That Dáil Éireann:
seriously concerned at the crisis situation now facing many small and medium sized enterprises arising from the credit famine and which is contributing very significantly to the massive increase in unemployment levels;
condemns the refusal of the banks to make available the normal credit streams which are the lifeblood of such companies;
deplores the failure of the Government to either ensure the banks make credit available or to provide alternative sources of credit;
expresses its further concern that failure to take urgent action will result in the collapse of many such companies within weeks and a further serious increase in unemployment;
calls on the Government to:
establish a Small Business Operational Fund to ensure that credit streams are made available to small and medium sized firms, drawing on the €15 billion Small Business Operational Fund established in September by the European Investment Bank, which Irish banks have so far refused to access;
assist such firms by ensuring that Government departments and agencies settle their bills within ten days, rather than the current 30 days;
establish a monitoring group made up of representatives of the Government, small and medium sized enterprises and the banks to monitor the lending practices of the financial institutions; and
strengthen the role of the County Enterprise Boards by removing the limitation on the type of enterprises the Boards can support and raising the limit on the number of jobs they can create above the current figure of ten, as well as a significant increase in Measure 1 funding to maximise their potential for job creation.
This is a simple motion in its content and intent but it addresses an issue that is pressing and vital. Small businesses in Ireland are facing a credit famine. The banks are not extending credit to small and medium sized enterprises. Instead, they are taking every opportunity to tighten terms and impose serious charges and restrictions upon existing customers. What chance do new customers have of getting a penny when they are behaving like that with existing customers?
This problem is not new. It has been going on for months but it was not addressed and is now at crisis levels. Had action been taken when this problem first came to light, we would not now be in this extremely difficult position.
What is at issue in the Labour Party motion is the survival of hundreds of businesses and possibly tens of thousands of jobs. What we are now facing is not businesses closing because they are not profitable, although that will happen, but profitable businesses closing down simply because they cannot get access to credit. That is a shame, and the Government must take responsibility for that along with the banks.
All businesses rely on credit. One needs credit to fill the gap between completing a job and getting paid and between paying someone for necessary supplies or meeting one's payroll and getting paid oneself. It is as simple as that. It is about cashflow, not profitability, yet across the country small business is finding it increasingly more difficult to access credit.
A recent ISME survey found that 54% of companies surveyed had been refused applications for new finance and-or the extension of existing credit lines. A striking feature of the results is that a similar survey in August revealed that 20% of companies at that stage had difficulties, confirming the escalation of the crisis in less than three months. In less than three months, therefore, we can measure the extent to which the crisis escalated and, in parallel terms, measure the apathy and lack of conviction of this Government to tackle a crisis that was as apparent as the nose on one's face. Of the 46% of successful firms, 38% could not meet the conditions attached by their banks to secure additional funding. Some banks are engaging in acts of usury. They are adding €40,000 or €50,000 for rearranging finance. That type of action drives people out of business. They are putting 1.75% on loans when people are already struggling.
It is time to call a halt. The Government helped out those banks in their hour of need but those of us in the Labour Party did not support that because we wanted to attach conditions to that guarantee to ensure they would not behave as they are currently. We wanted to make sure that in terms of the liquidity they were being guaranteed, that money would be made available to small and medium sized businesses but it has not happened and no amount of distortion of the figures can obliterate that fact.
These are not new businesses we are talking about — some 50% of them are in existence for more than ten years, with 74% in existence for 20 years or more. The Minister should know there are no mushrooms here. They are long-standing businesses that are suffering as a result of the credit crunch. The problem has reached the stage where the Small Firms Association estimates that up to 800 jobs per week are being lost in the SME sector. That is a phenomenal figure. What will happen next year if there is not immediate intervention? That is the reason we have tabled this motion.
The question that now must be focused on is one which the Government has an obligation to directly address. Why is it the case that the Government, after riding to the rescue of the banking sector on behalf of the Irish people, has not yet prevailed upon the banks to loosen the purse strings and make credit available to small businesses? Why has the Government, which rushed legislation through the Houses of the Oireachtas to protect the economy from the havoc that would be wrought from a banking system collapse, not exercised its muscle to put in place a plan to combat the recession and provide the necessary stimulus to reflate the economy and take a leaf out of our neighbour's proactive and positive attitude adopted in its pre-budget report yesterday? Is it ineptitude, inertia or indifference that gives rise to this perplexing state of affairs?
I refer to a local business to illustrate the points I am making. It concerns a local man, Johnny Owens, of Owens Concrete Limited, Gaulmoylestown, Knockdrin, Mullingar, County Westmeath, which is situated in a small, beautiful rural area outside Mullingar. It is home to my Labour Party colleague and land agitator, Councillor Dan McCarthy. The Minister should know that if Dan McCarthy were here, the roof would be gone. Johnny Owens started his business in 1972 and, with his family, built it up in the past three decades. It provides up to 140 jobs but in recent days he had to let staff go. These were people whom he said he knows well and with whom he worked hands-on for many years. It pained him to have to tell them last week, with just four weeks to go to Christmas, that he could no longer keep them on. He is deeply concerned that if things do not loosen up, of the 85 or 90 people remaining, he will have to let another 50% of workers go as he will have no work for them.
This is an area in the heart of rural Ireland, and the Minister can imagine the heartache and turmoil those unfortunate people will suffer in the next few months. These are people with commitments to mortgages, car loans, school fees and other household expenditures. Is there any concept on the Government side of the magnitude of what is happening in the real economy, which is not sheltered in any shape or form?
In the local newspapers Johnny Owens stated: "I am expecting to be forced to get rid of more workers when the Government's Farm Waste Management Scheme comes to an end in December." I visited him at his home last Saturday; I wanted to know if I could use his name in my contribution. I know him and his family since my early childhood. The man could not fathom how the Government could not see its way to extend the deadline for the farm waste management scheme, for which farmers were also calling. It affects 8,000 farmers, some of whom have work that is ready to start. Does the Minister know we had a bad summer? There were three months in which one would not put a duck out on the land, let alone machinery. We want that scheme extended because of the three months of inclement weather during the summer.
Is there any pretence of joined-up thinking or integrated Government operating on the Government benches? Surely any money expended comes back into the Exchequer through income tax — keeping workers employed, VAT and through helping protect other downstream jobs, especially in a challenging environment for the rural economy.
What Johnny Owens has to say represents what one hears from the thousands of small businesses across the country who provide the backbone of employment in so many of our communities. It is what one hears from Patricia Callan on behalf of the Small Firms Association, from Mark Fielding on behalf of ISME and other leaders of these industries. I want to quote Johnny Owens in full from statements he made to the local newspapers, theWestmeath Examiner and the Westmeath Topic. He stated:
After spending your life building a business from nothing, starting out with just 40 pounds, and not sparing yourself, and to go where we were, and borrow a lot of money along the way, it is very hard to tell people who have helped build up the business that you've no work for them [this is the punch line so the Minister should listen carefully] especially when you look at so much money squandered in so many other directions. Banks lending over 100% in mortgages, and now unwilling to lend money at all, and instead acting like the ‘grim reaper' towards those who got the money. Why is there no accountability from the people who lent the money recklessly, and how should we arrive at a situation where the Government, a year or so ago, predicted a €9 Billion surplus, and now we are being told there is likely to be at a minimum a €11 billion deficit? Can someone tell me where the €20 billion is gone, or what it was spent on?
I would like someone to explain just how this country got so far into the red. We are bailing out the banks for the mistakes they have made, but they are showing us no mercy when it comes to the crunch, they will still have to get back their pound of flesh.
This is not Labour Party propaganda but reports from the local newspapers under the headlines "Concrete business owner hits out at ‘squanderers'" and "Mullingar job losses cause heartache". This is not black propaganda against the Minister. These are direct words from a man who started out with his family in a cottage. I, too, come from a cottage. Mr. Owens's father, the Lord be good to him, was a county council worker with my father. I was very proud of his achievements, building up an industry in a rural area with 140 jobs, plus at least another 80 indirect jobs. This is a rural area. He contributes to everything and is a tremendous community man. Stories like his litter every village, constituency and community in this country.
This calls for one simple, little stroke from the Minister for Finance, instead of allowing the finance mandarins to run amok over him. If I were Minister for Finance the farm waste management scheme would be extended until next June. They are extending it in Northern Ireland. Forget about the eurocrats. Tell them that is why there was a "No" vote in this country. Tell them looking for a green cover six weeks after tilling was the reason there was a "No" vote in this country. I would not allow bureaucrats anywhere in Europe to tell a sovereign country how to behave. We are capable of running our business. The farm waste management scheme is one of the reasons there was great reluctance. The rural community knows this. I visit the houses of rural people. They know this scheme is being terminated without all the jobs being completed and all the necessary farm work completed, and that is why people are being laid off.
In this motion, rather than engaging in rhetoric, we have decided to let the real people be the mouthpieces through which we convey the seriousness of the situation. This seriousness underpins the cases upon which we mount the call for the very minimum, the four point plan of action which forms the core of this motion. We expect the Government will have no difficulty implementing it. I saw the blasé amendment and nearly fell off the chair. We are doing this in an effort to combat the recession and ignite a spark of recovery.
In the context of the plan unveiled by the British Government yesterday, especially regarding the 2.5% reduction in VAT, much more is required if we are not to witness thousands more jobs being put a risk. The disadvantage in VAT rate impositions is now a clear six percentage points and will lead to a further significant boost in cross-Border shopping and see shops of all sizes across the country suffering further falls in revenue, leading to a vicious cycle of further job losses. Lower prices in Northern Ireland and a favourable sterling exchange rate represent further challenges for this economy.
We must recognise these factors and not just say that is the way of the world and attribute them to the global economic recession. There is a recession but we are a sovereign country and we can intervene and take steps. We must be proactive in coming up with a plan to win back our competitive advantages. Old solutions dusted down and pressed into new bottles will do nothing for us, so the Government must rethink its strategy, which appears to focus purely upon fighting the recession. My colleague, Deputy Burton, who is an expert in this area, found 17 additional taxes in the Finance Bill. How many pages of the Finance Bill dealt with efforts to breathe life into our clearly ailing economy? We had a visionless budget lacking in imagination, with all the hiccups we saw over the last number of weeks. This is clearly the hallmark of a tired, jaded and, most important, out of touch Government.