REVIEW SPARKS A REACTION

The review of the Business Expansion Scheme recieves mixed reviews. Linda Pearson reports.

The 2006 Review of the Business Expansion Scheme (BES) and Seed Capital Scheme (SCS) was recently released with 35% or only 491 out of almost 1,400 companies responding to the survey. The companies surveyed had all availed of the BES scheme, an incentive which helps start-up companies get up and running through providing them with finance.

Response To The Review

The review was published after Minister for Finance Mr Brain Cowen TD announced in the 2007 Budget that the schemes would be extended for a further seven years. The review aims to provide the Minister with information on how the schemes have operated to date and will help him make decisions in relation to their future. However, there has been resistance to the review in that it’s findings are inadequate to base future judgments on because the response to the survey was so low.

On foot of the review being published, Green Party Finance spokesperson Dan Boyle TD said the review of the BES amounts to 'yet another rehashing of old material'.

“We thought the BES Review findings were very unsatisfactory in the sense that there was a low take-up rate and we questioned whether the survey mechanism was the best way of doing it. There were a lot of unanswered questions and the survey was far too weak to be in any way reliable as a source of information,” said Boyle.

Despite the criticism, the Green Party spokesperson is in favour of the BES and suggests an alternative way of getting concrete answers to important questions such as how many companies have been established as a result of the BES scheme, how many jobs have been created and what size these companies are? “We are in favour of the scheme and think it’s important that indigenous enterprise is encouraged but the problem is the government isn’t helping the the 2006 Review of the Business Expansion case by having insufficient information about the effectiveness of the scheme.”

“We would like it to be carried out like a census form. The application for a BES scheme would be on the basis of certain information being supplied by the applicant and updated on a regular basis so that we can see to what extent the scheme is working,” continued the TD.

Paul Sweeney, economic advisor, Irish Congress of Trade Unions, also agrees that the BES review does not represent all companies who have availed of the scheme. “I think it does not inform as it only asks some of the beneficiaries what they thought. It failed to get the views of those who failed or who could not raise BES funding. Further, the government should undertake an economic evaluation of all state aids before renewing them and should only extend them for three years, that is the advice given to it by their own Economic Consultants in October 2005,” says Sweeney.

Timing Of The Survey

2006 Business Expansion Scheme Statistics

STATISTICS SHOW HOW THE BES SCHEME INFLUENCED THE 491 COMPANIES WHO RESPONDED

52% said BES made them more ambitious to grow 40% said the scheme helped improve products and services 19% said BES helped them reduce debts 7% said it helped them innovate in other ways 34% availed of BES for R&D investment

It was during the course of 2006 that the BES was reviewed by the Department of Finance in conjunction with the Department of Enterprise, Trade and Employment, and the Office of the Revenue Commissioners. It was conducted as part of the ongoing policy of reviewing tax reliefs to ensure that such reliefs meet their socio-economic objectives.

It was decided that both the BES and SCS should be reviewed prior to their due expiry date to assist in making decisions in relation to the future, if any, of the schemes beyond 2006. However, the findings of the review were not published until after the Minister had extended the BES and SCS schemes in the 2007 Budget and Boyle says the information should have been available before it was decided to expand the schemes.

The Green Party Finance spokesperson says, “it seems to be a common feature of both the Minister and the Department of Finance that they bring out information subsequently that should have been used case by having insufficient information about the to inform policy that’s already been made and I think it’s unfortunate that yet again they seem to have made that mistake. It’s a back-covering exercise.”

However, the Minister for Finance was pleased with the review and when he issued the

preliminary results of the BES survey he said, “the survey indicates that the current BES scheme has been good for manufacturing, good for jobs and good for investment in small firms throughout the country. I am confident that the expansion of the scheme I announced in the Budget will further support our enterprise culture.”

Sweeney however does not share in the Minister’s optimism. “I cannot understand why the government failed to monitor all the beneficiaries of taxpayers subsides under the BES. It is thinking of doing that from now on. Had it done so in the first place, we would have far greater information today on the previous scheme,” said the economic advisor.

Seeking Approval