This submission makes six specific proposals for consideration for Budget 2015. They are proposed in the context of a number of medium to long term policy changes and executive action, which are required to rebalance the opportunities for people and businesses throughout the country to benefit from any upturn in the Irish economy into the future. The specific proposals are for now and can be implemented immediately and with minimum cost to the state.
In the recent months there have been two strategy documents published which are to be welcomed. They are the CEDRA report ‘Energising Ireland’s Rural Economy’ published in April by The Commission for the Economic Development of Rural Areas and the Government’s ‘Construction 2020 Strategy’ for Ireland published in May.
The CEDRA Report has over 30 excellent recommendations which would energise the social and economic life in rural Ireland. A number of the recommendations made in this study could be implemented immediately without any significant cost to the State. For example Recommendation 8 which calls on State agencies to strengthen their collaboration to bring small and niche FDI (Foreign Direct Investment) to rural areas.
Allied to the need to energise rural economic conditions is the need to stimulate consumer spending with the inevitable benefit of increasing employment, particularly among SMEs. In rural Ireland, outside the five main cities 92% of economic activity is generated by SMEs.
Construction 2020 contains 75 specific actions and while it is welcome it will take some time for any benefits to accrue. The change proposed in the strategy for the National Pension Reserve Fund (NPRF) to become the Ireland Strategic Investment Fund (ISIF) and have the ability to invest in commercial activities is one very welcome proposal.
Both of these strategy documents are welcomed by HAI because they deal with three of the fundamental policy needs that impact on the business of our members. They are the need to rebalance economic activity with a greater focus on rural Ireland; stimulating the building/construction industry and the availability of credit/loan finance. These are the three policy issues from which the specific proposals below stem.
1. Home Renovation Incentive (HRI) Scheme
Extend the Home Renovation Incentive (HRI) Scheme beyond 2015. The scheme has taken some time to be recognised by homeowners but the latest Revenue information, as of 26th August, is that the value of the works registered to date is €153.3 million, with an average value of €16,634.
The HAI believes that this scheme has increased employment levels among builders and helped maintain employment in the hardware sector. However, the bulk of the work registered for the scheme to date is focussed in the Dublin/Leinster area (77%). An extension of the scheme would allow time for it to be made more widely known in more rural areas.
The Revenue has stated that it is considering ways of promoting the scheme and we, as an association, are prepared to assist in that promotion as our members are a key point of contact with consumers and builders requiring building material and household goods.
2. Introduce voucher system for winter fuel allowance
We urge the introduction of a fuel voucher system where those who currently receive a winter fuel allowance, would have to use a dedicated fuel voucher/smart card to purchase a fuel product only, from registered and tax compliant retail fuel outlets.
Currently the allowance is paid by way of a cash top up on the recipients’ current payment, which can be spent on anything, not exclusively solid fuel, and from any source of supply without any traceability or recovery for the State.
The Department of Social Protection says that a total of 410,000 people currently claim €20 in fuel allowance per week, including those in receipt of social welfare and HSE payments. The allowance costs the State €211m per year. The fuel allowance is paid for 26 weeks from October to April.
A fuel voucher system scheme would allow the Government to recoup some of this €211m back through legitimate outlets tax returns; ensure that the money was spent with legitimate suppliers and not those operating in the shadow economy and ensure that the payment was fully used to help in reducing fuel poverty.
3. Help-to-buy and build
We understand that the Government has requested the Department of Finance to consider a Mortgage Insurance Scheme based in part on the Help-to-Buy scheme in the UK, which has been a success, in particular outside London. Outside the M25, the Help-to-Buy scheme has resuscitated new building, especially for first time buyers.
Our proposal is that help-to-buy should be thought of in terms of help-to-build also. The availability and accessibility of appropriately zoned land to meet current demands is vital. Unlike the UK where the threshold is £600,000, we would recommend that the threshold for an Irish scheme should be lower to focus first on the family-type home in areas of need and disadvantage.
4. Enterprise Finance Guarantee Scheme
Obtaining working capital through credit or loan facilities is currently a major problem for small builders and SMEs in the building construction industry. In an effort to alleviate this problem in the UK there is currently a pilot scheme in operation whereby trade customers can apply for a credit account of up to £25,000 from designated builders merchants.
Many small businesses struggle to secure credit due to lack of security or adequate credit history and would only have been eligible for a fraction of this amount. That made it more difficult for them to take on projects due to being unable to afford the upfront cost of the materials.
The pilot scheme is being backed by the UK Government with a multi-million pound fund in order to stimulate viable small and sole trader construction businesses and in an effort to provide alternatives to bank lending. HAI would propose that the Irish Government examines a similar pilot scheme in Ireland and would be a willing partner in its promotion.
5. Expand and promote Microenterprise Loan Fund Scheme
The existing Microenterprise loan fund scheme, which was introduced in October 2012, originally intended to provide over €90m in extra lending to 5,500 businesses and create an estimated 7,700 jobs over a ten year period, needs to be revamped. The latest report up to 31st March 2014, after a year and a half in operation, shows that only €3m in loans have been approved and 437 net jobs created in 192 businesses. Only 51% of applications were approved and 83% of the approvals were for businesses employing 3 people or less. These figures are so far off the original target that it is clear a revamp is required.
The current eligibility thresholds for micro businesses are that they have been declined bank credit, employ less than 10 people and have turnover less than €2m. These should be changed to include those companies employing up to 20 employees with a turnover of up to €5m. The loans available of between €2,000 and €25,000 are welcome, but must be promoted and made available to all companies within retail, especially in our hardware, building material, DIY sector where the economic downturn has been most evident.
Local Enterprise Offices must work in partnership with Micro Finance Ireland to proactively assist with training and guidance in preparing the applicant’s business plan. This includes initial evaluation of the quality of the business proposal for the loan application, mentoring and advice on an on-going basis.
6. Incentivise jobseekers to take up temporary seasonal positions
We propose a revamp of the social welfare conditions to incentivise job seekers to apply for seasonal temporary employment positions. The situation whereby temporary seasonal positions are not taken up by the unemployed due to the fact that it can take upwards of six weeks to re-register on the live register is archaic. The hardware, building materials, DIY industry can create thousands of part-time positions at peak trading periods including Summer and Christmas.
HAI members, both suppliers and hardware merchants, continue to face huge challenges and difficulties. Increased taxes and ever increasing business costs applying to the domestic economy have hoovered out any disposable income from consumers. Our members are making every effort to provide consumers with the best value products and services.
However, the market is still struggling as is evidenced by the latest Hardware Association Ireland members’ survey conducted in June 2014 by Behaviour and Attitudes, which indicates overall business activity is the same or lower than the previous 12 month period for half of hardware merchants. All the indications continue to suggest that the market remains most challenging for firms in rural Ireland and any uptake in business activity is focussed primarily in the Dublin/Leinster region.
Despite huge job losses over the past 6 years, the retail sector continues to play a significant role in the Irish economy. It accounts for approximately 10 per cent of GDP (approx €16bn) and together with the wholesale sector, is still the largest private sector industry employer with over 270,000 employed. It is a sector represented in every city, town and village in the country (c. 15% of the workforce). (Retail Consultation Forum June 2014)
HAI members both suppliers and merchants, are directly affected by weakness in construction activity, as well as by continued weakness in consumer demand generally. In a severely depressed retail industry, increasing and untenable business costs combined with a very cautious consumer, means major action must now be undertaken to support our home economy.
Another context for our proposals is combating the Shadow Economy. VAT and employment legislation compliance, continues to be a huge threat to many businesses in our sector. Retail sales in Ireland have fallen by over 25% since 2008. Government must rigorously enforce VAT compliance, with particular attention to the illegal use of legitimate VAT numbers in Northern Ireland, where major project products including timber for roofs, bathroom suites, windows and flooring products, are purchased using someone else’s VAT number.