Official Report (Hansard)
Date: Wednesday, 29 April 2009
Members present for all or part of the proceedings:
Mr Danny Kennedy (Chairperson)
Ms Martina Anderson
Mrs Dolores Kelly
Mr Ian McCrea
Mr Barry McElduff
Mr Francie Molloy
Mr Stephen Moutray
Mr Jim Shannon
Mr Jimmy Spratt
Mr George Dorrian )
Mr Paul Givan ) Federation of Small Businesses
Mr Wilfred Mitchell )
The Chairperson (Mr Kennedy):
I welcome to the meeting Wilfred Mitchell, Paul Givan, and George Dorrian from the Federation of Small Businesses (FSB). I see that you are handing out manifestos already. I did not expect that. You are here to offer evidence to our inquiry on European issues. We will be very happy to hear what you have to say, and perhaps you will then answer questions. We expect the evidence session to last approximately half an hour.
Mr Wilfred Mitchell (Federation of Small Businesses):
Thank you. I am pleased to be here today to follow up on the written submission on European issues that we provided to the Committee. As you are all aware, it is an interesting time for European politics in Northern Ireland, with elections just around the corner. The Federation of Small Businesses recently held the first of a number of public debates, giving local candidates the opportunity to speak directly to the business community about where they stand on issues relevant to that community.
We were encouraged by the turnout and the candidates’ understanding of the issues facing small businesses, many of which emanate from European legislation. We all recognise that Europe is at the centre of economic and social life. The FSB is on record for its praise of the business mentality of the Think Small First strategy, which has grown in prominence recently. There is much work to do, especially on the way in which European legislation is devised and implemented. Members should have received a copy of the FSB manifesto, which covers those points.
The recent FSB document entitled ‘Burdened by Brussels or the UK? Improving the Implementation of EU Directives’ was based on a UK-wide survey of more than 1,000 FSB members. It recommended that the Government should set up an independent, small, central body to assess the potential burden of all new legislation. That body would conduct approved risk assessments that would focus resources on the most relevant businesses and would be involved in all stages of the legislative process.
The case was made for representatives to attend legislative meetings at an EU level and to identify potential problem areas early in the process. The document called for retrospective regulatory impact assessments on existing laws, examining not only envisaged costs, but real costs to businesses. The FSB believes that the use of clear and unambiguous language in regulations should be a key priority for legislators, as many small business owners complain about confusion about what is required of them. Jargon should be consigned to the dustbin.
The main plank of our message is that the strategic relationship between all strands of public administration should be improved. There is a perception that there are all sorts of individual structures and programmes with little co-ordination. Given the amount of legislation that originates in Europe, we welcome the engagement of this Committee on the issue and are happy to take questions on our submission.
Thank you. I note that the FSB manifesto includes a demand for an end to gold-plating. What experiences have your members had of gold-plating? Has it been an adverse experience?
Mr George Dorrian (Federation of Small Businesses):
The most common complaint about gold-plating among our members is that other EU member states pick and choose which legislation suits them to implement, whereas there is a perception that gold-plating occurs lock, stock and barrel in the UK with little room to manoeuvre. Some of our members who also operate in the Republic of Ireland have mentioned that to us.
Is the evidence for that belief anecdotal, or do you have evidence from your members that confirms their grave suspicions?
We have no formal documentation, but the evidence comes from a number of case studies that our members have brought to our attention.
There was one to do with the pharmacies, although there is another name for it. It was to do with the effect of chemicals. We were able to move in early and have a significant impact. We removed a lot of the gold-plating in the early stages. We have papers on that issue.
Thank you for your presentation and your written submission, in which the FSB calls for a dedicated EU committee that would help small and medium-sized enterprises by prioritising the roll-out of current EU policy. The document also contains a call for a dedicated forum. The Committee has taken evidence from EU Commission representatives and others, who suggested that the North’s critical mass is too small. Given the connecting threads that exist in all-Ireland and east-west contexts, would it not be better to have a dedicated, broader forum that links into strands 2 and 3 of the Good Friday Agreement rather than having a more insular view? We do not have the critical mass that would allow us to tap into programmes that are trans-national in nature.
Also, you expressed disappointment that the small and medium-sized enterprises did not benefit from finance that was available under multi-annual programmes. Will you tell us a bit more about that?
Mr Paul Givan (Federation of Small Businesses):
Given the amount of legislation that is generated from Europe that the Executive and Assembly must then implement, there should be a dedicated Assembly committee to deal with European issues. We believe that a consultative forum, like that which OFMDFM established recently on the economy, could be established to deal with European issues.
In the briefing paper, we suggested that such a consultative forum should comprise MEPs, members of the Committee of the Regions, the social partners, MLAs — ideally from an Assembly committee on Europe — and civil servants. Representatives of the European Commission Office in Northern Ireland could attend that forum as observers. That would be a good way to involve all the stakeholders who are involved in European matters and to communicate to the Assembly all the issues that it and the Executive can use to get feedback. That would go a long way to give European issues a more central role, which we feel that they merit.
On the issue of expanding the cross-border-type operation, we want to ensure that the present North/South bodies operate effectively, and the interests that impact on cross-border businesses should be worked on closely. InterTradeIreland has a key role to play in that. It should be more pro-active by involving businesses and calling meetings and summits on those types of issues.
We produced a document that touched on the issues of European funding, energy costs, mobile-roaming charges and the variance in fuel duties, the latter two of which are cross-border problems. Therefore, we think that co-operation on cross-border issues is vital. We want to ensure — as I am sure all elected Members do — that the bodies that exist carry out their duties effectively.
Thank you, gentlemen. I want to ask you two questions. First, in your ‘European Election 2009 Northern Ireland Manifesto — Think Small First’, you refer to the wealth of business opportunities for small businesses. You also mention the influence that Europe can play in business. How do you see the influence of Europe being used here to help small businesses?
Secondly, network-building was a recurring theme that different people raised when we visited different places. I am keen to hear your ideas on how we can build networks in the EU, either through the institutions or other organisations. How can we do that to the full benefit of the people that we represent and, ultimately, the Assembly?
George will talk about the issue of innovation in Europe. I will then speak on the issue of networking.
From an innovation point of view, the regional innovation strategy for Northern Ireland is very good for local companies. SMEs do not tap into many of the Europe-wide initiatives and programmes. The fact that those are being underused is a problem. According to the Barroso task force report, one of the programmes focused strongly on innovation. We want to see more Northern Ireland SMEs tapping into, and making better use of, those programmes.
The issue of access to finance was mentioned, but I think that innovation is probably the key, especially given the current situation. SMEs should innovate to help to bring themselves out of the current situation. Given the nature of the situation, building networks with different member states will really be the only way to make that happen. A lot of innovation is knowledge-based or technology-based.
The Executive’s office in Brussels has a key role in identifying which commissioners and politicians are best placed to assist Northern Ireland. From a business perspective, we want the economy to be the priority for the Assembly and Executive in European matters, and the office in Brussels has an important role to play in that regard.
The UK national Government strikes the deals in Europe, so it is crucial that relationships with Government politicians and officials are strong, as they will ultimately sign off such deals. Where the Assembly is involved in issues, it needs to negotiate and influence the UK Government. We have a role to play with the Assembly and Executive in feeding in business issues. We hope that our Ministers in the Assembly will influence and negotiate with national Government.
Renewable energy is an example of that. Europe has set a certain standard and objective for us to try to achieve within a certain time. Our planning laws are not designed to suit those objectives. Brussels is putting pressure on us, locally, to see if we can reach those objectives in the set time, so the rest of the Administration has to come in line. That is an external factor that assists us. If we can get renewable energy at reasonable cost, it will make a great difference. Traditionally, our energy costs have been much higher than those elsewhere in Europe. Norway has hydroelectricity and Denmark has wind power. To compete in the global market, we have to reduce our operational costs. In a roundabout way, Europe is trying make a level playing field that will allow us to compete with those countries.
Thank you for your attendance. You have indicated that Federation of Small Businesses operates a dedicated office to campaign for businesses in relation to European issues. How can an Assembly presence in Brussels be managed to best effect? In the current economic downturn, how can we get the most out of it?
There are two aspects to that. Having a presence there would allow us to get early indications and determine the mood over there. However, as we all know, there is total inconsistency among banks and what banks are offering. Our local banks are increasing the interest rates and restricting their loans, but our competitors in Europe are able to overcome that. We are clearly at a disadvantage, and we want to ensure consistency.
You mentioned the economic downturn. Now, more than ever, the Brussels office has a key role to play. If there is any assistance to be gained from European, Westminster or local funding for the economy and projects, the Brussels office needs to be at the heart of ensuring that any moneys that can be gained from Europe are obtained and targeted at small businesses and the economy. It plays a key role.
Mr I McCrea:
Thank you for your presentation. You have supplied a written submission and your European election manifesto. I am surprised that this is the first manifesto that I have had my hands on, so I congratulate you for that. You are airing the issues early, and it is important, in this context, to do that. I note that you recently held a question and answer session with the prospective candidates. I am not sure who will fill that seat, but that is for another day.
In your written submission, you refer to the fact that the MEPs work independently of the Assembly. Without referring to individuals, you recommend that MEPs should be doing this or that. That leaves me to believe that they are not doing all that they should.
How have you found the relationship with the MEPs with whom you have been working? Do you find that it could, or should, be better? Can you expand on their relationship with the Assembly?
To date, we have had a good relationship with all of the MEPs. We have found that all three have been very willing to take forward the small-business issues that we have brought to them. They are very willing to take briefings from us and to campaign for us, and we have found them to be very helpful in that regard. Hopefully, they have found us helpful in providing them with information.
The MEPs need to act in unison, as far as possible, with the Executive’s agenda. Therefore, it is crucial that the MEPs receive good briefings from civil servants, so that it is not just Executive Ministers who go out to Brussels to campaign on issues; that our impact in Europe is maximised by using MEPs; and that members of the European Parliament get information from the Executive.
If a more co-ordinated approach could be put in place so that members of the European Parliament can access the Administration here, get the information that they need, and then lobby on behalf of the Executive, that could only be to everyone’s benefit.
To return to practical side, I have led two or three delegations of Irish small businesses to Brussels, and on every occasion, we met all three MEPs. They opened doors for us where necessary. The response we got from all three was very effective. However, they need to be more closely tied to home. MEPs have been in Europe for longer than the Assembly has been established, embedded and taking control at home. There is now an opportunity for the two to work together.
Thank you for your presentation. On the issue of SMEs not being able to access finance as much as they would like, what is your involvement in, or knowledge of, the European Investment Bank and its benefits? Have you, as an organisation, had any direct involvement with or response to the Barroso task force?
Our colleagues in Great Britain sought finance from the European Investment Bank to be routed through the regional development agencies (RDAs) in England. They thought that that would offer ideal financing to help small businesses. Apparently, the Government are currently looking into that. We have a limited role in calling for the Government to take a more proactive role. That is still up in the air, but the main sticking point appears to be the co-ordination of the flow of money from the Investment Bank to a local level.
We have had difficulties with local banks in encouraging the development of that. They seem to put a lot of emphasis on words and the definition of a viable business before they encourage loans. As you know, the word “viable” is open to interpretation. That certainly has not been to the advantage of small businesses.
We have taken evidence in the past that the European Investment Bank has not been used to the full, by SMEs in particular, to access funds and cheaper loans. Secondly, as an organisation that represents SMEs that should benefit from the Barroso task force, have you found any openings within that?
It is fair to say that the European Investment Bank has not been utilised. Certainly, we feel that it has not been utilised to its full potential by businesses in Northern Ireland. Our main focus on the Barroso task force was the economic section, as you would expect, so we are currently looking at the points concerning innovation and access to finance. We do not have any formal documentation; we have spoken informally with MLAs and some MEPs about our feelings about those aspects, but the key issue that we looked at was innovation.
To give the Committee an example, the enterprise finance guarantee scheme that was introduced was initially being administered by only one of the local banks. Now, the four main banks have signed up to granting businesses access to that scheme. They were reluctant, to a degree, to sign up a local finance offer that was made by the Government. Therefore, we have found the banks to be even more reluctant to get involved with the European Investment Bank.
Mrs D Kelly:
Thank you for your presentation. Have you looked at the European Union’s forward work plan? What, if any, proposed policies, procedures or regulations are causing you concern?
The more we looked into the Small Business Act, the more we realised that it is not an Act at all. It is really guidance, with a think-small-first mentality. Therefore, our work has concentrated on trying to get that strengthened to make it more formal. We also looked at the supply-chain network to improve security and to give more access to the SME network. Those are the principal activities that we have been looking at.
Mrs D Kelly:
It would be helpful if you were to forward some information to the Committee on those points. I presume that you are also looking at access to public procurement for small businesses?
We are working with the Committee for Finance and Personnel on public procurement, and one of the issues relates to the European aspect of it.
Mrs D Kelly:
Do you have any thoughts on the social contract part of it, in respect of apprenticeship creation, for example?
The Committee for Employment and Learning has just undertaken some initiatives in that area, but those are in the early stages. The theory of what Government is doing to try to get over the recession is fine, but we will have to wait to see whether the theory will match the practice. The mechanisms at home must also be in place. Education must be up to a certain standard to be able to deliver, and I am not sure whether all the ts are crossed in that respect.
Mrs D Kelly:
It would be interesting if we could learn a bit more about that too.
Thank you for your presentation. I am glad to hear that you are talking to the Committee for Finance and Personnel. You touched on public procurement. I noticed that, on measures to open up the single market, one of the issues that you highlighted is a ring-fenced percentage for public procurement for small business. That has obviously been successful in the US. What are your suggestions? I assume that you have been discussing that with the Committee for Finance and Personnel?
It is. I think that the figure of 30% was proposed for guaranteed procurement from SMEs. One other point was that we need to make SMEs more aware of public procurement. Raising that percentage will be simply down to SME’s awareness and ability, as opposed to lot of governmental structures. It is really a matter of improving the capacity of SMEs to bid for public contracts.
Small businesses face a major disadvantage in relation to major public procurement contracts, for instance. Could they act as subcontractors in that area?
We have subcontractors. We also try to encourage greater clustering of SMEs. That is a very underutilised area in Northern Ireland. We recognise that SMEs will be unable to bid for very big contracts, but a cluster of SMEs — for example in the knowledge-based areas — would be a lot more competitive and much more able to bid for medium-sized contracts.
Are you encouraged by what you are hearing, because, if there is EU legislation on that, it is a way of co-operating with the Assembly?
We are encouraged, to a degree. The Department of Finance and Personnel (DFP) recently announced new systems, and it will take some time to see how they will feed down. We still have some concerns, but we will give DFP the benefit of the doubt until we see the new electronic system. I know that it worked well with the Olympic network, which was very web-based and very electronic-based, and between 700 and 800 SMEs in Northern Ireland bid for it, or got onto it. There is a precedent there that, hopefully, we can build on.
Two years ago, we took a delegation to the United States to examine best practice. When we visited Atlanta, we found that that state had ring-fenced up to 40% of its procurement for small businesses. They were also examining barriers for small businesses, such as insurance, and were attempting to remove those barriers. Those activities had a great impact on the economy there in a very short period of time
You mentioned in your submission that we:
“did not participate in the MAP programmes aimed at enhancing the access to finance for SMEs.”
Have you engaged with the relevant Department — I assume that it is the Department of Enterprise, Trade and Development (DETI), as it is an enterprise and entrepreneurial programme — to get an explanation why?
We wrote to the Department to get some greater detail on the issues and concerns. We are now waiting for a response.
On the issue of subcontracting, I have found that in my constituency — and I am sure that the same applies in others — subcontractors feel very vulnerable and unprotected in a legislative context. Many of them have told me that when they are attempting to secure subcontracting work the margins are extremely small. In fact, some have told me that they are being offered 1990 prices for contracts already secured at 2007-08 prices. Is your organisation doing any work to provide protection for SMEs and subcontractors in the procurement process?
Our members have come to tell us about their vulnerability. Currently, we are collecting case studies in an attempt to construct a larger document.
What we have found frustrating is that big businesses go in for the tenders and secure them. They then give the work to a smaller firm, which may have had a bid rejected for the same tender. In the European context, we find that big business is quite happy to have detailed procedures, because they have the capacity to secure the tenders, but they then farm out the work to the smaller businesses. That is a problem.
We get about 500 calls a month from our members, indicating what their concerns are. Banking is first on the list, redundancies second and procurement third. That may give the Committee some indication of the problem.
Is there any indication what the gap is between what the larger or European contractors get for jobs and what the subcontractors get?
I am sorry; I do not have a figure for that.
Thank you for appearing before the Committee today, gentlemen, and for your presentation. That was a very good exchange. If there is any additional information that you would like to provide to the Committee, we would be very pleased to receive it. Likewise, it may be that the Committee will be in contact with you to clarify any specific points.