted. Time is the most precious resource for business and family. Sitting in a car or lorry on congested roads is not a good use of time.
Legal costs also represent a significant burden on business. World Bank analysis suggests that enforcing a commercial contract in Ireland costs more, and takes more time, than the Office of Economic Co-operation and Development average.
The appreciation of the euro-sterling exchange rate in the last number of years has created a serious challenge for Irish exports to the British market, eroding the competitiveness of Irish companies. This is, of course, a consequence of the loss of exchange-rate arising from our membership of the Eurozone. Exchange rate risk will be prolonged if uncertainty about Brexit continues.
Cost and (non) availability of Credit
The current government has created a near banking duopoly where two banks control some 85% of the market. Even in an era of on-line banking, this gives these banks very significant ‘supplier power’ over the costs and availability of credit. There are also “switching costs”. All of this bears especially heavily on SME’s and start-ups.
The reality confronting Irish enterprises is that the very necessary stabilisation of the banking system has not been accompanied by a conscious effort on the part of the banks to re-imagine their role in repairing the damage inflicted by their behaviour on lives, businesses and the national interest.
Too many start-up and early stage Irish enterprises find it hard to access credit. Venture capital is risk-averse and scarce. The cost of credit compared with prevailing low interest rates is high. The discretionary powers of branch management have been replaced by inflexible ‘management by algorithm’.
The problems and the lack of creative thinking go even deeper. The national network of Post Offices is being run down, eroding the social capital of rural Ireland. The scope for Credit Unions, with their embedded sense of social purpose, to play a larger role in serving the national interest, continues to be constrained by government, despite some liberalisation since 2016. Current government still impedes the development of a ‘Public Banking’ system in Ireland despite the fact that this sector works well in a number of EU countries, including Germany.
Input Costs: a burden on Enterprise
Escalating Insurance costs are imposing enormous pressures on SMEs. It is hardly an exaggeration to say that thousands of jobs are at risk from rising insurance costs. The pace of reform in this area has been glacial.
Aontú supports the Alliance for Insurance Reform in seeking to prevent exaggerated and misleading claims and believes these should be pursued through a Garda Insurance Fraud Unit. Aontú also seeks consistency in the calculation of awards at realistic level and also transparency on how premiums are calculated and claims are settled.
A priority for Aontú is a systematic review of commercial rates across the state in a cost-neutral reallocation exercise. We believe businesses should pay rates for the services provided by the state, but that rates should be reflective of the size, scale and profitability of a business. This is not the case at present and it is a major burden on domestic enterprises
The Irish are the biggest international online shoppers in the world. In total, Irish consumers spent over €6.5 billion in 2017, and this is set to rise to over €10 billion by 2020. Meanwhile, local spend, particularly in town centres continues to struggle. Shops are closed and jobs are shed.
Aontú will work to establish an online e-commerce platform, providing local businesses an opportunity to compete in the digital age. E- marketplace would put local products and services within a click of a button to consumers across the county and into the global marketplace. A countywide, united approach would ensure it is cost-effective, professional and mobile friendly service for the consumer, while also maximising online traffic for the retailer. Technology should not be a burden – it should be a platform.
Mis-use of Irish Branding
For years, the agri-food sector has provided evidence that the ‘Ireland’ brand is being mis-sold to confuse consumers who do wish to buy Irish, for example, by labelling something as ‘Irish’ when it is simply packaged here.
Aontú believe that “Brand Ireland” is a national resource that is being misused. We will initiate a campaign to urge the food catering industry to use domestic suppliers and to increase monitoring of ‘Irish goods’ labelling.
Strengthening Linkage of Irish Enterprise to MNC
The ‘Linkage Programme 1985’ was established to develop a supply base in Ireland that would maximise local purchases of Irish materials, components and services by foreign-owned enterprises located in Ireland. Reports show the programme was successful for a short period. However, the inability of Irish companies to enlarge their scale for a variety of reasons constrains the potential of the linkage programme to create more jobs as well as added value for MNCs. Aontú strongly affirms work by the state enterprise agencies to achieve this objective.
Improve Access to Public Procurement Contracts for SMEs
Public procurement acts as a critical stimulus for the domestic economy. It is an important driver of Ireland’s economy, both in terms of employment and employment standards across the economy. Aontú seek a system of managing the procurement process that creates opportunities for enterprises and value for the public and society. We believe government has to be more ambitious in generating an economic return on public spend on goods, services and capital projects. This can be achieved by making public procurement more visible and more accessible to Small to Medium Irish Businesses.