Amendment No. 1 has been ruled out of order because it introduces a charge on the Revenue.
Credit Guarantee Bill 2012 [Seanad]: Report Stage
Can I comment on that?
There is no provision for comment when an amendment is out of order. Perhaps you can refer to it when you speak on amendment No.2.
Amendment No. 1 not moved.
I move amendment No. 2:
In page 8, to delete lines 13 to 19 and substitute the following:
"6.—A credit guarantee scheme shall be debated by both Houses of the Oireachtas prior to sanction by the Minister.".
We are basically dealing with an enabling Bill which provides that the Minister for Jobs, Enterprise and Innovation may, with the consent of the Minister for Finance, introduce a scheme whereby the system will operate. When the scheme is ready, there is provision in the Bill so that it will be published and laid before both Houses of the Oireachtas. I presume that will be in the Library. If a motion annulling the scheme is not introduced within 21 days, the scheme takes effect.
The scheme is the very basis of how the system will operate. This is a very important scheme. It enables businesses that are starved of credit to access credit and to help get the economy going. We have a situation in this country where the banks have been literally stuffed with capital - the Minister for Finance admitted this - not because they are venerable institutions or because we want to preserve them for their own sake, but to enable them to lend into the business community so we can get growth and employment going again in Ireland. The banks have not adhered to their side of the bargain. By and large, lending from the established banking system to small businesses has been abysmal. The Minister of State need not take my word for that. As recently as three days ago, the CEO of the Credit Review Office essentially confirmed that.
The scheme, which this Bill enables the Minister to introduce, is all important. It will contain all the fundamental details that people are asking us about in our clinics, such as the kind of businesses that will be covered and the position on personal guarantees. If lending is 75% guaranteed by the State, will the lender still be entitled to ask for a personal guarantee? What about the situation concerning the private residence of the person from whom that personal guarantee is extracted? These are pretty fundamental details which should be debated by both Houses or at a minimum, be debated in the separate committee on enterprise. I am sure this will be done, but it would provide a good signal if it was written into the legislation that it shall be done. These are the questions people are asking.
Even though it is only an enabling Bill, it has been a very long time in gestation. This scheme has been promised on numerous occasions for the past 15 or 16 months. I appreciate that at the time of the change of Government, insufficient work had been done in the Department. Judging from the Department brief that was handed to me, some work had been done on looking at such a scheme, but the work was in its infancy. I appreciate that it takes some time, but we are 15 months down the road and we only have the enabling Bill. It only provides that the Minister may make the scheme. There are only some general provisions in the Bill.
I put down an amendment to ensure the scheme would be in place within 60 days of the passage of this Bill through both Houses. It was deemed to be out of order because allegedly it was a charge on the Exchequer. I have racked what is left of my brain to see how this could possibly be a charge on the Exchequer. I know this is not the responsibility of the Minister as it is the responsibility of the Bills Office, so I hope they are listening. The only way what is proposed could represent a charge on the Exchequer would be if the scheme were not to come into operation within 60 days of the passage of the Bill through both Houses of the Oireachtas. Is the Government really saying to people who have been crying out for credit, who are hanging on by their fingertips and who have been promised this scheme for the past 15 months that it will not be in operation two months after the Bill has been passed by both Houses and signed by the President? The latter will happen by the end of the current session. Is the Government not giving a guarantee to the effect that the scheme will be in operation by September or October? How much longer will we be obliged to wait? What I have outlined is the only logic I can detect with regard to the position of the Bills Office.
I am aware the Minister of State cannot accept amendment No. 1 because the Bills Office, in its wisdom, has deemed it to be out of order. However, I ask him to provide a firm commitment to the House that the scheme will be in operation within 60 days of the passage of the legislation before us through both Houses of the Oireachtas. I am not seeking to make a political point or to be politically confrontational. I am seeking the commitment to which I refer in the interests of every small business owner and sole proprietor in the country. These people are crying out for extra credit and this scheme means a great deal to them. I am of the view that the scheme is overblown and that it will not have the desired impact. The cap that is envisaged is too tight and the types of loans that will be allowed under the scheme are far too restrictive in nature. To some degree it pales in comparison with the British scheme on which, in many respects, it is modelled. The fact that it is modelled on the British scheme makes the delay in implementing it even more inexplicable.
The least those in the credit-starved business community deserve is for the Minister of State to provide an assurance such as that to which I refer. He must give a firm commitment that the scheme will be in place within 60 days of the passage of the Bill through both Houses of the Oireachtas. If he does not want to accept amendment No. 2, I ask the Minister of State to provide another firm commitment that, at a very minimum, the Select Committee on Jobs, Enterprise and Innovation will be given the opportunity to discuss the scheme in some detail before the Minister for Jobs, Enterprise and Innovation finally signs off on it. I am also seeking a commitment to the effect that the Minister of State and his senior colleague, Deputy Bruton, will be open to suggestions on how the scheme might be improved and that the committee will not be expected to discuss it in an academic way or to simply rubber-stamp it. The committee should be given the right to have an input into how the scheme will work. The scheme is vital and relates to saving businesses and creating jobs. In that context, we all have contribution to make.
The scheme will not be debated. Best practice is to lay schemes before the Oireachtas and not to engage in debates on individual schemes. I cannot accept amendment No. 2, the purpose of which is to have the scheme debated. On Committee Stage, the Minister, Deputy Bruton, clearly indicated he was unwilling to engage in a further full-blown, policy-based discussion on the temporary partial loan guarantee scheme when presenting it to the Oireachtas. The time for policy-based discussions is during the presentation of Bills to the Oireachtas, not on the presentation of secondary legislation. I understand Deputies were offered the opportunity to contact officials from the Department in the interests of discussing the draft scheme. I am not sure whether, to date, any requests in this regard have been received. To my knowledge, they have not but the matter is open to clarification.
The operator of the scheme is currently running workshops with the banks. The target date for going live with the scheme is August. As soon as the Bill is enacted, we will be in a position to try to ensure we meet this target.
Many of the arguments that have been put forward by Opposition spokespersons were also put forward in the previous debates on the Bill. The Minister has been definitive in the context of replying to those arguments.
It ill behoves the Minister of State to say the time for policy-based discussions is at an end. The delay in respect of this legislation have been exclusively on the Government side. To date, there has been a delay of 15 or 16 months. All I am seeking is that we engage in a policy-based discussion, which might take no more than a couple of hours, before the scheme is finally signed off on. Surely, holding such a discussion will not make any material difference in the context of when the scheme is going to come into operation.
I wish to correct the Minister of State in respect of a few points. I accept that Members were invited to contact departmental officials regarding any matters they would like to see contemplated by the scheme. I already made a number of suggestions in respect of the scheme on Second Stage and Committee Stage. I sent copies of those to the officials in the Department. In addition, some of those officials were present for the debates on the Bill and heard what I had to say. In such circumstances, I do not believe I should be obliged to go through the process of contacting them again. It is not just a question of contacting the officials of the Department while a scheme is being prepared. I am seeking that the House, as represented by the Select Committee on Jobs, Enterprise and Innovation, should be in a position to see the final version of what the Government is proposing, to discuss it and the merits and demerits of various proposals relating to it, and to have an input in respect of it. Is that not what we do here all the time in any event? If we take the Minister of State's logic to its ultimate conclusion, it would mean we would be invited to make submissions in advance of legislation being produced but that when the latter is finally introduced, we would not be in a position to make any further comment on it.
The idea behind debate and discussion is that everyone has an input into the final product. With respect, the Minister of State and his Department do not have a monopoly of wisdom. I informed my party colleagues that I would not call a vote on this amendment. I am seriously tempted to press it to a vote now but I will not do so. I am flabbergasted by the Minister of State's comment to the effect that the scheme will not be debated. If he does not want to accept the amendment, that is fine and I will not press the matter to a vote. His boss, the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, unequivocally informed us on Committee Stage - we can access the record in this regard - that the committee would have an opportunity to debate the scheme when it was produced. Unless my memory has completely deserted me, that is precisely what the Minister stated. I will check the record shortly to confirm that. Is the Minister of State indicating there will not be any facility provided in order that the scheme might be discussed? That is what I understood him to say. I would like clarification on that matter.
I do not know if Deputy O'Dea is playing politics with this issue-----
No, I am not.
-----but I suspect he is doing so.
I would not be the only one to do so.
There is no precedent which would prevent the scheme, once it is up and running, being debated by the committee. There is no lack of clarity on my part or that of the Minister, Deputy Bruton, in respect of that matter. The Bill before the House is enabling legislation and the scheme is the subject of a procurement exercise. There were actually two such exercises carried out in respect of the scheme, one for the design consultant and the other for the operator. The Deputy is a former Cabinet Minister. He would have had control over policy in the various Departments in which he served and he knows exactly how the game is played in respect of these issues. He is also aware we are obliged to comply with the timelines relating to public procurement.
It took time to draft the legislation and deal with the various technical details involved. However, this was necessary to ensure we got it right. The process is all but complete and we want to ensure we will be in a position to roll out the scheme in August. If the committee wants to discuss the scheme thereafter, there is absolutely no issue in that regard.
That is a given. It is a fundamental democratic principle that the committee be given that opportunity.
Gabhaim buíochas as ucht deis a bheith agam labhairt ar an mBille. Rud an-thábhachtach é. In the last while I have been before the Minister and a number of others to discuss the Bill and the issue of credit as it affects small businesses. If anything, I can be criticised for barracking the Minister and his colleagues on the need for speed in getting funding to businesses. Every day five businesses go to the wall. This is shocking for the individuals involved and their families who have invested so much time and effort in trying to grow businesses. It also has an enormous effect on the domestic economy. It is part of the reason jobs are being shed at such a rate. It is, therefore, important that a response is made as soon as possible. Sinn Féin will not try to slow this process in any way.
This is happening because the banking system, the job of which is to fund small businesses and which has received €64 billion from the Government and its predecessor, is not, according to business sector organisations, fulfilling that responsibility. The Irish Small and Medium Business Enterprises Association, ISME, states 50% of its members are not receiving the funding they are seeking. The Bill is to target €150 million in a three year period. That amounts to between 2% and 4% of the funds needed by the business community. This is not sufficient to deal with the problem; therefore, the problems in the banks cannot be ignored.
My party tabled a number of amendments to the Bill on Committee Stage. In an effort to make loans more accessible, we sought to reduce the 2% so-called administration charge being levied on them. The businesses seeking loans will be under pressure and, therefore, less able to pay extra amounts over and above normal credit costs. However, our amendments were ruled out of order, whether by the Bills Office or the Ceann Comhairle, because it was claimed they would involve a potential charge on the Exchequer. We proposed that administrative costs be included, but that they should not amount to 2%.
I agree with my colleague on the Opposition benches that it is important to include in the Bill elements that will make its provisions happen faster and put money in the tills of the businesses which need it. Every day we prevaricate five businesses will go bust. People will be lost to the State through emigration; jobs will be lost and there will be a further reduction of the domestic economy. I appeal to the Minister to do everything in his power to ensure this happens fast.
All Opposition parties submitted amendments regarding the 2% charge. In fairness to the Minister, Deputy Richard Bruton, he accepted the spirit of these amendments and has made substantial modifications to the 2% charge which are very acceptable.
I find it personally hurtful that the Minister of State has accused me of playing politics. I am not. I believe in anything that will improve the flow of credit to business. I want the scheme to go through as quickly as possible. I could just as easily claim Members on the other side of the House were playing politics when they promised the scheme 37 or 38 times in the course of the last 15 months, but I will leave that matter to one side.
The Minister of State made an interesting observation in his reply to me. He said I, as a former Cabinet Minister, knew how the game was played. I thought this was to be a new era. I thought the old games and systems were to be consigned to oblivion, that we were entering a brave new world of openness and transparency and that we were going to do things differently. Was that not the mantra?
We can, of course, debate the issue after the event. However, we should be given the opportunity to discuss the details. The Minister is aware that relevant details about personal guarantees, types of schemes, upper and lower limits for loans and this, that and the other are not included in the Bill. It is an enabling Bill and very general. Before the meat of it comes into operation, people of all persuasions who are represented on the committee should discuss it. They might come up with a couple of good ideas that would force the Minister to change his mind on a few issues, but if that is not to happen, so be it.
The Bills Office, in its wisdom, has ruled my amendment about the 60 day deadline out of order on the basis that it would impose a charge on the Exchequer. That does not prevent the Government from making the amendment. It can impose whatever charge it wishes, real or imaginary, on the Exchequer. The Minister of State said August was the target date. I welcome that announcement as August is within 60 days of the present. It is no harm to put a constraint on oneself occasionally. The Government is entitled, with the full permission of the Bills Office, to write the 60 day limit into the Bill, if it wishes. I will not press the amendment, as I welcome the announcement that August is the target date.
Without being disingenuous, I apologise to the Deputy if he found my remarks personally hurtful, although an element in my brain tells me his skin is thicker than he might let on.
I am recovering already.
The Deputy knows that when I say we know how the game is played, I mean there is a process and a system in place. I was speaking in a metaphorical sense. We are moving to ensure we can put the scheme in place and expedite it as quickly as possible.
The scheme must be targeted towards commercially viable businesses. We are conscious that businesses have failed in the last while. That is why we are anxious to get the scheme up and running before the fall of the year. Business that are in trouble will not, necessarily, be supported by the scheme. An application must be viable and accompanied by a business plan, with potential projections for the business.
The figure of 2% had to be charged, in line with state aid requirements. In tabling amendments opposition Deputies must have regard to this. State aid rules must be adhered to. We must be cognisant of this in order that when we communicate our respective party positions on the Bill, the public will be made aware that the 2% charge is not being imposed simply for the sake of levying a charge. There is an onus on us to do this.
That is not true. The Minister for Jobs, Enterprise and Innovation said on Committee Stage that a charge of 0.8% was necessary to ensure it was within the bounds of State funding. There is no legal imperative on the Government to impose a charge of 2%. State aid schemes administered by county enterprise boards and other bodies carry a charge of less than 1%. The figure of 2% has been chosen by the Government, for whatever reason, and it is over and above the necessary administration cost. During the debate on Committee Stage we were told the charge was to cover potential losses within the system, but we were not given the details of these potential losses. The Minister undertook to return to the select committee with the loss element of the 2% charge, but he did not do so. That 2% is, without evidence to the contrary, an arbitrary figure and one that is a cost on small businesses, which find it difficult to survive. I understand that it is necessary for the Government to focus on viable businesses. I will not argue with the Minister of State, Deputy Sherlock. I agree that viable business plans are necessary in order to convince for this level of credit. It would be wrong for any Member to expose the State in a scheme that would further its loss of funds. However, the microbusiness element, which is a key sector in society, is not being dealt with in the legislation. It is part of the pipeline of new businesses that come into the economy. I presented the case to the Minister previously that the European Progress Microfinance Facility had produced €200 million as far back as March 2011, which was approximately the date on which he received his seal of office. As of yet, apart from a small amount going into an organisation called First-Step Microfinance, there has not been significant drawdown by the State for the purposes of microfinance facilities. As far back as last March, 11 other countries in Europe had drawn down funding, including Bulgaria, but this State has not. I urge the Minister to focus on the microbusiness element of society that is without funding.
It is important to answer the point. A charge had to be made under State aid rules. We all accept that premise. That is fact. The decision was for 0.8% upwards. The Government chose 2% as the most appropriate rate because one must allow an appropriate figure to be able to cover losses contributed to by administrative and other costs. One must factor that in. We are dealing, essentially, with taxpayers' money and we must factor in a potential figure for those losses and 2% was deemed to be the most appropriate figure in that respect.
I have just been handed a note on the progress fund. We do intend to approach the European Investment Fund, EIF, re support for the microfinance fund. That will be introduced in the Houses in the coming weeks. There will be progress in that regard. Perhaps we can communicate with the Deputy on that particular issue as well.
Question, "That the words proposed to be deleted stand", put and declared carried.
Amendment declared lost.
I move amendment No. 3:
In page 9, line 14, after "time," to insert the following:
"not later than 12 months from the commencement of the scheme,".
Section 10 provides that the Minister may at any time conduct a review of the operation of the credit guarantee scheme. What I propose is that the review should take place within 12 months. That is not unreasonable and the timeframe is not too short. As has been outlined, we are putting taxpayers' money at risk in order to generate more credit. We are reaching out, as it were, to small businesses, some of which would not be able to borrow in the normal way, either because the banks do not understand the nature of the business or for whatever other reason.
To return to the Committee Stage amendments that were deemed out of order, I tabled an amendment to the effect that overdrafts and various other types of loan should be included, not simply new borrowing. That was ruled out of order as being a charge on the Exchequer. I do not know how it could have been ruled out of order for that reason because there is a cap anyway and given that is the case how could the charge on the Exchequer increase if one varies the type of loans that can be granted? However, we will leave that to one side. I have a suspicion that the real reason this is not being allowed is because if one allows necessary financing such as overdrafts and invoice financing, which is allowed under other comparable schemes in the United Kingdom and Canada, within the level of the cap, there would be a surge of demand and we would literally be at our limit within a short time in the early part of the year in the first 12 month period of the operation of the scheme. I suspect that is the reason the proposal was turned down.
Regardless of the fact that the Government does not want to vary the type of loans that can be guaranteed, there could be a rush and we could find ourselves out of money or up to the limit in a short period. It may become apparent at an early stage that the scheme in its present format is not working because there is and will be a considerable demand which is not being satisfied by the banks for other types of loans such as overdrafts and invoice guarantees – the various types of loans that are allowed under the United Kingdom scheme which is the nearest comparable scheme. Because such loans are not included the scheme is not working in the way in which the Government and everyone would like it to work in the interests of the country. I accept the Government will probably review the scheme after 12 months but that should be specified in the legislation. The initial review at least would need to take place after the scheme has been in operation for 12 months.
The amendment mirrors one I tabled on Committee Stage and I agree with it wholeheartedly. Given the speed at which things are happening within the economy and given the major needs that are becoming apparent on a monthly basis it is important and logical that a scheme is reviewed properly to ensure it can deal with the issues that arise. There is no logical reason not to accept such an amendment.
I understand the Minister, Deputy Bruton, has already given a commitment that there would be a review of the scheme after a year of operation. It would be right and proper that a review would take place. As a matter of course one would have to review the scheme and I believe the Minister's commitment is sufficient.
One could argue that there may not be sufficient data, patterns or trends emerging on the type of lending that arises from the scheme before a 12 month period has elapsed. That is the justification for the Government's decision in that respect. However, the commitment has been definitively given by the Minister, Deputy Bruton, in that respect. The review will be broad and comprehensive and will not be restrictive as per the amendment suggested. The policy commitment is to conduct a review and to lay it before both Houses. The matter is adequately dealt with in section 10.
Invoice financing will be eligible for the scheme. We will monitor closely the performance and we will consider if other types of credit should be included, as per Deputy O'Dea's point. We will make changes if we deem it necessary following the review. We are trying to ensure that we get the scheme off the ground, put a review mechanism in place after 12 months based on qualitative criteria and then if modifications or adjustments need to be made there is an open mind in government on the matter.
There is no danger that sufficient trends will not emerge within the first 12 months to enable the Government to review the situation. Although I accept what the Minister, Deputy Richard Bruton, stated on Committee Stage, if that is the Government's intention, why not include it in the legislation? If the amendment is badly worded in the sense that it would force the Government to conduct the review within 12 months, perhaps it could be phrased more eloquently to the effect that a review would be conducted after the scheme had been operating for 12 months. It is unfortunate that ministerial assurances, although given in good faith, do not always translate into reality, regardless of who is in office I hasten to add. For this reason, I sought to include the provision proposed. I have heard the Minister's commitment which has been reiterated by the Minister of State to which we will hold the Government when the scheme has been in operation for at least 12 months.
I acknowledge the Deputy's point which has been made in good faith. A scheme of this nature will be vital in providing the credit necessary to fund businesses which are the backbone of the economy. In this light, it would be ridiculous not to review the scheme after a certain time. It is important that it be reviewed.
Amendment put and declared lost.
Amendment No. 4 not moved.
Bill received for final consideration.
Before continuing, I would be obliged if, in accordance with Standing Order 140, the Chair would direct the Clerk to make a verbal correction to the text of the Bill. It relates to the ordering on page 4 of the Bill of the definitions of "participating lender" and "participating borrower". I request that the order of these two definitions be changed in order that the definition of "participating borrower" is placed before the definition of "participating lender" in keeping with the alphabetical layout of the definitions on page 4.
We cannot upset the alphabet. That is the last thing we would want to do.
Is that agreed? Agreed.
Question, "That the Bill do now pass", put and agreed to.