Loan Guarantee Scheme: Motion

Tuesday, 19 October 2010

Dáil Éireann Debate
Vol. 719 No. 1

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Deputy John Perry: Information on John Perry  Zoom on John Perry  I move:


I wish to share time with Deputies Clune, D’Arcy, Breen, Tom Hayes, Connaughton, Joe Carey, Doyle, Deenihan and Coveney.

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  Is that agreed? Agreed.

Deputy John Perry: Information on John Perry  Zoom on John Perry  I welcome the Minister. The motion is simple and to the point, namely, to introduce a loan guarantee scheme for business. Small businesses up and down the country need help. The motion forms part of the Fine Gael plan to help small businesses survive the current economic crisis. Fine Gael is giving Government Deputies one last chance to provide an essential credit lifeline to struggling small businesses.

Small and medium enterprises, SMEs, are the backbone of the Irish economy. A total of 80,000 small firms employ 800,000 people in every city, town and village. They add billions to the national economy. They are largely absent from Government thinking and policy. In round figures the SME sector contributes approximately €500 million in corporation tax, more than €500 million in PRSI, approximately €3 billion in income tax and €4 billion in gross VAT. By any standard the SME sector is important to the national economy. The Government does not consider the consequences when it increases charges and adds duplicated red tape. Mishandling of the economy has destroyed consumer confidence and hit SMEs the hardest. Fine Gael is [67]committed to assisting this important sector as the national economic recovery will not happen without a healthy and thriving domestic SME base.

Ireland’s recession has been longer and deeper than that of any other European country. Far from turning a corner, as was claimed at the previous budget, 2010 has been the toughest year yet for Irish business. The challenges facing small business are enormous. Business has declined by between 20% and 40% in turnover. Insolvencies are at a record level. Most enterprises going out of business are typically small businesses, such as micro-businesses that employ one to ten people and small businesses that employ between ten and 49 people. Local jobs have been lost throughout the country. Small businesses have done what they can to survive, so far without any Government assistance.

A loan guarantee scheme is a proven approach to help viable companies get access to credit finance. I have no doubt the Minister will refer to bank recapitalisation and the fact that we will be giving the Bank of Ireland and AIB €3 billion each in the next two years. Unfortunately, that money is not getting through to businesses. Promises of a “wall of cash” were made by the Minister for Finance in September 2009 when trying to sell the NAMA proposal, but it is clear that all Government promises have come to nought. The Government still claims that the existing strategy of NAMA and bank recapitalisation will get credit moving but the real experience of SMEs proves that this has not happened. Viable companies are going under on a daily basis. Approximately 1,132 businesses have closed their doors permanently between January and the end of September, compared to 1,003 during the same period last year.

Recent research from ISME revealed that 42% of companies which applied for funding in the past three months were refused credit. ISME also reported that 83% of firms said banks are making it more difficult for SMEs to access finance. I accept that some may have had unworkable business plans, but it is clear that many small viable businesses are being forced to close due to conditions outside of their control. The small business sector can do its part to bring the country out of the present crisis through the creation of jobs at local level. Traditional local small businesses, whether manufacturing, tourism, retail, wholesale or construction have the potential to create new jobs. Many of those businesses are being held back because of a lack of Government support. They must get as much attention as the smart economy.

In the September 2010 Forfás report, access to finance is identified as one of the single biggest challenges currently facing SMEs. Access to finance and the cost of finance are the most significant issues facing SMEs today. It is a constraint as small businesses attempt to weather the recession and to survive. It hinders them as they prepare for the upturn and invest in management development, productivity improvements and-or innovation. Many small businesses can demonstrate commercial viability yet fail to obtain loans. Even Forfás recommended a loan guarantee scheme because of issues relating to risk management. SMEs find it more difficult than large enterprises to secure working capital loans from financial institutions. There is substantial factual evidence that the representative associations for small business have identified a real and serious need for a credit guarantee system. State agencies such as Forfás have made the same case.

If this Fianna Fáil Government will not listen to the case being made by those bodies, perhaps it will look to international experience. The main finding of a review of SME credit guarantee systems done for the Canadian Government was that other jurisdictions have adapted basic features of their small business support programs to align them with the changing financial institution practices, SME financing needs and available technology. The international experience is very clear. Small businesses in other countries are being aggressively supported by the use of credit support and loan guarantees as well as export promotion and export insurance supports. Experience from other countries such as Chile and Taiwan is clear and decisive. Other governments have acted in the interest of preserving jobs in small businesses. Based on international experience, a targeted SME credit initiative can facilitate access to credit for [68]SMEs. Such an initiative is not a substitute for commercial bank lending nor does it facilitate credit for unviable companies. It would place Irish firms on a more level footing with international competitors, which is not the case currently.

The OECD attributes three main factors to the success of the Chilean system, namely, a strong regulatory and supervisory system, which is now the case in this country. It is something we are only starting to get right. Transparency and fairness are important. For example, the guarantees are allocated to institutions through a sealed bid auction. An intensive publicity and promotional campaign was considered necessary to explain the scheme. Training programmes were provided to commercial banks to inform them about the scheme and its policies.

Last week the Taoiseach performed a U-turn by announcing that the Government has abandoned plans for a credit scheme. In the process he broke the promise made by the Tánaiste, Deputy Coughlan, when she was Minister for Enterprise, Trade and Employment. He also went against numerous commitments made by her successor, the Minister for Enterprise, Trade and Innovation, Deputy Batt O’Keeffe. That was a terrible shock for thousands of Irish businesses which have been starved of credit and are barely surviving. Later there was an indication from Government that it is considering a loan guarantee system for a tiny number of specialist areas where it may not be possible for the businesses concerned to obtain a bank loan and that the State would step in. It is intended that such a system would apply to only 2% to 4% of loans. There is merit in this approach in that the special preferential guarantee terms may be applied to start-up and innovative companies in the emerging industry areas such as green energy, biotechnology, tourism, health care, agrifood and the creative sectors. However, to limit the proposed scheme to a small remit is completely inadequate. Most international schemes allow the guarantee funds to be used for any reasonable business purpose, including working capital. A major focus for international schemes is the protection and retention of existing businesses, which is a real problem. Financial institutions should continue to take all available collateral consistent with their normal practices.

With a broader business focus to the proposed loan guarantee programme, restrictions on the use of funds would be necessary. I would not wish to see guarantee funds being used for share purchases, owner payouts, and debt refinancing. Some features of the proposed credit guarantee system include that it would be short term, one round would cover the next three years. The amount of guarantee must be considered. For example, €50 million would lever up to €500 million worth of loans. A multiplier of ten is the experience elsewhere. Risk sharing should be considered. The code of conduct for business lending to SMEs issued by the Financial Regulator under section 117 of the Central Bank Act 1989 and published in February 2009 should be amended to specify the processes banks are required to adopt in facilitating access to the guarantee system, including the Credit Review Office. The Minister should consider the issue of access to cash.

Deputy Deirdre Clune: Information on Deirdre Clune  Zoom on Deirdre Clune  I am pleased to speak to this motion. It is well thought out and focuses on small businesses which are the backbone of the economy. There must be an effort to provide guaranteed funding to them, an idea that has been lacking in all the announcements made by the Government. I noticed the Minister for Enterprise, Trade and Innovation said at the annual Small Firms Association dinner on 16 September that departmental officials were working on such a loan guarantee scheme and that detailed discussions were under way. However, the Government’s amendment to the motion does not refer to it. I look forward to hearing the Minister’s contribution on that. This is a significant scheme, with its operation clearly detailed, and I commend Deputy Perry for that.

Foreign direct investment is a significant source of employment but it will not continue at the same rate. If we look at Ireland’s share of the investment by foreign-owned companies in the eurozone, it has fallen from 13% in 2001 to 6% in 2007. Belgium, Finland, Italy and Spain [69]have all increased investment, according to IMF figures for last year. There will naturally be an ebb and flow of creation and reduction in the jobs market but if we examine the figures, the number of jobs attracted here by the IDA is falling. The focus must be on our indigenous companies, small and medium enterprises. We must create an establishment where such businesses can be established and developed. Export-led and export-oriented companies must be the target and must be supported. We all campaigned for the Lisbon treaty on two occasions and the argument was that we were buying into a market of 500 million people across Europe. We must support companies that can identify products and services they can sell to that market.

Forfás recently published the report “Making It Happen” that outlined a range of approaches that must be put in place if we are to return to export-led growth, a key driver of the economy. We should focus on three objectives: fiscal stability, international competitiveness and access to credit. This is continuously sited as the most significant issue facing small businesses across Ireland. Firms that can develop and demonstrate viability are failing to obtain loans because of risk management issues. We know the banks lack the expertise, although they know about construction and buying sites. All that experience will not be used again but the banks have not developed expertise in the operation of business, their market potential or trends.

Does the Government realise that firms need cash? They must weather this recession and invest for future growth, enhance their productivity, embrace innovation and focus on new markets. The credit guarantee scheme outlined here is a way to ensure small businesses that are viable can get access to credit. A similar programme has been established in more than 100 countries; Ireland is one of the few countries in the EU that does not have such a loan guarantee scheme. I appeal to the Minister not to dismiss this out of hand but to look at it in a meaningful way. This is where we have potential but these companies will go to the wall unless there is some form of intervention. I am not saying every small company is viable but there are those, particularly those that are export-oriented, that should be protected by this form of guarantee.

Deputy Michael D’Arcy: Information on Michael D'Arcy  Zoom on Michael D'Arcy  I compliment Fine Gael on tabling this important motion. There are 1.85 million people working in the State, with 350,000 in the public sector and 1.5 million outside the employment of the State. Of those, 800,000 work in the small and medium enterprise sector, which shows how crucial the sector is to the economy. Those companies and businesses are being starved of cash flow. We were told at the start of the banking crisis that there was a liquidity problem, not a problem with capitalisation, which was not correct. All small businesses, however, are now experiencing cash flow difficulties. Part of the problem is that much of the money has gone into NAMA and the wall of cash that would flow into the economy never appeared.

Those with small and medium enterprises often employ two, three or four people. When someone has a business and works 15 hours a day six or seven days a week, without taking any funds out of the business, because he wants his employees to keep their jobs, because they are often friends or family, if that business does not work out, why is that person disallowed from social welfare payments for 12 months? It is a major problem and it is particularly unfair when they put in such hours to the detriment of their families and themselves; they are told they are self-employed and will get nothing because they were sole traders. That is wrong for those who have worked so hard in so many small businesses. These firms are in all areas, from agriculture to services. Solicitors’ firms and architects’ firms are closing and farmers are leaving the land because they are in such straits financially. Will the Minister sit down with his counterpart in the Department of Social Protection and work that out, so those who run businesses will be entitled to a social welfare payment the same as someone who was let go? It is crucial and would show the State has some confidence in these people, who need a safety net like everyone else.

[70]Deputy Pat Breen: Information on Pat Breen  Zoom on Pat Breen  Consumer confidence is at rock bottom. It is sad to say that this Government has done little to help the unemployed and to protect small businesses. As previous speakers have pointed out, the Minister for Finance promised a wall of cash which would get credit going to small businesses when NAMA was established. There was no such wall of cash, but small businesses that have run into difficulty and have had short-term cash problems have met a wall of silence from the banks, banks which we taxpayers bailed out.

I see it every day in every town and village my county. Shops, pubs, small companies and post offices are all closing down and many of these go unreported because the numbers losing their jobs are small, but the closures add up and the numbers involved are significant. Near my constituency office in Ennis for example, the owner of Tony’s Menswear, which has been in the town for 21 years, has announced that it will close shortly. He is angry because he has been forced to close. Rents are too high and rates are an issue for many businesses. The shopkeeper in my local shop told me that small business rates are €10,000 per year in a rural area. People cannot afford to pay these rates. Tony’s Menswear is just one example and this could be the thin end of the wedge for other businesses if small businesses are not given a lifeline. Deputy D’Arcy referred to an important issue in respect of people who close down their businesses, in that they are not entitled to jobseeker’s benefit for 12 months. That is wrong, given the number of businesses closing down.

Electricity prices are high. We all know of the amount of money that small businesses must spend on fridges and coolers. In my constituency, Kilrush town centre has seen businesses close recently. It has a domino effect and will affect many other businesses.

We need a fresh approach. Fine Gael has outlined one to the Minister. A partial credit guarantee scheme is the way forward. Small and medium-sized enterprises, SMEs, act as a lifeline for other businesses and many manufacturing businesses have gone elsewhere. Creating two, three, four, five or six jobs in every village is the way forward. There must be some type of market intervention. Billions of euro have been spent on saving the banks. It is a no brainer that the sector which provides a large number of jobs should be given a lifeline.

I commend the motion and Deputy Perry for tabling it. I hope the Minister will take heed. If he does not, rural Ireland will take heed of him.

Deputy Tom Hayes: Information on Tom Hayes  Zoom on Tom Hayes  I join previous speakers in commending Deputy Perry on tabling this important motion. If there is a glimmer of hope for the country in any quarter, it is in the SME sector. SMEs can help to bring the country out of recession, but they are under considerable pressure to survive. They are fearful. In a recent survey by the County and City Enterprise Boards, CEBs, 29% of businesses stated they were at risk of closure. This figure is worse in respect of smaller businesses, with 58% of those employing three or fewer employees indicating that they are at risk of folding in coming months. This is a frightening situation, but the Government has shown no sign of taking it seriously.

The banks’ credit process is a significant problem. From speaking with many business people in my area, they have needed to go to and fro with paperwork many times. If the Minister is serious about getting money into the SME sector, it is time to give the banks guidelines so that they stop looking for issues and making the process more difficult and complicated. Every time business people return to banks at considerable cost to themselves, bank managers look for something else because head office has been on to them. It is time to take on the banks’ head offices. They are driving people to despair. People are worried for themselves and their employees.

A large range of issues is involved. However, a great challenge is presenting some hope. For example, there are many opportunities in the food industry. As a nation, we have failed to market our products abroad. There is an opportunity to set up many small enterprises. Since there are more than 100,000 young graduates bursting to the brim with ideas for small business [71]start-ups, the Minister will agree to our motion if he is serious about helping us and the many small businesses that are suffering and under significant pressure.

Deputy Paul Connaughton: Information on Paul Connaughton  Zoom on Paul Connaughton  I only have a few minutes to address the Minister across the floor. The real nub of how we will overcome our terrible economic woes is contained in the motion. I thank Deputy Perry, who believes in this motion. As he drafted it, he knows what he is saying when we debate putting people back to work.

If necessary, Fine Gael must get a point across to the Minister. If he has not got it by this stage, God help us. Where getting people back to work right, left and centre is concerned, there is no other show in town. Some 450,000 people are out of work. If we were able to get 100,000 back into work in a short period through this mechanism, as Fine Gael asserted in its NewERA document, can the Minister imagine the effect on the country’s confidence? It would reduce the cost of social welfare payments dramatically and, above all else, restore dignity to people who wanted to work anyway. For the 300,000 people still unemployed, at least they could see something happening, but they cannot see anything happening now. Can the Minister imagine a return to job creation?

Thousands of young people are being crucified because they listened to the banks, Ministers and taoisigh over the years going on about a soft landing and that the prices they were paying for houses were worth it. Imagine the crucifixion of so many young families across the country because of that.

I will use the last minute or so at my disposal to say something.

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  The Deputy has one minute.

Deputy Paul Connaughton: Information on Paul Connaughton  Zoom on Paul Connaughton  The loan guarantee scheme is a part of the issue. A few months ago, the Tánaiste stated such a guarantee would have a part to play. I understand that the Minister saw some good in it. When the Taoiseach was present last week, one need not have been in the House for too long to know that he just did not want to hear. If someone comes up with an idea, the Government lets it out to the press if it looks even half way right and irrespective of what it entails because at least the Government would be seen to be doing something. However, the public knows it is not doing anything.

Deputy Simon Coveney: Information on Simon Coveney  Zoom on Simon Coveney  That is right.

Deputy Paul Connaughton: Information on Paul Connaughton  Zoom on Paul Connaughton  The problem is that the Government is delivering nothing. If one wants to bell the cat — I hope the Minister knows what the term means, in that everyone has an answer but the Government is doing nothing — there is only one way to do it. There are 80,000 small firms of one description or another. Just one job per firm would put 80,000 back to work. If one meets a man or woman who is able to employ another person, one should shake that person by the hand and call him or her a patriot.

Deputy John Perry: Information on John Perry  Zoom on John Perry  Hear, hear.

Deputy Joe Carey: Information on Joe Carey  Zoom on Joe Carey  This motion is crystal clear. For once, I appeal to the Minister to accept a positive Fine Gael suggestion. I compliment Deputy Perry on tabling this motion on behalf of Fine Gael.

Small enterprises are one of our few potential engines of growth and can play a key role in solving the economic crisis. The required capital increases due to Basel II rules have undoubtedly resulted in capital hoarding by the banks. Our banks are almost exclusively focused on rebuilding their balance sheets. Due to the Government’s softly softly approach, they continue to hoover up whatever capital is available. Our dysfunctional system was born when even the [72]most basic element of moral hazard was thrown out the window of Government Buildings in September 2008.

The terms of this motion propose that the guarantee scheme would place an emphasis on start-up and export-oriented companies. The debacle of two weeks ago in respect of county enterprise boards underlines the need for a loan guarantee scheme. The fact that those bodies were allowed to run out of money by September speaks volumes. That there is no seed capital for them makes this motion even more important.

For the next six weeks, Clare County Enterprise Board will run a start-your-own-business campaign involving 14 participants. This is the first of four such programmes over the winter. Overall, 50 potential business ideas will be intensively teased out over the winter. Their viability or lack thereof will be established by the end of their respective courses, but people who are in a position and want to pursue their ideas will face difficulties next spring when they seek funding to move to the next stage. Were there a loan guarantee scheme in place, potential entrepreneurs would feel pursuing their ideas worthwhile. This is what the terms of the motion are about, namely, an expression of absolute confidence in our small business sector.

The Taoiseach and the Minister for Finance have become adept at stating that we are all in this together. They don of the green jersey of Ireland when they are in trouble and when they want us all to join together. I ask the Government, especially the Minister, Deputy O’Keeffe, to put on the green jersey on behalf of the small business community of this country.

Deputy Andrew Doyle: Information on Andrew Doyle  Zoom on Andrew Doyle  I thank Deputy Perry for tabling this Private Members, motion. In August an Irish rural study symposium hosted by the departments of food and business development of UCC and Teagasc identified 54 distinct local economies in the country, not five or six. Given the statistics, which speak for themselves and show that 80,000 small businesses employ, on average, ten people, it is fair to assume that most of the 54 local economies are underpinned in the main by small businesses rather than by large foreign direct investments. The Government’s ongoing love affair with the latter — trading and investing in a smart economy — can produce a relatively small number of high-end jobs that are very well paid while we still have high unemployment. We need to develop a smart way of developing an economy, but not necessarily by developing only a so-called smart economy.

In the short time I have I shall concentrate on the agrifood sector. When the food harvest document was produced, the Taoiseach said: “At a time perhaps in the last decade when we have seen employment reduced by 1,500 in the agri-food sector, we now see a prospect of 3,500 to 4,000 jobs being created by 2020”. He was entirely correct but I believe he underestimated the figure. The report envisages our agrifood exports growing from €7 billion to €12 billion, bringing an increased revenue to the country of €5 billion with all the associated employment, tax revenue and goodwill generated in the economy. It would have an enormous impact.

In Food Harvest 2020 and in the Pathways for Growth report commissioned by Bord Bia with the Harvard Business School, a mix of small and large businesses was identified. We must support these in a loan guarantee scheme. People who established food businesses in the 1980s will report that the IDA at the time provided small grants and guaranteed loans from the ACC and ICC, in particular the latter, which allowed companies get off the ground. If the loans are properly stress tested by agencies such as the county enterprise boards and Enterprise Ireland, the failure rate, and there will be one, need only be very small. We must embrace the view that we need a loan guarantee scheme based on the fundamentals outlined by Deputy Perry. If we are serious about trying to get things moving, this is a very small signal that could be sent.

Deputy Jimmy Deenihan: Information on Jimmy Deenihan  Zoom on Jimmy Deenihan  I wish to speak on behalf of the tourism industry. As the Minister, Deputy O’Keeffe, knows, access to and the cost of credit have become major issues for the [73]tourism industry and for enterprises in all sectors of the economy. Companies in the tourism industry, especially hotels, have difficulty in obtaining credit. If they do get it they pay higher interest rates than in any other part of the EU and as a result they lose competitiveness.

The near collapse of the banking sector in Ireland, the need for Irish banks to restore their capital ratios, as noted by previous speakers, and the higher prices paid for funds by the banks have all contributed to this situation and lack of competitiveness. As the Minister knows, the difficulties faced by the tourism industry will be greatly exacerbated by the withdrawal from Ireland of Bank of Scotland. That bank has given loans in excess of €2 billion to the hotel sector alone and provides overdraft facilities for about 350 hotels. There is no evidence of an appetite among the other banks to take over these loans when Bank of Scotland withdraws. In these circumstances, Deputy Perry’s proposal is very important and is critical for the tourism sector. It is vital for the Government to introduce a loan guarantee scheme for viable small and medium-sized enterprises in the tourism industry in order for these businesses to gain access to credit.

Last week the Irish Hotels Federation made a major attack on the Minister for the Environment, Heritage and Local Government, Deputy Gormley, because he would not take any action on rates. Approximately 180 hotels may be before the courts in coming weeks, having been prosecuted by county managers. That is why it is so important to have a scheme as proposed. Such schemes are in operation in the United Kingdom, the United States of America and many eurozone states, including France and Germany. The guarantee in the UK is for up to 75% of the loan amount, with a maximum loan exposure of €1 million. Borrowers pay a premium on the interest rates. If the scheme works in that country and in the USA, why would it not work in this country? I appeal to the Minister on behalf of the tourism industry with which he is familiar. This loan guarantee scheme could ensure doors are kept open for the 2011 season.

Deputy Simon Coveney: Information on Simon Coveney  Zoom on Simon Coveney  I thank my colleague, Deputy John Perry, for tabling this motion. I recognise that the Minister is sitting through the entire debate. I hope he is listening to what Members are saying and taking it on board.

I have one question to ask and one suggestion to make in the short time allotted. What has happened to the Minister’s commitment to this issue? Almost a month ago he spoke at the Small Firms Association annual conference in Dublin and stated:

Your chairman has called on the Government to step up to the plate and set up a Government-backed loan guarantee scheme. I am pleased to tell you that officials in my Department and the Department of Finance are looking at options for a loan guarantee scheme. Detailed discussions on how this can be achieved are under way and I hope they can be finalised very shortly. The scheme would target market failure in small business lending when commercially viable businesses fail to get credit because of insufficient collateral and information deficits despite having demonstrated an ability to repay. Over 2,000 loan guarantee schemes operate in almost 100 countries. Ireland is one of the few nations in the European Union that does not have some form of loan guarantee scheme. Getting credit flowing to small businesses is vital to our economic recovery.

That was what the Minister stated, according to a press release on his own website. When he addresses the motion, therefore, will he give the House a detailed answer as to why the commitment he made to the Small Firms Association a month ago now seems to be entirely absent? This is suggested by Government policy regarding his strategy for supporting small businesses. I do not understand why he has changed his tune. Clearly, the Taoiseach shares the view this should not happen but we have not had a detailed explanation as to why the State cannot do what hundreds of countries are doing to try to ensure that banks which are risk averse at present can extend loan facilities to small businesses that desperately need cash.

[74]We understand how difficult it is for banks to access cash at present because of their mistakes. They are being funded weekly by the lender of last resort, the European Central Bank, and therefore funds are not readily available. None the less, we must ensure the funds they have are being made available to small businesses that have proven themselves likely to be able to repay. The State can assist in that process by adopting the motion my party has proposed and which the Minister endorsed a month ago in his address to that conference. I hope he will address that point in some detail.

There are many small firms which want to be able to employ people on a short-term basis, namely, contractors such as painters, tradespeople or whoever, who are lucky enough to get a job for a month or six or eight weeks. They want to be able to re-employ staff they had to let go in the past 18 months but cannot do so because people are not willing to come back and work on a short-term basis owing to the hassle involved in coming off jobseeker’s benefit and then returning to social welfare at the end of their short-term contract. People are not willing to come back and work on a short-term basis because of the hassle involved in coming off jobseeker’s benefit and trying to go back onto social welfare at the end of the short-term contract or work on offer.

It is a significant problem for small businesses at the moment that they cannot get people, even though enormous numbers are unemployed, for short-term work because of the difficulties people have in availing of the jobseeker’s benefit system. That is something the Government needs to address, so that people can come off and go on the dole quickly, when and where work is available, if we are to reduce our exposure to welfare payments as well as giving job opportunities when they arise.

Minister for Enterprise, Trade and Innovation (Deputy Batt O’Keeffe): Information on Batt O'Keeffe  Zoom on Batt O'Keeffe  I wish to share time with the Minister of State, Deputy Conor Lenihan, Deputy Darragh O’Brien and Deputy Seán Fleming, with the agreement of the House.

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  Is that agreed? Agreed

Deputy Batt O’Keeffe: Information on Batt O'Keeffe  Zoom on Batt O'Keeffe  I move amendment No. 1:


The Fine Gael motion opens with a recognition of the important role that small firms play in Ireland’s economy. This is reflected in the fact that small firms across the country support over 700,000 jobs. They play an important part in supporting all firms in all sectors, as suppliers of the goods and services on which larger companies rely. It is because of the important role small firms play and the recognition of the challenging environment they have operated in.

In the past two years the Government has placed support for this sector at the heart of its strategy for economic recovery. I have addressed the issue of the Government’s jobs strategy in the House recently. I set out that the best way to support businesses and create jobs was to fix the banks, address the deficit and improve our national competitiveness. These actions are not aimed at firms of any particular size, in any particular sector or particular ownership. They are aimed at improving the overall business environment in this country so that all firms can survive and grow.

[76]Central to this has been the repair of our banks which are the key facilitator of business transactions in the economy on a daily basis. Specifically, the provision of credit to our enterprise sector, especially SMEs, should primarily come from a properly functioning banking sector. I want to take this opportunity to again acknowledge the extraordinary work done by the Minister for Finance to address the banking problem. The code of conduct, the bank guarantee scheme, the recapitalisation scheme, the nationalisation of Anglo Irish Bank and the establishment of the National Asset Management Agency have all contributed to the stabilisation of the banking sector with a view to facilitating the flow of credit.

The primary objective of the code of conduct for SME lending is to facilitate access to credit for sustainable and productive businesses. The code promotes fairness and transparency in the treatment of SMEs by all regulated entities. It applies to areas of banking that are key to small firms such as overdrafts and term loans. It is specifically aimed at regulating the relationship between small firms and financial institutions. This is not optional. Regulated institutions must comply as a matter of law. Not only have we addressed how banks lend to small firms, but as I mentioned already, the Government has also secured commitments on the actual levels of credit that these banks must extend to the SME sector.

The House will be aware that the Government secured a commitment from the main lenders, AIB and Bank of Ireland, to make available not less than €3 billion each for new or increased credit facilities to SMEs in both 2010 and 2011, including funds for working capital. When it comes to honouring these commitments, the Government is not prepared to simply take the banks’ word for it. The Credit Review Office is making a major contribution to dealing with the outflow of credit, not only in reviewing cases where credit has been refused but in reviewing bank lending policies and in driving the process of providing our businesses with a proper, professional banking service.

I have made it a priority to regularly meet with the banks to discuss the availability of bank credit for businesses, especially SMEs. I have also travelled around the country to meet with businesses to hear their experiences at first hand and ensure that Government hears both sides of the story. I have conveyed the concerns of business regarding credit availability to the banks. I have also reminded the banks of their obligations under the recapitalisation package and of the huge investment of taxpayers’ money into the banks aimed at getting our economy moving again. The fact that we have someone of Mr. John Trethowan’s calibre monitoring the banks and assessing their policies is having a positive and meaningful impact on this aspect of banking performance. Mr. Trethowan said this month that the “worst is over” for small business borrowers, and that the situation was much more positive for bank customers than it was six to nine months ago. This echoes the view of business representative groups that there has been a recent improvement in the level of bank credit to small companies.

While fixing the banks has been a key element of our recovery, the Government has in parallel focused on maximising direct and indirect supports to enterprise with a specific emphasis on SMEs. Remember, SMEs in Ireland benefit not only from the direct financial supports available through the CEBs and Enterprise Ireland but also from the FDI activity supported by the IDA, up to the multi-billion, multi-annual capital investment programme. The Government has targeted interventions and supports for small firms but they also benefit from our initiatives in the wider economy.

Regarding targeted support for entrepreneurs, I was pleased to be able to provide additional capital funding of €3.3 million to the CEBs last week, supporting more than 450 new jobs in small firms. This is in addition to capital funding of €15 million already provided in 2010 to the county and city enterprise boards.

The Government also responded quickly to the rapid economic downturn by providing financial support to almost 2,000 companies through the employment subsidy scheme and the [77]enterprise stabilisation fund. The public sector, as a large procurer of goods and services provided by small firms must do what it can to improve the cash flow of SMEs.

That is why we have required all Departments to pay their business suppliers within 15 days of receipt of a valid invoice. I am anxious to see this approach extended as widely as possible. Small firms in existence today are the product of the creativity and effort of an entrepreneur who believed in their idea and worked to make it a reality. The Government assists these risk-takers in particular through the programmes provided by Enterprise Ireland.

In 2010, the Government increased the funding available to Enterprise Ireland by 26% on the outturn for 2009. We did this to stimulate the development of new businesses and facilitate the expansion of existing companies through a broad range of initiatives including direct financial and non-financial supports. We are also investing in small firms in the earliest stages of development via El’s €175 million seed and venture capital programme. We are committed to developing the venture capital landscape further and we are doing this through the €500 million Innovation Fund Ireland.

SMEs benefit from our targeted investments but also from initiatives in the wider economy. The Government’s new integrated strategy for trade, tourism and investment creates a platform for small firms to maximise their potential either as suppliers to exporting firms or as exporters themselves. The strategy sets a number of priorities and targets to be achieved by 2015. These include increasing the number of new export focused jobs by over 150,000 in manufacturing, tourism and traded services, with a similar number of indirect jobs also being created; increasing the value of exports by indigenous companies by 33%; diversifying the destination of indigenous exports; increasing overseas visitors to 8 million; and by securing an additional 780 inward investment projects through IDA Ireland.

The UK market, which is key to many small indigenous firms will, along with the US, continue to be a key market for Ireland. However, there is also considerable potential to expand business with our eurozone partners and the new and high-potential growth markets such as Brazil, China, India, Russia, Japan and the Gulf States. Our small firms will face obvious barriers such as language and cultural attributes as well as different business practices and regulation. The co-ordinated effort of all agencies will be focused on helping our small firms overcome these barriers, win new business, succeed in new markets and reach their potential. In doing this, the Government is providing leadership and taking action in support of small firms. These facts are absent from the Opposition’s analysis of the Government’s economic strategy.

One thing that has come across strongly in my dealings with small business owners is that they thrive on confidence. They need consumers to have confidence and they too must have confidence to invest in the knowledge that the Government is doing what it can to provide the best possible operating environment. There have been positive signs in recent weeks. Redundancy claims are down and recruitment agencies inform me that there has been a healthy increase in the number of jobs advertised. Three quarters of jobs advertised are for newly created positions. Even more importantly, there has been a 55% increase in job placements in the third quarter of this year compared with the third quarter last year. This is on the back of Ireland’s improved trading performance. The value of exports in July was up by 12% compared with the previous July. Enterprise Ireland says its firms will recover about 70% of the export earnings that were lost last year. These are the messages that will encourage small business owners and consumers and engender the confidence we need to get the economy growing again. Let us compare this to the uninspiring and negative sentiment that emanates daily from the benches opposite. The rhetoric of those Members does a disservice to small businesses that are succeeding every day and discourages potential entrepreneurs and consumers.

I will now deal with some of the more puzzling aspects of the Fine Gael motion. Fine Gael has been known to complain about a lack of information from the Government on economic [78]policy. It also claims that the Government has broken a promise to introduce a loan guarantee scheme. This is quite bizarre, given the information I provided on the floor of this House less than a week ago. I will refresh the Deputies’ memories. My officials are working with their colleagues in the Department of Finance, the Credit Review Office, Enterprise Ireland and Forfás to address issues regarding access to credit for viable SMEs, including the option of a targeted loan guarantee scheme. The most recent meeting was held on Monday of last week. A range of issues regarding SME credit were discussed and follow-up action is under way. These meetings are aimed at building on the already substantial progress made in identifying critical elements for further initiatives. It is important that any initiatives complement rather than provide a substitute for the lending commitments and activities of the main banks under the recapitalisation package and that they represent value for money from the taxpayer’s perspective. This activity can hardly be described as equating to a broken promise on the part of the Government. On the contrary, it is evidence that the Government will take every step necessary to ensure that small firms have access to the credit they require, while ensuring that banks meet their obligations and taxpayers are spared undue risk.

I am concerned at the implication in the Fine Gael motion that initiatives should be implemented in haste and a blind eye turned to the outcomes expected from the banks in light of measures already taken. Even more worrying is Fine Gael’s pursuit of a strategy that overlooks the potential exposure to the taxpayer. The main source of credit for viable businesses is a functioning banking system — in this case, one which has been well supported by the taxpayer. The Fine Gael motion implies that it is willing to put taxpayers’ money at risk by promoting an all-pervasive loan guarantee scheme and allowing the banks off the hook. It would redirect responsibility from the banks to the taxpayer. We, on the other hand, focus on targeted measures for businesses that are critical to our economy and indigenous export growth.

It is clear that the Government has a multi-faceted approach to supporting small firms. Our strategy includes the provision of one-to-one advice and grants by county enterprise boards and a range of supports from Enterprise Ireland, the delivery of spin-off benefits from IDA Ireland and Science Foundation Ireland activities, our multi-billion euro stimulus programme and our ambitious strategy for international trade and investment. Government is a complex business. The idea of a silver bullet, to which the Opposition seems to turn to mask the absence of a proper economic strategy, is disingenuous and dangerous. The Government will not be distracted from implementing its wide-ranging strategy for economic recovery. This motion is just one more example of the Opposition taking a populist and narrow stance rather than demonstrating an understanding of the complexity of the broader business environment. For that reason, I recommend the Government’s amendment to the House.

Minister of State at the Department of Enterprise, Trade and Innovation (Deputy Conor Lenihan): Information on Conor Lenihan  Zoom on Conor Lenihan  The Opposition motion acknowledges the importance of SMEs to our economy. On the Government side, we have always recognised the importance of the SME sector to our overall long-term economic well-being. As we have improved the business environment, raised our competitiveness and provided direct supports to enterprises through our enterprise development agencies, SMEs have always been at the centre of our policies. That is why we have focused our efforts over the past 18 months on the key issue of credit for viable SMEs to help them get through these difficult times and bring us through the recession.

Our first priority has been to sustain the banks and ensure that credit flows to the economy as a whole. We also want to maintain a pro-business environment where entrepreneurship can flourish so that new and existing businesses can survive and grow. The Minister, Deputy O’Keeffe, has already outlined in detail a number of specific initiatives included in the two recapitalisation packages of 2009 and 2010, including the commitment from AIB and Bank of [79]Ireland in the 2010 recapitalisation package that they would provide not less than €3 billion each for new or increased lending to SMEs in 2010 and 2011.

In August, as part of a series of regional meetings, I attended a meeting in Tallaght, in my constituency, on access to credit for SMEs. Thirty-three representatives from business and farming organisations, including the Small Firms Association, ISME, Chambers Ireland, the Irish Farmers’ Association and the Irish Hotels Federation, attended from Dublin, Kildare, Meath and Wicklow. It was important to hear at first hand the experience of borrowers so that I could feed back their constructive views to the Government, the Credit Review Office and the banks. Since then, Mr. John Trethowan has indicated that the environment for bank customers is much better than it was six to nine months ago. I also note that one of the business representative groups has recently indicated that there has been an improvement in the provision of bank credit to small businesses. This development will no doubt be welcomed by all sides of the House.

If we are to build a much greater number of competitive and innovative companies in Ireland, we will need to see the creation of many new businesses, mostly small and medium-sized, now and in the years ahead. From my perspective as Minister of State with responsibility for science, technology and innovation, STI, our investment in this area is aimed at helping us compete in a highly competitive global market. We appreciate that nations with long-term competitiveness make significant investments in research and development. Recent analysis by the OECD which makes a strong case for public investment in research development and innovation is highly persuasive, particularly in offering a way forward from the economic crisis.

  8 o’clock

In December 2008, the Government reinforced the importance of investment in STI through the paper entitled Building Ireland’s Smart Economy: A Framework for Sustainable Economic Renewal, which prioritised continued investment in science and engineering infrastructure and research. The decision in budget 2010 to allocate €600 million to the STI priorities of Departments, despite the challenging economic times, reinforces the Government’s commitment to STI as a productive investment for the future and an engine of economic growth. In budget 2010, we reoriented the focus of spending on STI. Our goal for this year and the immediate future is to leverage the investment made to date in research and development to obtain a return in terms of jobs and exports while consolidating what has been built to secure long-term growth. The tripling of public investment in STI over the past ten years concentrated on built infrastructure and productive human capital development. After the reorientation, we are now focused on deriving maximum commercial benefit from the investment to date.

For us, building a smart economy depends on the development and application of human capital — the knowledge, skills and creativity of people — and our ability and effectiveness in translating ideas into valuable processes, products and services.

The report of the innovation task force, which was launched in March of this year, provides a roadmap for delivering sustainable new jobs by making Ireland an innovation hub.

There is one way out of this recession, and that is through export-led growth. That export-led growth will be driven by companies that engage in research and development. It is no accident that the 800 companies that work with Enterprise Ireland in research and development are adding to their export share in these difficult two years of recession. It is also a hallmark of the success of the Government strategy that 51% of the inward investment we achieved through foreign direct investment has been in the area of research and development.

Deputy Darragh O’Brien: Information on Darragh O'Brien  Zoom on Darragh O'Brien  I wish to speak in support of the Government’s amendment to the motion. Fine Gael’s motion states that there are over 800,000 people employed in the Irish SME sector. We both agree that it is a crucial part of our economy which needs to be protected [80]as much as possible. We might disagree on some of the detail behind that, but it is important that we are having this debate tonight because I welcome that part of the Fine Gael motion. It is interesting to note that there is no mention of NewERA, which has been binned, or of Deputy Bruton’s magic bank, which has gone, but we will move on from that. Our policies in this area have been incredible.

The Government has improved financial support for over 2,000 companies under the employment subsidy scheme. That scheme maintains over 100,000 jobs in this economy. We are creating long-term sustainable jobs. The Government is supporting enterprise agencies in creating high quality sustainable jobs by attracting foreign direct investment and supporting Irish companies. In the first six months of 2010, IDA Ireland and Enterprise Ireland made over 50 announcements, which have led to the creation of over 4,000 jobs across the country. The pipeline of new job announcements from both these State agencies is very strong between now and the end of the year.

Last year was a very difficult year for foreign direct investment across the world. FDI dropped by 30% internationally, but there was only a 4% drop in Ireland. We brought in €19 billion in new foreign direct investment, which was half of what was brought to the UK. That shows we are continuing to punch above our weight when trying to attract new jobs and investment to this country. There are two crucial reasons for this. The first is that we have reduced our labour costs significantly. Our labour costs and our competitiveness index have improved by 6% since 2005. We have seen a marked improvement in our competitiveness. It has been a shock to the system, but the cost of doing business in this country has dropped. We also have a low corporation tax regime and an educated, flexible workforce. We only have to see what is happening in France this week to understand why flexible workforces like our own will attract high quality jobs into this country. That is good news.

Our exports are holding up very well. The Minister of State pointed out that a major part of the recovery will be export led, because we cannot consume what we produce. Eighty per cent of what we produce is exported. Irish exports fell by 3% in 2009, whereas the international average was minus 20%. Our trade surplus is up nearly 30% to €4 billion. These are facts and figures. They show that we are on the way to recovery.

Capital investment is crucially important and we will be discussing this at length between now and the budget. If we take the €40 billion that will be spent over the next six years, it is very easy, as the Labour Party might point out — it is absent tonight for the second consecutive Private Members’ motion, just like its absence on financial policies — to talk of reductions. We can get more for less with our investments. In my own constituency of Dublin North, the first flight will land at terminal two of Dublin Airport later this month. This terminal has created 900 jobs and many other spin off jobs.

I am very pleased that the Minister for Enterprise, Trade and Innovation has spoken about the county enterprise boards. They do phenomenal work on the ground. Since 1993 they have created a net total of 30,000 jobs. We need to continue to support those boards. They know what is happening on the ground. My own county enterprise board in Fingal is doing a phenomenal job, and I was able to open a new enterprise centre there with over 40 companies up and running. That is the type of business environment we need. We must look at what we can create and what we can do better. I welcome the fact that we are debating this issue tonight. I thank Fine Gael for tabling the motion. Obviously, I cannot support it, but the counter-motion is far more realistic.

Deputy Seán Fleming: Information on Seán Fleming  Zoom on Seán Fleming  I welcome the opportunity to speak in this very important debate. We all have to concentrate our efforts in the days, weeks, months and years ahead on small business [81]and employment. It is the key growth area for our economy and we know the vast majority of people in the private sector are working in small businesses. Many of these are single operators that may have a small number of employees, but people often do not realise that there are such active businesses in their area. However, these businesses are often keeping people in employment in cities, towns and in rural areas.

I am a little bit disappointed by the motion put forward by Fine Gael tonight. In recent times, it has begun to grasp the economic difficulties that the country is facing and it has been very responsible in its approach. After all we have been through with the banks, trying to get to the bottom of the reckless lending by these institutions, I am surprised that Fine Gael would put down a motion asking the Irish taxpayer to give a loan guarantee scheme for businesses that would involve risk sharing between the financial institutions——

Deputy John Perry: Information on John Perry  Zoom on John Perry  The Government can give billions to the banks.

Deputy Seán Fleming: Information on Seán Fleming  Zoom on Seán Fleming  I am reading directly from the Fine Gael motion, which “calls on Government to introduce a loan guarantee scheme for small and medium sized businesses based on ... risk-sharing between financial institutions and the State”.

Deputy John Perry: Information on John Perry  Zoom on John Perry  The Government bailed out the banks.

Deputy Seán Fleming: Information on Seán Fleming  Zoom on Seán Fleming  Fine Gael is pushing a motion in this House asking the Irish taxpayer to take on more risk on behalf of the Irish banks for a loan guarantee scheme.

Deputy John Perry: Information on John Perry  Zoom on John Perry  There is no risk with the banks.

Deputy Seán Fleming: Information on Seán Fleming  Zoom on Seán Fleming  I think the motion is a little bit out of date. I could understand if somebody put down that motion two years ago when we did not understand things, but to come in here tonight and state that the Irish taxpayer should take on further risks on behalf of the banks is a concept with which I cannot remotely agree. The general idea of supporting local business is good——

Deputy John Perry: Information on John Perry  Zoom on John Perry  The Deputy should say that to the small business owners in Offaly.

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  Please, allow Members to speak.

Deputy Seán Fleming: Information on Seán Fleming  Zoom on Seán Fleming  ——but the specifics are out of kilter. I would be amazed if people outside the House would agree that we should ask them to take on more risk on behalf of the banks.

Deputy John Perry: Information on John Perry  Zoom on John Perry  My God, the Deputy is getting a conscience now.

Deputy Seán Fleming: Information on Seán Fleming  Zoom on Seán Fleming  The Labour Party is not here, so I do not know if it subscribes to that. However, I doubt that it does.

Other measures are being put in place. A code of conduct for small and medium-sized enterprise lending is up and running and is very effective. A credit review committee is being chaired by John Trethowan and it makes sure that loans are being paid out. There is a fund of €12 billion over two years between AIB and Bank of Ireland to provide loans to local businesses. Partnership companies and county enterprise boards are in receipt of such loans.

Change is happening. Three different business delegations have come to see me at my office in Castletown, County Laois. The first was a small manufacturing export company in County Laois that has 22 employees, and it wants to increase its market in the EU. The second was a specialised company in the construction industry with six employees and it cannot keep up with [82]its work. The third was a sales and sales support high-tech ICT company from Portlaoise that now employs 25 people, even though it did not exist two years ago. It wanted access to the metropolitan area network and additional office space in the town so that it could increase its services. Last Saturday I met representatives of these three businesses in Castletown and I believe the shoots exist but we need to nurture them. I am not saying we have turned the corner, but I believe we are on the right track from the Government’s point of view.

Deputy Seán Sherlock: Information on Sean Sherlock  Zoom on Sean Sherlock  The sun may be shining in Castletown——

Deputy John Perry: Information on John Perry  Zoom on John Perry  Electioneering.

Deputy Seán Sherlock: Information on Sean Sherlock  Zoom on Sean Sherlock  ——but I know other businesspeople who are being put to the pin of their collars by the Revenue Commissioners and other agencies of the State whereby if——

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  I understand the Deputy is sharing time.

Deputy Seán Sherlock: Information on Sean Sherlock  Zoom on Sean Sherlock  I apologise, a Leas-Cheann Comhairle, I forgot to ask if I could share my time with Deputies Morgan, Penrose and Upton.

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  That is agreed.

Deputy Seán Sherlock: Information on Sean Sherlock  Zoom on Sean Sherlock  I am aware of businesses in the small to medium-sized enterprise sector which have the ability to trade their way out of their difficulties, some of which have already reached agreement with Revenue on excise, VAT returns, income tax etc., but now find that some of the agencies of the State, including Revenue, because there is such a clamour to get money in, are changing those terms somewhat. It is something that needs to be examined. The motion refers to the SME sector, the loan guarantee etc. However, we need to look to the wider aspect and the potential of the SME sector within the economy. Where Revenue is now putting the squeeze on businesses that have the capability to trade their way out of difficulties, we respectfully suggest there might be some word from some Minister to suggest to Revenue that while it will get the tax due and every person will maintain his or her responsibility for that, it should be more relaxed in lengthening the terms so that some of these businesses are not put out of business for want of better terms from Revenue and other State agencies.

While it is said there is an oversupply of houses in the market, at the same time some businesses are still willing to build houses because there is still a demand by people, in rural areas in particular, who want to build, for example, one-off houses on family-owned land or in localities with which they have a connection. Many people of my generation who have received mortgage approval are finding that such approval lasts for only three months. However, a small building company cannot operate on the basis that someone has approval for only three months. Extending the approval to six or nine months would also help small building firms, most of which are family-owned and intergenerational, to get up and running. It is a case of looking at things more laterally.

I would also like to concentrate on the issue of the regulatory burden ascribed to the small to medium-sized enterprise sector. On 2 June, Mr. Seán Gorman, chairman of the high-level group on business regulation at the Department of Enterprise, Trade and Innovation, attended the Oireachtas Joint Committee on Economic Regulatory Affairs to discuss the work of the group in identifying ways to reduce the administrative burden on business arising from regulation. The high-level group was established in 2007 to act as the fulcrum which Government, business and unions could tackle issues such as administrative burdens and red tape issues, and propose simplification procedures to reduce SMEs’ cost burden. According to the terms of [83]reference of the group as elucidated by Mr. Gorman “its remit is to identify the administrative burdens placed on businesses, in particular small and medium-sized enterprises, arising from regulation or other administrative requirements, particularly in the areas of taxation; health and safety regulation; employment law; environmental regulations; company law and statistical returns; to determine ways to reduce and simplify administrative burdens and to eliminate them where they are unnecessary.”

The bottom line for the group was to reduce the paperwork associated with regulation, and simplify and streamline the information flow between business and Government. The question for the group is whether it has achieved its aims and whether adequate resources are attributed to this task.

Since 2008 the CSO, in co-operation with the Department of Enterprise, Trade and Innovation, has adopted its standard cost model to compare the results. Mr. Steve MacFeely of the CSO, who also addressed the committee that day, stated:

Compared with the figures for bank bailouts etc., €10 million is probably minuscule. For a small business, however, perhaps a sole trader or a business employing fewer than five people, reducing that kind of cost would increase turnover and should be considered.

The Labour Party would seek to address the baseline target. If the target is a reduction of 25% by 2012, it would appear there is not enough departmental staff to deal with the high-level group aspirations adequately to move forward the agenda. I am not convinced that any target has been reached to date in reducing the regulatory burden for small businesses. A new political impetus should drive this agenda and no more lip service should be paid to reducing the cost burden. The Government has signed up to an EU target in this respect. The challenge facing us now, given that this process started in 1999 and has been through two transitions, is that we are in an economic downturn. There is a serious urgency about this because of the cost implications for those same businesses.

There is a 25% target for 2012 but it must be remembered that the SME sector is under significant pressure. We clearly should have had a yearly target. The high-level group has met only five times in 2009 and if the need to reduce the regulation burden on businesses is critical then the group should meet monthly. This is a view that was proposed by Deputy Kieran O’Donnell when the high-level group appeared before the committee.

The group is examining five key areas where businesses have stated they have issues. These include the burden of complying with tax law, health and safety, employment law and environmental regulations. The fifth area is company law and the related area of statistical returns. At a recent meeting of the Oireachtas Joint Committee on Economic and Regulatory Affairs, I questioned the high-level group on the cost burden arising from the work of the Health and Safety Authority. I did so on the basis that we wanted the cost of health and safety measures reduced without compromising the safety of workers. On health and safety, the administrative costs associated with the IO/20 risk assessments were €167 million, and €146 million for the IO/13 safety statements. As a percentage of the overall cost burden, these amounted to 51% and 44%, respectively. How, in practical terms, is it proposed to reduce the burden of these two areas by 25% by the end of 2012?

[84]I am somewhat sceptical about the targets being reached. It needs a new political impetus. What I am saying does not necessarily speak to the motion, but in terms of the spirit of the motion and giving some kind of a fillip and assistance to the SME sector, we also need to review the regulatory burden the sector is facing.

Deputy Arthur Morgan: Information on Arthur Morgan  Zoom on Arthur Morgan  I thank Deputy Seán Sherlock in the Labour Party for sharing his time with me. I very much support this Fine Gael motion moved by Deputy John Perry. He has a way with understatement, given that one of the bullet points in the motion states “- notes with concern that small businesses are still having difficulty accessing credit through financial institutions for a variety of reasons”. By God that is true. There is less than a trickle coming through. The few tokenistic measures taken by Government are not doing anything to improve the position. The Deputy’s next bullet point states “- recognises that the Government strategy of NAMA and bank recapitalisation has not produced a ‘wall of cash’ in credit for small business promised by the Minister for Finance”. That is certainly true as well. Rather than a wall of cash in credit having been produced for the SMEs a wall of isolation has been built around them in terms of their ability to obtain funding. The Government has done nothing practical to ensure that they will be funded. Admittedly, it has put some money into the banks and ticked the box that it is to be lent to the SME sector but that has not happened.

I will spend a few minutes to go through the speech of the Minister, Deputy Batt O’Keeffe, which I found most interesting. He took a different attitude from Deputy Perry to the subject of this motion. He said: “I want to take this opportunity to again acknowledge the extraordinary work done by the Minister for Finance to address the banking problem.” Why would he not commend the Minister for Finance on that, given that he has done nothing else only address the banking problem in the past two years? That is not only true of the Minister for Finance but the entire Government has been dug into addressing the banking system and has ignored the rest of the economy. It could care less about it and it has done nothing positive to bring a solution, initiative or stimulus to the SME sector — so much for commending the Minister for Finance on what he has done. The Minister has not produced a wall of cash in credit for the SMEs, rather he has built a wall of isolation around them.

The Minister, Deputy Batt O’Keeffe, also told us about the code of conduct for SMEs. Whatever about other regulated agencies, the banks have danced a merry jig around the Government since the evening in September 2008 which they walked into Government Buildings and wagged the finger at the Taoiseach and the Minister for Finance. They have danced a merry jig around the Government since. If the Minister says they have not done so and if he is aware of what they were at, he must have been compliant in what they were doing. He must be supporting their carry on in not revealing — if they did not — the accurate situation to the Government. Which is the position? The Minister cannot have it both ways. They either danced a merry jig around the Government or the Government was playing along with them. Either way, the comment of the Minister, Deputy Batt O’Keeffe, about this code of conduct being some kind of a lifesaver for SMEs is nothing short of ridiculous.

The Minister also said: “Firstly, the Credit Review Office is making a major contribution——

Deputy John Perry: Information on John Perry  Zoom on John Perry  It is doing nothing.

Deputy Arthur Morgan: Information on Arthur Morgan  Zoom on Arthur Morgan  ——to dealing with the outflow of credit.” Some 20 cases have been referred to that office since it opened and it has dealt with ten of them. It found in favour of five and in the other five cases it found in favour of the banks. What should we take from the message that sends to the sector? If the Minister does not know the answer to that, I will give him a hint. It means that the SME sector has no faith whatsoever in that office, although I [85]acknowledge the sound character of the credit reviewer. I acknowledge Mr. John Trethowan’s credibility but the office and the way it was established by the Government and the relationship between the Government and the banks is such that SMEs would take one look at that office and say: “Thanks but no thanks, hang on to your so-called Credit Review Office, it means nothing for us.” That is the message about that office that is being taken by the sector; no could message could be taken from it.

Mr. John Trethowan said the “worst is over” for small business borrowers.

Deputy John Perry: Information on John Perry  Zoom on John Perry  That is not the case at all.

Deputy Arthur Morgan: Information on Arthur Morgan  Zoom on Arthur Morgan  Where did we here the words that the “worst is over” before? The last time we heard those words was from the Minister for Finance when he had introduced the bank guarantee scheme and was introducing the legislation setting out the terms and conditions of it, which left the option wide open for the banks to continue to play their merry jig and thumb their noses not only at the taxpayers but at the European institutions. We are supposed to believe there is credibility there.

The “worst is over” comment of the Minister for Finance reminds of another comment he made in the budget before last when he said that people should do their patriotic duty, by which he meant they should not go across the Border to buy a can of beer. I would like to see the patriotic duty of this Government given some practical and credible leadership in working its way out of this economic crisis by dealing with some issues such as giving SMEs some vibrancy through a stimulus package. We have not had a stimulus package. Admittedly, there have been job announcements. We have had more than 600,000 job announcements by the Government during the past year, but where have the jobs been created? There has been a trickle of jobs here and there, but job creation, as such, is not happening.

I caution other Opposition parties — who may not be in government with us if we have a good enough election performance on the next occasion — that the Government is trying to fool the people into believing that it was going to create these 600,000 odd jobs, but, guess what, the electorate turfed it out, it did not get to do that, the new Government will not do the business and the people should have stuck with it, or some such nonsense. In any event, what it amounts to is that we have a Government of announcements and not a Government of action.

There are few other gems in the Minister’s speech. He said: “We are also investing in small firms [I give him credit for this] — in the earliest stages of development via Enterprise Ireland’s €175 million seed and venture capital programme.” I commend that; I only wish the fund was bigger. I know that seed and venture capital investment is high risk but when such investment works it yields a huge return, and it has worked substantially in recent years. I acknowledge that. It is one area of investment which, although it is high risk, is useful.

The Minister also spoke about increasing “the number of new export focused jobs” and he made an another announcement of 150,000 jobs. It is probably the fourth time that was announced but there is no substance to it.

I have wasted too much time on the nonsense about which the Government is talking. I am not a Fine Gael supporter but the Minister said that “The Fine Gael motion ... [was] promoting an all pervasive loan guarantee scheme and allowing the banks off the hook”— such a comment from a Fianna Fáil Minister. I am sorry for laughing; I would rather not laugh and get on with addressing the seriousness of the business in hand. However, that comment is so ridiculous and ludicrous that it is worse than pathetic. An Opposition party in this House is being accused of letting the banks off the hook when characters are swanning around America, Seanie and few characters are still swanning around this town while the rest of them are sipping [86]champagne in fancy restaurants in Spain and celebrating the fact that they got over there. Deputy Perry, or whoever will reply to this debate, should remember that the Fine Gael Party is letting the banks off the hook. I would like to hear that party’s response to that comment.

In regard to providing credit to SMEs, they simply are not getting it; it is a very light trickle. The consequences of that is that one business is not paid by another and, consequently, it cannot pay its suppliers. Therefore, a domino effect is occurring across the board which is resulting in the loss of viable jobs and the closing down of viable businesses and that will continue to happen until the Government stops its bluff and bluster. It will continue to happen until such time as the Government finds a bit of backbone somewhere or someone on the opposite side, with a segment of entrepreneurial spirit, says to the Taoiseach and the Minister for Finance, “Lads, cop on; you are making a muck of this; you are costing hundreds of thousands of businesses to close and hundreds of thousands of jobs to be lost — viable companies, viable jobs.” They should wise up and get off the scene. We should hit the decks and have an election. Let us clear this up once and for all and see where the mandate lies and, hopefully, somebody will come in to pick up the pieces before it is too late.

Debate adjourned.

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