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Dáil Éireann debate -
Thursday, 28 Jun 2012

Vol. 770 No. 3

Microenterprise Loan Fund Bill 2012: Second Stage (Resumed)

Question again proposed: "That the Bill be now read a Second Time".

I note Deputy Donnelly is the next speaker. Is the Deputy sharing his time?

Yes. I wish to share my time with Deputy Mattie McGrath.

Before I talk about the substance of the Bill, the direction of which I agree and welcome, I wish to make a point about the procedure for dealing with the Bill this week. We did not get access to Bill and its digest until earlier this week and I understand the debate is to be guillotined today. This is important legislation, and it is extremely important for small and medium enterprises around the country. It is difficult for me and other Deputies to make any meaningful input given those timelines and I wanted to bring that to the Minister of State's attention.

The focus of the Government and its predecessor, and of the media much of the time, is on foreign direct investment and multinationals. We hear a good deal about that. The multinationals are very welcome and they bring many jobs, money and expertise, but we do not hear much about a focus on the SME sector. We know that 55% of jobs in Ireland come from the SME sector. Interestingly, in the UK it is around 60% and in Germany it is around 70%, which suggests not only do more than half of Irish workers work in the SME sector, but there is huge potential to grow this sector. Therefore, I welcome the Government's focus on it.

There is an issue around not only focusing on the SME sector, but ensuring that the resources of the State do not only focus on exports. Many Deputies would have heard similar stories to the ones I have heard. Many business people in Wicklow have come to me and said they had a great idea, they have gone to country enterprise boards and Enterprise Ireland but their idea is not export oriented and would not generate export oriented jobs. The county enterprise boards and the Enterprise Ireland have said, "Sorry, it is not within our terms of reference and we are not about to help you". From an economic perspective, anything that addresses import substitution is just as important as anything that is exported based. An example would be if a person could set up a company in Wicklow or somewhere else that manufactures a product that we can buy domestically rather than something we have to buy in from abroad, as in the case of bio-fuels using rapeseed oil and so forth. Import substitution from an economic perspective in terms of balancing our trade balance is just as important as exports but for some reason - it is a legacy one in that it is something the Government did not bring in but it seems to have continued from previous Governments - we have State agencies that will explicitly say to people if they are involved in import substitution rather than exports that the conversation is over. I could not see in the Bill's digest anything that addressed this point. I urge the Government to examine this and make sure that these loans are not just ring-fenced for high-tech export oriented companies. Economically, there is a good deal of benefit derived from import substitution as well

SMEs are struggling. We know that the council rates are not falling. There are one or two noticeable exceptions but, by and large, in a time of economic crisis the council rates are not falling. The councils give good reasons for that. The Government is pulling away central funding and the councils still need to provide services, but the people who are being made to pay for them are SMEs. It is very difficult in the current economic climate and trading environment. The cost of energy prices, transport and other factor imports have not fallen all that much, but the markets into which they selling, domestically and abroad, are in a great deal of trouble.

There is also a major issue for SMEs in Ireland with regard to the UK. From memory, the competitive advantage that UK firms have had over Irish firms, be they selling into each other's markets, is about 30% just because sterling has devalued and the euro stayed strong because the ECB and the European powers were not willing to engage in quantitative easing and the kind of macroeconomic measures that would have devalued the euro. The UK is our second biggest trading partner. A 30% price disadvantage has been incurred by our SMEs in the past number of years just on the currency factor. Many of those in SMEs have come to me and said they have cut their costs, they are as lean as they can possibly be and they are paying themselves the minimum wage. They are trying to keep people at work but they are competing with people across the Border and in Britain who, during the past few years, are 30% more competitive than they are for doing nothing. There is no way they can compete with that. The SME sector in Ireland is struggling in a hugely difficult trading and currency environment.

I really welcome the principle of this Bill. There are mixed messages coming from the banks, the Minister, Deputy Noonan, and the SME sector as to whether sufficient lending is happening. We have had recent research from the Central Bank of Ireland which suggests that there is a market failure and that Irish firms are not being lent money by the banks, consciously or subconsciously, when it is reasonable, correct and prudent to lend to them. We are also hearing other things. We addressed this matter with the Minister, Deputy Noonan, at the Joint Committee on Finance, Public Expenditure and Reform some time ago. He referred us to the Credit Review Office and the fact that only 44 claims had been made by companies that said the banks were not treating them fairly. He used this as evidence that there was not this great unmet demand and that they were not being treated unfairly. I have taken a look at the evidence on both sides. It seems, particularly backed up by the recent Central Bank research, that there is prejudice and that many viable SMEs in Ireland are not - some of them are - getting money and that the counter-argument of the Credit Review Office that it has only had 44 claims does not stack up. I do not know why the office has not received more claims. Perhaps many small and medium enterprises are not familiar with it. On balance, it seems there has been a market failure and in which case, this type of microenterprise fund makes a lot of sense and I welcome the principle.

However, the fund is entirely inadequate. I have examined the numbers. It seems to be like trying to inflate a large bouncy castle with a bicycle pump. The original fund will be €10 million with the aim of borrowing another €25 million and, over a ten-year period the objective is to lend €9 million a year, amounting to €90 million over the ten years. This should be seen in the perspective of what happened this week when we have paid €1.1 billion to unguaranteed, unsecured bondholders. The interest on that payment in perpetuity will amount to approximately €40 million a year. On the one hand a fund is being created for struggling small and medium enterprises which are vital to the economic and social recovery of this country and this fund will lend €90 million over ten years. In the same week and covering the same period we have taken an action which will incur a €400 million cost and this is just to service the interest on €1.1 billion. I understand the Minister would like to be putting ten times this amount into the fund. I urge him to make these comparisons to his Cabinet colleagues and explain to them that the market failure cannot be solved with €90 million because it is completely inadequate.

I suggest a range of policy issues for the Government's consideration. I ask that import substitution be considered, not just for this fund but in the terms of reference for the county enterprise boards and for Enterprise Ireland. We are missing a very great opportunity. In fairness to Enterprise Ireland and the county enterprise boards, their terms of reference do not permit them. I suggest that a very simple change could be made in a number of weeks and which would aid economic growth, a stimulation of new ideas and encouraging entrepreneurs to think about new areas other than exports. The small and medium enterprise sector needs an infrastructure such as innovation hubs, mentoring and training. I acknowledge that the county enterprise boards and Enterprise Ireland do some of this work but more is needed. There are opportunities in towns around the country to set up innovation hubs and to bring, say, 30 entrepreneurs together to use shared facilities and to exchange ideas. This works very well in other countries.

The fund itself will need ten times or 20 times the money. I appreciate we live in very difficult financial times. However, does it make sense to incur €400 million in interest payments on money which we do not owe but which we are paying while just €90 million is being allocated to try to deal with the market failure which is the lack of lending to entrepreneurs? It seems our priorities are wrong and it might be better if it were the other way around.

Small and medium enterprises need relief on corporate rates, which are killing them. They are hit immediately from the local authority with a very large bill which they cannot pay. I ask the Minister and the Government to consider some form of council rate relief for this sector when enterprises are being set up.

I ask the Minister to consider another issue. Viable businesses all over the country may have invested in property during the property bubble. That single investment is killing the small and medium enterprise and is putting people out of business. It should be possible to create a legislative mechanism and financing structure which would allow for the separation of these two debts. If a viable business in a town is employing between two and ten people and is therefore within the remit of the fund but a mortgage on an apartment will put those ten people out of work, it should be allowed to separate that debt from the company in order to protect the jobs and the enterprise.

The Small Firms Association welcomes this Bill. The association also advocates proper social welfare protection for the self-employed. Potential entrepreneurs are encouraged to take risks in order to create jobs and they are helped with a small level of funding. However, if things go wrong, they get nothing. The social welfare payments for the self-employed who lose their jobs are means-tested. However, mortgage payments are not taken into account when assessing income. If the household is paying €1,500 on a mortgage out of an income of €2,000, in real terms this is an income of €500 a month and they will need the assistance of a social welfare payment but the means test does not take the mortgage payment into account. I would like the Minister to consider these five or six issues. These provisions in this Bill are a start but we need to do much more.

I am pleased the Minister is here this morning to listen to what we have to say. I agree with the previous speaker that the delay in publishing this Bill and the use of the guillotine is a very unfair way to do business. I know the Minister and the Department are very busy and under pressure but this issue stands out like a sore thumb. Small businesses are not being looked after. They are the backbone of our communities and I include the small shopkeepers, small farmers, farriers and many other service industries which are often family businesses for generations. Such businesses have been good employers in their community and they are struggling. They have been good and compliant taxpayers. However they must also deal with a plethora of regulations on health and safety and insurance and they are being strangled. To cap it all, the banks have abandoned them. I am not a member of the finance committee but Deputy Donnelly referred to the Minister for Finance, Deputy Noonan, saying that only 44 people had applied to Mr. John Trethowen of the Credit Review Office. He has only three staff. I heard him say about three weeks ago that the banks were not living up to their promises. The two main banks promised the late Minister, Brian Lenihan - God rest him - that they would provide the funding for the sector. I know for a fact they are not providing funding to small businesses. Many of these businesses have a small overdraft earned with their sweat and blood over the years and the overdraft may amount to €25,000. The banks are calling in those overdrafts. Businesses cannot buy stock because cash payment in advance is required as a result of wholesalers being caught out. They cannot pay cash without an overdraft facility and they cannot pay for a delivery of fuel or goods. Agricultural contractors are unable to pay for plastic and diesel. The banks call in their clients to inform them they are removing overdraft facilities but they offer a term loan instead. I wonder why they cannot be stopped and this practice exposed.

I can explain why Mr. Trethowen and the Credit Review Office have only received 44 claims. I have been in business for 30 years since last February. I have a good relationship with my bank which may be fraught from time to time but the bank knows me. I know that nobody will want to report a bank to the Credit Review Office because they are conscious of the reputation of the informer in past times. They will not complain about a bank because they do not want their relationship with a bank to turn sour overnight and then they would be up the river without a canoe. It is not the case that people do not want to go to the Credit Review Office but we must understand why they do not complain. In any case, business people do not have time to make a complaint. They are trying with might and main to stay in business and they do not want to spend time filling in forms and more important, they do not wish to get a black mark against their name in the bank.

There is also the issue of rates. We all know rates are crippling people. I was a member of the county council and I know why rates must be levied, but people are getting no value for the rates. The county councils are stretched, as we have seen today. They do not have local workers on the ground any more. As I said recently about my local council, it is all chiefs and no Indians. They do not have workmen carrying out maintenance to stop places being flooded. Again, we are getting bad value for money in that area. This must be examined. We must deal with rates and review the rates system. Currently, one must appeal to the body that assesses the rates in the first instance, which will cost €250 or €300 for the privilege, and it takes six or eight months to complete the process. It is totally unwieldy and absurd. We must also re-examine the legislation on upward only rent reviews, which are crippling bigger towns and cities.

I do not know why a new group must be set up for this fund. The county enterprise boards were doing a tremendous job for the sole trader and businesses with up to five or six employees. They are ready, willing and able to do this job, so they should be used. Enterprise Ireland does good work too, but the business must have 200 employees. There was nothing for the businesses in between. That is where the money is needed. I welcome the €6 million and the €10 million. It is a start. Tosach maith, leath na hoibre. However, it is only a drop in the ocean, although I understand the economic climate in which we are living. I am delighted with the shift in thinking in the Department and I congratulate the Minister on that. Department officials need to get out, get down and dirty and understand what makes small business tick. If the 400,000 businesses in the country employ a single extra person each, consider the impact that would have on the dole queues. They could do it, instead of being driven out of business.

There is another big issue which I consider to be totally unfair. It has affected many self-employed people since the crash took place. They paid all their taxes, PRSI and so forth, and rightly so. That is as it should be. They were under a great deal of pressure to pay but they did so. They wanted to be good, law abiding and tax compliant citizens, with honour, respect and dignity, unlike the cowboys that surfaced during the Celtic tiger economy who went off and left everybody unpaid. They had no intention of paying anybody. They wanted to get rich fast so they could go off in their yachts and whatever else. The self-employed people, unfortunately, had to let their employees go. It broke their hearts to let their employees go because they were good employees with whom they had a good relationship for years. However, at least the employees got social welfare, despite how bad the situation was.

The employer, however, who drove the business and who will help this country to recover, got nothing. They were left penniless, with just bills from the Revenue Commissioners. Now, they have the sheriff knocking at their doors. It is happening in my county in a village near Tipperary. A man rang me last Sunday because the sheriff was due to come to his house again this week. It is despicable. The sheriff's charges and the Revenue Commissioners' interest are piling up, but one cannot get blood from a stone. This person does not have enough to eat. I appeal to the Minister to call off the hounds. The use of sheriffs is an outdated practice but they are terrorising ordinary people. These are people who were in business, gave employment, spent money and invested, housed themselves and looked after their families. Now they are penniless and hungry. The community welfare service will not help them because they have so-called assets. In fact, they have no assets because they are worthless. The last thing they need is a sheriff threatening and intimidating them.

There is a sheriff for Tipperary and part of Offaly who should be retired or otherwise dealt with. I will not name a person, but the system of a sheriff coming to somebody's door is like something one would read in an outdated book. It must be changed. There must be an understanding of the difficulties of self-employed people. They are proud people who did not ask for anything from anybody. They worked hard and now they are destroyed. Their energy and any future investment and ideas will be buried with them.

I welcome the opportunity to speak on this Bill. The Bill is another step by the Government to put in place initiatives to sustain small and struggling businesses so they can survive and return to growth. It will also encourage people to set up much needed new businesses.

The Minister for Finance and the Minister for Jobs, Enterprise and Innovation have continued to identify the lack of finance from our banks as a core problem, which the Government continues to monitor. However, the problem is broader than that. Confidence in the economy is a huge factor in deterring business people from starting up and expanding businesses. The establishment of a microenterprise loan fund is one of the many initiatives the Government has introduced to provide them with support. We must ensure finance is available for small and new businesses. These initiatives will create the atmosphere of confidence which will benefit the economy as a whole.

It is important to ensure, as the Irish Banking Federation suggests, that this scheme is up and running by the autumn. The purpose of the scheme is to provide loans to businesses which banks are not in a position to provide because of the risk associated with small and new business. The fund will be managed under the Social Finance Foundation, SFF, on behalf of the Minister for Jobs, Enterprise and Innovation. It will be established as a subsidiary of the Social Finance Foundation and, as the press release states, the intention is that under the guidance of the SFF the subsidiary will be equipped with the necessary levels of finance systems and skills and supported by the European Investment Fund, EIF, guarantee scheme to ensure a high level of efficiency, relevant expertise and strong corporate governance. A single lender will, in the first instance, minimise the costs which are traditionally high with micro finance, as well as ensure a clear financial and management information reporting structure. This will enhance the possibility of EIF assistance and allow for the clear identification of the costs involved in operating the scheme.

This all sounds very good but we must remember at whom the scheme is targeted, small businesses with fewer than ten employees. The owners of these businesses find the existing services through enterprise boards and local development companies very confusing and extremely bureaucratic. It is one of the reasons that many small businesses shy away from seeking support. Two years ago in Cork the economic development department of Cork County Council set up a fund of €1 million per year to perform a similar function to this fund. It identified gaps in existing programmes where the enterprise boards, the local development authorities and banks fell short of providing the necessary finance for a project. The council was able to help to provide the final piece of assistance which made the business proposition work.

I hope this proposed scheme does not add further to the concerns of small business owners by adding another layer of bureaucracy. The terminology used and the national structure could be off-putting for small enterprises. For that reason I welcome the Minister's suggestion that the fund will operate in conjunction with the enterprise boards. I believe it should also be expanded into local development companies. Perhaps the Minister will consider that. The fact that the enterprise boards will soon be part of the local authorities will facilitate this process and perhaps in the overall reform of local government, local development companies will also become more integrated.

In Cork, the council's economic development fund works through the enterprise boards and the local development companies under the auspices of the county development board to ensure there no duplication of services. It also works very closely with third level institutions to create the spirit of enterprise. This new fund could be assimilated into this process and in that way would be more accessible to local and small businesses. It would not be as daunting as dealing with one agency after another, which is what we are trying to avoid.

This Government is doing everything possible to encourage businesses and create jobs. If the Government's initiatives are to be successful when dealing with smaller businesses, in particular, they must be fully integrated and administered locally with the minimum amount of red tape. A new entrepreneur must have the confidence that they can easily access support. These are the businesses that will make a huge contribution to creating jobs. In fact, 70% of new jobs will come from new businesses, many of which will be supported by these initiatives. A multiplicity of agencies and complicated procedures will slow down the process, if not stop it. For that reason it is crucial that the local enterprise offices, LEOs, and the one-stop-shop approach, as is indicated in the jobs initiative, are implemented as soon as possible.

Finally, I ask the Minister to consider, as part of the process of being granted a loan, requiring that a business would also have to benefit from mentoring for a specified period of time, ideally for 12 months. Business mentoring support can make the difference between success and failure for small enterprises and new businesses. I have worked in this area for many years and I have seen the difference mentoring can make to a business and to the development of the individual business person, as well as the leadership skills from which they can benefit. I commend the Bill to the House.

The Microenterprise Loan Fund Bill gives us the opportunity to discuss the importance of small business to the Irish economy. Compared with the multinationals and the headline news when big job announcements are made, small businesses and microenterprises might not appear as sexy and do not grab the headlines but I believe they are more important to, and have a far bigger impact on, our economy. They are of equal importance, at the very least.

I have huge regard and respect for those who display entrepreneurial spirit and take a chance with a business idea. In a way, they take on the system and confront all the challenges. When one employs somebody, Friday tends to come around very quickly when one must have the person's wages. Whether one has two, three or ten staff, it is a huge and constant pressure. The point is that the Government must encourage these people and give them every support. The phrase often used is that this Government, and governments in general, do not create jobs but the environment in which jobs can be created. That is what we are examining here.

Leaving aside the Bill briefly, there are other points it is crucial for us to address for business and the way business operates. One of those challenges is the PRSI system. We need a review to examine how those who are self-employed can be given a mechanism that would allow them contribute more to PRSI in good times and therefore claim social welfare benefits in the event of their company folding. In terms of somebody who took a chance, set up a business and employed people and that business goes to the wall, it is an unfair system that they are not entitled to social welfare yet the people they employed, who took the weekly wage job and did not take the same level of risk, are entitled to social welfare. That discourages people from taking a chance, and it needs urgent review.

Rates is another issue. When I was a councillor in my county of Kildare we examined the possibility of trying to get a reduction in rates. In real terms we got a 1% reduction but it made no difference to the small business, the person who employed a few people. The hairdresser, the shopkeeper or the publican did not notice the difference yet to the big industries in Kildare, the multinational companies - we are lucky to have them - a 1% reduction meant a huge decrease in the amount of income Kildare County Council was getting from them. We must examine introducing a mechanism whereby those rates can be separated to make bigger reductions for smaller companies which will have a real impact and help them free up some of their funding.

On the issue of redundancy, I understand the need for the changes recently to the redundancy measures under the Minister, Deputy Burton. However, we cannot have a system that encourages a company like TalkTalk in Waterford, for example, to up sticks and close overnight when we are paying 60% of the redundancy payments. It could be argued that is almost an encouragement for it to do that.

The knock-on implications of the change in the redundancy measures down to 15% has been colossal for the small enterprises that employ just a few people. I am aware of business people at home who inherited the business from their parents or started it themselves who have one or two members of staff who have been with them 15 or 20 years. The business is struggling and they are terrified of the implications of having to pay 85% of the redundancy.

The other impact is not on the company that goes to the wall and loses all ten staff but the company with 15 staff which must lose five to keep safe the other ten jobs. They need that level of support. I have raised that issue with the Minister, Deputy Burton. The status quo in terms of the old system of redundancy should be retained for small businesses with a turnover of between €800,000 to €1 million. Those businesses are not employing people currently because of fear of the redundancy knock-on implications.

On the loan fund, I am concerned that the money is not sufficient but the system is crucial. If we get the system right the rest will fall into place. Every person who is taken off the social welfare system and gets back to work benefits the State to the tune of €20,000. A total of €9 million a year is small money but if we get the system right and the model is proven to work, which I believe will be the case, it will strengthen the Minister's hand in Cabinet to seek more money.

Cash is king, and the lack of credit is a major issue for businesses. It has been proven by the Central Bank, ISME and the CRO that the banks are not lending in the way they should do. Start-up companies and small businesses are always viewed as slightly risky by the banks, and in the recession it appears they are not lending in those circumstances. That is the reason this Bill is badly needed. The figures by the European Central Bank that Irish firms are 15% to 18% more likely to be rejected for credit than comparable eurozone small and medium enterprises speak volumes. I welcome the publication of the Bill and commend it to the House.

I too welcome the Bill. As part of the Government's ongoing strategy on an action plan for jobs, it fits in with the other initiatives including the credit guarantee scheme, the innovation fund and the development capital scheme, all of which target different scales of operation.

Jobs are the key to economic and social stability in any nation and in this State. Job creation must be the key objective of the Government. Multinational companies, small and medium business and larger indigenous businesses are located in different sectors and all of them must be encouraged and supported.

This fund targets the microbusinesses that are starting up or already established who employ ten or fewer people. That is an important sector. A piece of work done some years ago by a Mr. Ahern in Teagasc in Cork found that there were 52 local economies in the countries which are centred around provincial towns with a hinterland of agriculture and a mix of small, medium and very large businesses.

In terms of small businesses, four issues have been addressed in the debate which must be considered. The first issue is the lack of finance, which inhibits small businesses establishing, continuing or surviving. The second issue, which was mentioned by Deputy Heydon and others, is rates. That was raised earlier by another contributor who decried it. Yet, when we try to spread the cost of running local authorities to a broader base there is an outcry. We must be honest about the way we will fund local government.

The third issue is the problem of not having a safety net if one starts one's own business. Deputy McGrath and Deputy Heydon mentioned that people are afraid to start their own business and establish an asset. I know of one individual who had paid €3 million in taxes including PAYE, PRSI, his own income tax and VAT in a plant hire business that went out of business. When all of his staff were let go they got jobseeker's benefit immediately but because he had some listed properties, which were his only option in terms of a pension, he was not entitled to anything. While he could start his own business and claim back some of the PAYE he paid in recent years, which is a welcome initiative, when that traumatic event took place he was left high and dry. He employed fewer than ten people. He had a big turnover and a big tax bill. He paid huge costs by way of extra revenue taxes on fuel.

The issue of redundancy was mentioned. That issue can be resolved but unless we support small businesses in a co-ordinated fashion and people with a good idea we will never rebuild local economies. Like farm revenue, local small businesses spend 70% or 80% of their income locally. That creates local jobs, and we must concentrate on nurturing those small businesses.

I welcome the efforts to streamline the mentoring system, be it through the county enterprise boards and the local enterprise offices. Those are the initiatives that must be taken. Putting the funding in place is welcome but that funding is for people who have been refused previously because they did not fit the banks' strict lending criteria. They must be helped. The people who will work with those people must recognise a good idea that is viable.

This scheme will only be as good as the people who are mentoring, and I appeal to those involved to ensure that the people who are mentoring, and the people who come to them, understand the concept of doing business and creating a job or ten jobs. I commend the Bill for what it is intended to do.

When I first entered politics only a few years ago I spoke to a publisher I know in the United Kingdom and asked him what he wanted from politics and politicians. He replied that what he wanted was for the Government to get out of his way. He was talking about making it easier for businesses to set up and making it cheaper to employ people so that he could go about creating jobs and creating wealth, which would naturally be distributed throughout the economy and bring the stability in our society and in our lives about which Deputy Doyle spoke. I found that very interesting.

Before the general election our party discussed the role of government when it came to job creation and how it was not the role of government to create jobs directly but to create the environment in which jobs could be created, as referred to by Deputy Martin Heydon. That is an important point. It is not the role of the Government to create jobs directly, nor is it the role of the Government to lend money. These are exceptional times and the Government is doing a host of things currently that it should not normally have to do. While the circumstances are not welcome, the solutions from the Minister are. It is for that reason this Bill is so welcome and important. This fund will do some good. It is important we move quickly with the legislation and get the fund up and running. With regard to the fund itself, it is vital that Deputies cannot be lobbied on it. Some people will take the view that because the agency is being set up, Deputies will have some influence and if those people do not get the funding they want, they expect we will be able to interfere. It is vital that any potential linkage is broken and that it is made clear that Deputies will have no role in it. We would not want political interference in what we hope will be a very good enterprise scheme.

With regard to small businesses, this fund is for companies of fewer than ten people looking to create jobs. Yesterday, I met Seán O'Sullivan from Open Ireland and we discussed a technology visa and talked in general about how Dublin and Ireland could be made the Silicon Valley of Europe. This is something in which I have been interested since my first days in politics. We are aware we have underemployment in the IT sector. The figures we have for this are approximately 2,200. However, when one speaks to anyone working in the sector, one hears the figures are quite a bit higher. The multinationals are starved of talent, but new start-up businesses setting up in Dublin cannot get talent either. There is huge competition for the developers and engineers we have, and as a result they are very expensive to employ. Consequently, small start-up businesses in the technology sector find it very difficult to get the right talent.

We have a start-up entrepreneur visa scheme and an investor visa scheme, both good measures we would like to see get off the ground. However, it is not just enough to invite an entrepreneur to come here and start a business. That person needs to be able to bring people with him to work in that business. That is the reason the proposed technology visa is so important. It would be a specific visa for people working in the technology sector, with certain criteria that would allow people come in to work in these new Irish companies or to fill vacancies in indigenous companies. Some 5,000 technology visas would create 20,000 jobs. Studies done indicate that for every one job created in the IT sector, a further four jobs are created. This is significant. Often, when people talk about the technology sector and technology jobs, they say it is specific and only applies to a certain category of people. However, it is the knock-on jobs created from those technology jobs being here that are significant.

The Taoiseach has talked repeatedly about his vision for Ireland and expects that by 2016 we will be the best small country in the world in which to do business. Those of us interested in technology and the high-tech sector, as is the Minister, are talking about making Ireland the Silicon Valley of Europe by 2012 and the best place in the world in which to start a technology business. This is an important goal and one to which we should aspire. It is for that reason the technology visa is so important. I know it is not particular to this Bill, but as we are talking about ways in which the Government can help create an environment to help businesses set up, get going and employ people, it is relevant to today's debate.

I know the Minister has been briefed on the technology visa, but I urge him to take part in any conversation or discussion he can with the Minister for Justice and Equality on this front to see that we can move to such a scheme. This would be a welcome part of the many measures the Minister is introducing in these exceptional circumstances to help tackle the unemployment crisis. This is important for all of us.

As far as it goes, this Bill is welcome. Anything done to provide extra finance to small and medium enterprises and any effort made to stimulate the domestic economy should be welcomed and supported. There is nothing to oppose in the Bill, as it is an effort to give some support to the small and medium enterprise sector and to the domestic economy.

However, if the aim of the Bill is to address the enormous crisis facing the small and medium enterprise sector, the massive unemployment crisis of 438,000 people unemployed, the collapse in the domestic economy we have witnessed over the past four years or the credit crunch associated with that, the Bill is tantamount to whistling in the wind. It reminds me a little of the story of Peter and the dyke. People may be familiar with the story of Peter and the dyke. Peter noticed a hole in the dyke and stuck his finger into it to stop the water coming through. However, cracks and new holes kept appearing all over the dyke making it an impossible situation to resolve. This is not a bad analogy for this Bill in the context of what is happening to the economy and the scale of the crisis we face in terms of unemployment, the collapse of demand in the economy and the collapse of investment in our economy over the past number of years. This Bill is only a small drop in the ocean, covering up the much bigger crisis and will not address in a substantial way that crisis.

The lending capacity of the fund provided for in this Bill is €90 million. For the small and medium enterprises that get loans from this fund, any amount will be welcome. However, we should look at this €90 million in the context of a situation where we have removed more than €20 billion from the economy since 2008. Under the terms of the EU-IMF programme, we will remove another €8 billion in the next few years. Under the terms of the fiscal treaty recently passed, we will have to remove approximately another €5 billion or €6 billion in order to meet the deficit targets. In addition, we may have to remove €3 billion or €4 billion per annum for the first few years when the treaty comes into force to meet the debt targets. When we consider all of this, we get a sense of how microscopic this initiative is faced with the enormous withdrawal of resources and investment from the economy. I do not see how we can address that problem in any serious way.

The issue of the banks lies at the centre of all of this and this infinitesimal initiative is trying to compensate for the massive banking problem we face. We have got a fund that can lend €90 million, but we have put more than €60 billion into our banks. We suffered enormous pain to do that and huge austerity has been imposed on ordinary people. The justification put forward for imposing this crippling austerity on ordinary people in order to bail out the banks was that the banks would lend and invest in the economy; that the banks would provide support for small and medium enterprises and stimulate the economy more generally. This has not happened. One must ask why we are now setting up a small micro-enterprise fund, when the banks into which we pumped €60 billion should be doing this job. However, they are not doing the job. I do not understand the thinking behind the Government's failure to force the banks to lend and invest in the economy, particularly now that we own those banks. What is the point? Why are we allowing this to happen? Government Deputies and Ministers are rightly bemoaning the failure of the banks to do the job they are supposed to do, but they remain at arms length from them. If we own the banks why can we not tell them what to do, especially since it is glaringly obvious what they should do? They should give a break to the tens of thousands of distressed mortgage holders who, because of their mortgage distress, are not spending money in the economy and consequently depressing demand on a vast scale. The Government should tell these banks to start lending and investing again. I do not understand it.

When set against this problem, the €90 million, as helpful as it may be for the 5,500 enterprises that will benefit from it, is simply a drop in the ocean. I cannot understand why the Government will not address this central problem. I can only imagine it is something to do with being ideologically blinkered and this ideological blinkering appears to be shared throughout Europe. The policy of bailing out private banks is being implemented throughout Europe and we have helped to do this but it is not working anywhere. Trillions of euro have been put into the banks throughout Europe but we still have a credit crunch, no money and no investment.

Gross capital formation in the State has dropped by 70% since 2008, a vast reduction. There can be no recovery with such a fall-off in the level of investment. Those with the resources to make investments are those in the banks because we put all the people's money into them and we have taken on a vast debt burden to further recapitalise them and other European banks as well. Despite this we cannot tell them what to do or what they are supposed to do. I do not understand it.

Is it because of an ideological belief that it is not the Government's job to tell the banks what to do? This appears to be the case. Deputy Eoghan Murphy stated that it is not the job of Government to lend money to enterprises. If not, whose job is it given that we now own the banks and they are not doing it? Who else will do it? No one. That the Government has been forced to set up this fund is an acknowledgement of that fact. The fund is minuscule, however, compared to the scale of the problem. If the Government has recognised that it has a responsibility to stimulate the economy on this small scale and to put money into the domestic economy, why does it not realise that it should do the same on a greater scale and that no one else will do it? I do not understand it.

People have raised other valid issues and I will refer to them for the record. These include the fact that rates are crippling many small businesses. Some 70 businesses in Dún Laoghaire have gone in recent years and Dún Laoghaire is beginning to resemble a ghost town. The excessive level of rates is a major factor crippling small businesses. Many others are hanging on by the skin of their teeth. The high levels of rent which the Government has failed to address is an issue as well. We could throw into the mix the issue of parking charges, which have been especially damaging. I am unsure of the position elsewhere in the country but in Dún Laoghaire parking charges imposed by the council have done considerable damage to small and medium enterprises. Small businesses in Dún Laoghaire and elsewhere have been kicking up about these issues and they are right to do so but we all know the reason why local authorities will not budge. Most county managers recognise the problem but they cannot reduce rates or parking charges because they have become a revenue stream for local authorities, which are chronically underfunded. This all comes back to the austerity and the cuts that have been imposed on the funding of local government and, more generally, on the incomes of ordinary people. The cuts affecting ordinary people are sucking demand out of the economy and the cuts being imposed on funding to local governments are essentially limiting their room for manoeuvre in terms of doing something about rates or parking charges. All of this is being done to bail out our banks and European banks and to impose austerity. I cannot understand how we can achieve the objective of the Bill if we do not address this much greater problem.

The problem appears to come back to an ideological viewpoint. I have heard those in the Government state many times that it is not the job of the State to create jobs but to create the conditions for jobs to be created. This sounds like a good slogan but what does it mean? In what sense is the Government creating the conditions for jobs to be created by others? Clearly, it is not doing so. In fact, the Government is doing the opposite. For jobs to be created by anyone there must be demand in the economy but there will be no demand in the economy if tens of thousands of people are saddled with unsustainable mortgage debt and if hundreds of thousands of people have had their incomes slashed. As a consequence, they will not have money to spend in shops and businesses which, we hope, will be the drivers to chart our way out of the economic depression. What is the alternative? I do not believe there is an alternative unless we deal with the debt problem and unless we end the suicidal policy of austerity.

Let us put aside what has been done in the past and the €20 billion that has been taken out already. The plan to take out a further €8 billion to meet the 3% deficit target will only further cripple our economy. Set against this figure of €8 billion, a fund of €90 million goes nowhere; it is a drop in the ocean. Why has the Government set itself against the idea of the State intervening in this situation on a grand scale? The banks will not do so and the private sector is not doing so either because it has no wish to take the risk or, in the case of small and medium enterprises, it does not have the finance. Why does the State not intervene and create the conditions for employment by identifying strategic areas where we have the resources and the people to develop enterprises and invest in them?

I do not accept the view that it is not the role of the State to do this. The State effectively moved from being a Third World country to a modern state as a direct result of the creation of large public enterprises, including the ESB, Bord na Móna, Bord Gáis and Aer Lingus. That was how we moved from being a colonial backwater to a modern state, through the creation of state enterprises.

Employing tens of thousands of people in strategic industries will stimulate the rest of the economy but if the State does not step up to the plate in the way it has done in the past nobody else will do the job.

The theory that the Government and the political mainstream in Europe has promoted for the last five years simply is not working. Regardless of how much money is shovelled into the banks, they are not reinvesting it in the economy. Is it because of dishonesty or a lack of understanding that we bemoan the fact that the banks do not lend without asking why this is the case? Is it just because they are run by mean and miserable people who do not understand how desperate we are?

Is Deputy Boyd Barrett's finger still in the dyke?

The Government's finger is in the dyke but the cracks are growing.

The cracks are all over the place.

I am trying to put a serious argument to a Government which is failing to address the unemployment crisis. I would be amazed if Deputy Humphreys did not believe the domestic economy is on the floor or that we have a real problem with our banks. If the banks do not start lending this €90 million fund will not even begin to address the problem. How many businesses are likely to succeed, even with the best intentions in the world, on the finance this fund can provide while demand continues to contract? Demand is guaranteed to collapse further if we introduce further cuts and taxes on the incomes of ordinary people in coming budgets. It does not add up. I support this Bill but let us not pretend it will have a significant impact against a background of a depressed domestic economy and collapsing demand.

Even though we now own the banks, they are refusing to lend because they know it is too risky to do so in the absence of demand. If a business goes to a bank to request credit, the bank will point out that with the economy on the floor there is little demand for business products or services. Until we address that issue, we are wasting our time. It is time that the Government breaks with its ideological aversion to intervening directly in the economy through major public enterprise and public work schemes directed at strategic areas in order to put tens of thousands of people back to work and get demand into the economy. By refloating the economy in this way, small and medium enterprises will begin to thrive.

I welcome the opportunity to contribute this Bill. It is being introduced by the Government alongside other measures aimed at stimulating enterprise and creating jobs. Nobody is suggesting this Bill will solve our economic problems or do everything for small businesses but it is a building block and it has to be welcomed in that context. The small business sector supports 800,000 jobs and plays an important part in the economy. The announcement by major multinationals over the past six months, such as PayPal, Apple and Allergan in my own constituency, are welcome but we should not forget the impact of the crisis and small and medium enterprises.

This Bill will give a welcome stimulus to growth in small enterprises that provide three or four jobs. These enterprises do not receive the headlines given to multinationals when they open or close their operations here but they operate under the radar to provide jobs and confidence in the economy. The jobs they create foster vibrant communities, whether in towns, villages or rural areas. The president of the chamber of commerce in Claremorris stated recently that 72 businesses have closed in Claremorris and Ballinrobe over the past four or five years. That is an incredible figure for two small towns with populations of 3,000 each. Previous speakers raised issues in regard to rates and parking charges. The life of rural constituencies and small towns is been sucked away and some sort of remission from rates needs to given to small businesses in these areas.

This Bill can be a catalyst for regenerating the economy and providing a financial impetus to entrepreneurs who feel hamstrung by their inability to access credit. These businesses have been forgotten. I have met business owners who have good ideas but have grown frustrated by the lack of finance. One would could compare their plight to the university graduates who cannot find work because they lack experience. Five years ago the banks were throwing money at people and a business which sought a loan of €50,000 would be offered €100,000. Now the same business cannot get anything. Many business owners are leaving the country while others who stay have to be supported by the social welfare system.

Whatever help this Bill offers must be welcomed. If it works it will pay for itself because it will take people off social welfare. Everyone would like the fund to be bigger but no single measure will solve the economy's problems. It is the total package that counts. I am familiar with a number of people who have experienced frustration at the inability to get credit. This Bill will at least give them some hope. I am glad to note that organisations representing small and medium enterprises in Ireland have welcomed the Bill because they understand the difficulties their members are experiencing.

The Bill recognises that businesses cannot engage in profitable opportunities when they are refused finance by the banks. This in turn means that they cannot increase employment and in some cases they must make existing employees redundant. The Bill's potential impact on economic growth is clear. It will also have an impact on social welfare expenditure. We welcome the large multinationals and all that goes with them but it is vital to recognise the role of small businesses, which is what the Bill does. In many rural communities, there is no multinational or large employer but there are pockets of small firms keeping the communities alive and employing local people. There is growing evidence of vibrancy. Everyone is at their wits end but they have ideas. Sometimes people's character is shown when their backs are to the wall. Real leadership comes out, which is happening throughout the country with small business ideas. The farmers' markets or country markets are an example. These stalls are little businesses employing a couple of family members seeking to exploit a niche in the market. The Microenterprise Loan Fund Bill provides people with an opportunity and a leg up to use their resources to provide a few jobs.

Many speakers referred to the plight of self-employed people, who are not entitled to social welfare payments. As representatives, we all have experience of this. People in the Celtic tiger construction boom employed people and paid their taxes and, I would like to add, paid their VAT. Then they fell on bad times and, while their employees were entitled to social welfare, employers were entitled to nothing. I welcome the recent commitment by the Minister for Social Protection, Deputy Burton. We all talk about how social welfare must be reformed. One badly needed reform is to consider the plight and entitlements of self-employed people. I support the Minister in any restructuring that needs to take place in that mission. I welcome the Bill, which provides some hope to those who have not had it up to now. I commend the Bill to the House.

I am pleased to speak on this particularly important legislation. It is important because it represents a positive intervention at a critical juncture. Every intervention from here on must be positive in encouraging the economy to move in the right direction. We are not living in a bubble or in isolation. John Donne's comment that no man is an island was never more true. We cannot isolate ourselves from being affected by the outside world, the European economy and the global economy. We can make a positive contribution. Contrary to what Deputy Boyd Barrett said, this may be small in the context of what is required at the present time but it is a step in the right direction. That is what we need because we need to generate enthusiasm, interest, stability and confidence. Confidence cannot be quantified and nothing encourages the economy like confidence.

There is a major flaw in the economic thesis of Deputy Boyd Barrett. In the 1970s, we did what he proposes as the resolution for our economy. I am not making a political point about what happened in 1977; it is there for all to see. There was regeneration of consumer spending and footfall and it broke the country. We have not yet repaid it. I do not understand why people still go on with that kind of nonsense. Everyone who was around at the time, reads the newspapers or knows recent history knows that one cannot inflate the economy as suggested by Deputy Boyd Barrett. It does not work. We must generate enthusiasm and confidence from the ground up. We must use the private sector to invest money. Deputy Boyd Barrett defeated the purpose of his argument by saying the banks are afraid to lend because of the risk. Where else do we go?

This Bill will not solve our economic problems but it is one of a series of strategic measures that will ultimately lead to regeneration of growth and restoration of economic stability. Today's newspaper makes the point that this is the most difficult time in history since the Great Depression. I am amazed economists did not come up with that before now. They have been looking at this for the past four or five years and have now realised that it is comparable to the Great Depression. Did we not know that all the time? What happened that means people did not recognise it? In the Great Depression, a series of positive interventions were made by the United States Government over a ten-year period. None of them was sufficient to regenerate the massive growth required for recovery but all made a contribution towards it. The cynics will say the war was the cause of the recovery but that is not the case because the war was a massive cost in terms of money and people's lives. That is a signal to us that we should not go in that direction.

Deputy Boyd Barrett also mentioned the misery of the huge number of people unemployed. We have been here before. In the 1980s we had 17% and 18% unemployment but we got out of it eventually. At the same time, we had interest rates of 17% and 18% and it looked impossible. One or two Members exploit the misery factor, which is hugely depressing to people who are unemployed and those who have difficulty keeping businesses afloat, creating new business and employing people.

A number of people mentioned the issues that hit small businesses in towns and villages. Parking is one example. People complain to us that if they come in to shop, they have no place to park because of all the regulations that have built up over the years. If they park and stay two minutes over their time, they are clamped and towed away. They do not go back. At local authority level, there is a need to consider this matter in a more sympathetic fashion and to try to work out how, in our present circumstances, we encourage people into towns and villages to encourage footfall, which is important.

The lack of credit is applicable everywhere because of the difficulties in which the banks find themselves. I do not agree with the previous speaker, who said we should order the banks to lend. The reason the banks are in their current situation is because they do not have money to lend. The same applies to European and world banks. I cannot understand how someone at Government level can turn a key and money will pour out of the banks, making us all happy. That does not stand up and it has never worked. It does not happen and it only makes a bad situation worse. Where do we go from there? We need to encourage the banks to be more positive in lending to accommodate job-creating enterprises and to retain those in existence. It is self-defeating if banks do not allow sufficient credit to enable businesses to remain afloat or to enable people to set up new businesses. It will fall to someone else to look after that part of the market. It does not require major change in the amount of credit but in the amount of encouragement from the lending institutions to those in a position to provide employment through small businesses.

Upward only rent reviews have been rightly criticised. It is an appalling concept. The Opposition has criticised the Government parties for saying, before the election, that upward only rent reviews would be abolished. Now, it transpires they cannot be abolished. My view on the matter is that it is the upward-only rent clauses themselves which are unconstitutional. I cannot understand how they were ever permitted, because to allow such a practice to be pursued on a large scale can only serve to undermine the entire retail sector in any country, and to a far greater extent in a smaller country. We all understand why people would wish to retain an advantage to which they are long accustomed. The reality, however, is that this arrangement is having a huge negative impact on small businesses and must be addressed. It may be the case that somebody in a position to take action on this matter has a notion that if we simply hold our breath for a few years, property prices will return to former levels and we will be back on the hobby horse. That is not going to happen and any inclination to operate on that assumption will leave us in an even worse situation than we are currently facing.

I have spoken to the Minister about the issue of foreign workers who no longer qualify for work permits. My theory is that these are often people who, as students, were engaged on a part-time basis by a particular employer who invested in their training over several years. Such people have remained with the same employer during their entire educational career and are now an important asset to the small enterprises that wish to retain them. I understand that such workers are competing with local people who are available for employment or training, but the fact remains that where small businesses have invested in a particular employee - in some cases training him or her for up to seven years - that person may well become fundamental to the operation of the enterprise for the next three or four years. There is a balance to be struck here. Perhaps an arrangement could be made that in such cases, where the foreign person's work permit is being renewed, a suitable local person who is available for work would be taken on as a trainee. I ask the Minister to examine the potential benefits of such a scheme in terms of job creation and all that goes with it.

Any small business owner or owner of a small farm will report that many lending institutions have either withdrawn or significantly reduced overdraft facilities or demanded that credit be taken in the form of a term loan rather than an overdraft. This is an old trick familiar to anybody who has been in business for a substantial length of time. Overdrafts are much more flexible and useful than term loans, providing a more regulated flow of funding and greater stability for borrowers and, on a larger scale, for the economy. In addition, it should not simply follow as a matter of course in any economic downturn that lending institutions which gave a business owner access to a credit line of €100,000 in the good times should reduce it by 50% or more. That will be of no benefit to the borrower or the economy and ultimately of no benefit to the lending institution itself.

I welcome this Bill as one of a range of measures that are required to be taken in this area. It represents a positive contribution at a difficult but crucial juncture in our economic history and I look forward to more of the same from the Minister and his Cabinet colleagues. In the situation in which we find ourselves, it is incumbent on every Department, every Minister and Minister of State, and every Member of this House, in whatever way he or she can, to encourage development, growth and employment creation. If we think and act positively and commit to putting our shoulder to the wheel, we can achieve an outcome that is much more dramatic and achieved much sooner than we might expect.

I propose to share time with Deputies Dominic Hannigan, Kevin Humphreys and Patrick O'Donovan.

I welcome the opportunity to contribute to the debate on this extremely important issue. I cannot proceed without first expressing my frustration at some of the points made by Deputy Richard Boyd Barrett. He chose not to finish the story about the little boy with his finger in the dyke, but most of us know that, in the end, he kept his finger in so long that he was the saviour of Holland. The Deputy did not refer to that outcome and he is not in the Chamber now to hear what other Members made of his contribution. He repeatedly referred to the Bill as a mere drop in the ocean and of very little significance. I am not sure how good he was at science in school, but he surely knows that the ocean is made up of many millions of drops. This legislation represents an extremely important step forward but it is only one of a range of measures which, taken together, will lead to real progress. The Deputy went for so long about how it is such a small step that he seemed effectively to be saying that we should all sit on our hands and do absolutely nothing. With apologies for employing another cliché, I am sure Deputy Boyd Barrett knows as well as I that every long journey begins with the smallest step. I could say a great deal more in response to the Deputy but will try to refrain from doing so. I will point out, however, in response to his comments regarding rates that the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, indicated in the House this morning that he will introduce the Valuation Act 2001(amendment) Bill later this year. The debate on that legislation will provide an opportunity to discuss the effect of rates on business.

I agree with a great many of the points raised by colleagues in today's debate. In particular, I support the call by Deputy Martin Heydon for a scheme to allow self-employed people whose businesses have failed to access social welfare supports. It became very clear to me during last year's election campaign that there are many such former business owners who made substantial profits in the boom but, unfortunately, did not pay into any scheme or support mechanism. We must consider developing a scheme into which business owners could contribute in the good times in order to avoid any repeat of the horror stories that have emerged in the recession. I am aware of a particular business that was established before the Famine, went on to survive two world wars, the violence of the years up to 1922 and all the other major upheavals that have occurred in this country. It could not, however, survive the Celtic tiger. That says a great deal about how this country has been brought to its knees.

I reject the notion that this Bill represents an insignificant step in seeking to address the difficulties facing small business. In the current climate, survival is the real success for small and medium-sized businesses. SMEs often lack collateral, which renders them unattractive to creditors. A lack of credit, in turn, inhibits those companies from investing in staff and new products or methodologies. In other words, they cannot build for the future. This forward-looking Bill will provide vital support to many small companies, the type of support which was noticeably lacking in the past. Access to credit is a fundamental requirement for the conduct of any business enterprise and these measures should lead to new job creation opportunities. Small and medium-sized businesses are accustomed to dealing with small amounts of money. In fact, it is a sign of their resilience that they can turn a small sum into something very significant.

I take this opportunity to remind the Minister of the report by the British-Irish Parliamentary Assembly on the SME sector. There is a need for continuity and stability in Government initiatives targeting SMEs. Information on support schemes is not always communicated adequately to businesses by Departments. Perhaps the Minister can take on board the fact that SMEs understand what we are trying to do, but they want the relevant information to be easily accessible.

I welcome the opportunity to speak on this important legislation. We are all aware of the importance of accessing credit to enable businesses to start up and grow. I started my own business 17 years ago and accessing credit was essential to its success. It meant there was money for cash flow and expansion. At that time, however, because I had no credit history, it was difficult to get cash, but family members helped out. The problem for many businesses starting up today, however, is that they do not have family members with money due to these recessionary times. That is why it is so important to have access to a microfinance scheme such as this one.

In the past week, I have been contacted by a company in south Meath which is having terrible difficulty in obtaining credit from a bank. It is a microenterprise that was set up after the owner's original business failed. He does not want to sit out this recession because he has new ideas which he thinks will work out. That business has a particular niche market and got approval from a bank to provide finance, but the bank had a change of heart. As a result, the business now finds itself without access to credit. That is exactly the type of business that will be able to apply to the new microfinance loan fund for expansion.

Irish people understand the importance of small businesses. In my own area of County Meath, small businesses make up 71% of the enterprise sector, which means that the majority of people there work in the small firms sector. I am sure that is probably also the case throughout the country.

At the moment, Ireland is the hardest place in the eurozone for small businesses to obtain funding. If we are going to make Ireland the best small country in the world in which to do business we will have to rectify that situation. We must make it much easier to get credit. That is precisely why the Government has introduced a range of measures, including the action plan for jobs, which features 256 points on how to make Ireland an easier location in which to do business. This microfinance scheme is one part of that plan. Its aim is to help approximately 10,000 companies to expand while in the process generating in the order of 10,000 jobs. Therefore, 10,000 families will benefit as a direct result of introducing this scheme.

I have always been committed to making access to microfinance easier. I know how pleased micro-business owners and other entrepreneurs will be when this scheme is eventually signed into law. I will focus on ensuring that happens as soon as possible. This side of the House will continue to support any efforts the Minister makes to facilitate doing business in this country.

I welcome the introduction of the Microenterprise Loan Fund Bill, which is a key part of the action plan on jobs. It shows that the Government is delivering on promises made in the programme for Government.

I welcome Deputy Boyd Barrett's conversion on the issue of rates. I spent many years on the city council where his colleagues continuously voted against a reduction in rates for small and medium-sized businesses. How quickly they forgot that when they arrived here. I was reminded recently that the Deputy's colleagues voted against funding to keep three swimming pools open in areas of Dublin that badly needed such facilities.

I thank the Minister and his Department for having brought forward this measure quickly, along with the recent Credit Guarantee Bill. The Bill before us is another small step in the right direction to deliver sustainable growth in the economy. It will restore confidence to the SME sector, which can be an engine for growth, helping to create and sustain domestic jobs.

Some 1.8 million people are employed in Ireland, of which one third or 650,000 are in small businesses. We therefore need a strong mix of measures that targets growth and supports where they are needed. A statutory micro-credit scheme is something that has been missing from our basket of policy measures for too long.

Approximately 200,000 small businesses are providing jobs in parishes, villages and towns across the country. Deputy Durkan mentioned earlier how important the small business sector is, particularly in rural areas.

When somebody creates a job through their own business, it has the potential to create even more jobs. I applaud the courage of those who start up small businesses. Access to credit is important in this regard. Many such businesses use bank overdrafts as their working capital. However, I have heard examples of where this lifeline for many SMEs has been closed or withdrawn from existing businesses. As a result, it is almost impossible for new start-ups to access credit.

I recall a recent story about a small restaurant in Dublin that was funded by its owner's credit card, but that is not sustainable funding. The model we are bringing forward through this Bill will allow more small businesses to open.

There are many commercially viable proposals, yet banks will not lend them money. This Bill commits €90 million over ten years, but I am cautious as to whether this will be enough in the start-up stages. Consequently, I welcome the two-year review provided for in the legislation. It is important to recall other Government projects, including the credit guarantee scheme and the strategic investment fund, as well as many other business supports.

Once these are fully operational, the Minister should seriously consider combining these measures into a proper strategic investment bank. It would be a help to bring such measures under one management structure. I would urge the Minister to be mindful of the time factor involved. Applicants have already been refused funding from banks after a lengthy application process.

I also wish to seek assurances that the terms of the loans are not onerous. These are already difficult times and we must make it as easy as possible to set up small companies. I am concerned that the proposed limit of €25,000 may be too low, so it should be reviewed after two years. The Minister should consider setting the limit at €50,000 which would be better. In addition, I am concerned that the interest rate should not be set too high. Let us give the Bill time, however, to see how it works.

I am confident that this Bill will address some of the existing concerns. I also welcome the proposals in the Bill whereby audited accounts can be discussed at the Committee of Public Accounts. Oversight is very important so I am glad to see that that provision is contained in the legislation.

I ask the Minister to clarify the number of directors he intends to put in and how they will be appointed. I believe in evidence-based decisions, so I welcome the impact assessment provision. I note that the regulatory impact assessment estimated that, over ten years, the fund will benefit the Exchequer by €92.4 million at a cost of €20 million.

Previous Administrations used to throw large volumes of money at projects without any evidence base on its return. I therefore welcome the Minister's measured approach to this scheme, which will eventually benefit the State, taxpayers and those who set up businesses.

I welcome the opportunity to contribute to the debate on this important piece of legislation which is contained in the programme for Government. It is somewhat unfortunate that some people bemoan the amount of money involved as being very small. Those familiar with the small business sector, however, will know that many small firms are currently being operated on a shoestring. The sums referred to in the legislation, in or around €15,000 or €16,000, are not insignificant to many small businesses. For those of us who were not educated in private, fee-paying schools in leafy suburbs, it is a significant amount of money which will, in many cases, keep businesses open. It is a little disingenuous of those people, whom I would refer to as caviar socialists who put profit before people rather than people before profit, to be attacking the Government for introducing a measure which is being sought by everyone in the small and medium enterprise sector.

That this legislation is being introduced is an admission that our banking system is operating in a quasi-dysfunctional manner. That the Government is in the process of establishing a microenterprise loan fund to assist companies who have been refused credit by the banks, which are being kept open courtesy of the taxpayer, to sustain jobs is a scandal. However, as stated by a previous speaker, we are where we are. The commercial banking sector needs to be reminded again of who is keeping it going, namely, the Irish taxpayers. Despite this, we are now putting in place another loan facility to keep our economy ticking over, which is regrettable but necessary.

While the foreign direct investment and agri-food sectors are doing well our domestic economy is as flat as a pancake. As such, anything that can be done by way of this €90 million fund, which is not as some would claim an insignificant amount, to support 5,500 enterprises over ten years is to be welcomed. That we may also be able to access a similar fund from Europe, if the charitable status of that fund can be addressed, indicates further growth in this area into the future. I welcome that the Bill provides that the annual accounts in terms of this fund will be audited by the Comptroller and Auditor General and subject to scrutiny by the Committee of Public Accounts. However, I am concerned about day-to-day operation of the fund. It is important people believe it is worth their while applying for money from this fund, which will be the last chance saloon for many businesses. We must ensure that those making the decisions in terms of the release of these funds have a business acumen and can understand and appreciate the risks, business plans and business models put before them. This is important if jobs are to be sustained. I am sure that other Deputies are, like me, also being visited at their clinics by business people who are at their wits end by virtue of their treatment by the commercial banking sector, which is, by and large, owned by the Irish taxpayer. We have a duty to assist these people.

It was on the back of the small and medium enterprise sector that much of the property bubble was built, in respect of which they or at least most of them paid huge amounts of income tax and VAT and other related taxes. Many of these people have fallen on hard times and are not eligible for social welfare benefits. Many self employed people literally do not have money to put bread on the table and have no access to a credible social welfare fund because they were never asked to pay the appropriate stamp. This issue needs to be addressed by the Government as a matter or urgency. While I am aware that the Minister for Social Protection, Deputy Bruton, is looking into it there is an urgent need to assist self employed people who, ultimately, are the backbone of the economy.

I welcome the establishment of the fund. It is regrettable we have had to introduce it but the banks have failed us despite that we were there when they needed us. I believe this is a step in the right direction and is part of the overall jigsaw of getting Ireland back to work.

I wish to share time with Deputies Kieran O'Donnell, Mary Mitchell O'Connor and Michael Lowry.

I welcome the opportunity to speak on this Bill and thank the Minister, Deputy Bruton, and his staff for their work on it during the past number of months. I compliment the Minister on his visit last Monday morning to Wexford where he hosted a conference on the Action Plan for Jobs, which provided local businesses with an opportunity to engage directly with him. I welcome also his announcement at that time of Danone's €20 million investment in County Wexford, which will result in the creation of an additional 45 jobs. Business people from County Wexford were encouraged by the Minister's visit and by his making himself available to them. While previous Governments did not have an open door policy, this Government does, as evidenced by the Minister's visit last Monday morning to County Wexford.

There are many examples countrywide of enterprising people who are willing to put their necks on the line to start up a business but who have been refused capital to do so by local banks for a number of reasons, including, perhaps, that they may have no money of their own to put into the business, they have high bad debt levels, high administrative overheads and the time and investment requirement in terms of loan assessment. I believe the microenterprise loan fund will assist many small and medium enterprises in this country. As stated by Deputy O'Donovan, while €90 million might appear an insignificant amount in this regard, it is huge in terms of the number of people it will assist in starting up a business. All people want is some assistance to get up and running.

During his visit to Wexford last Monday, the Minister, Deputy Bruton, met with representatives of 14 start-up companies. These are the type of people we need if we are to recover and create jobs. The Government must be seen to assist them. I was disappointed to hear some people say that €16,000 is a small amount of money. I believe it is a huge amount, in particular, for example, to a husband and wife who have some savings but have been refused additional finance by the banks. That amount of money could assist in the creation of a number of jobs over a number of years. Our domestic economy is on the ground, which is evident from the number of businesses closing in our towns and cities owing to a lack of credit from the banks.

I recently launched enterprise week in Bank of Ireland, Enniscorthy, at which I met small business people who are employing, one, two, three or four employees. These businesses are the backbone of our economy. They are the people taking the risks every day in terms of keeping their businesses open, despite being under pressure in terms of rates, ESB, telephone and other charges. The people must be complimented. This fund provides a second chance for the many entrepreneurs who have been turned away by our banks. I am sure all Members could give examples of reasons people have been turned away by the banks.

I compliment the Minister, Deputy Bruton, on the introduction of this initiative, which it is hoped it only the first of many to be introduced in this area. All people need is a second chance. For example, the man who brought bottled water to Ireland was refused finance by a bank for start-up of that business. That industry is now worth more than €300 million per annum to our economy. There are many more similar examples. I again compliment the Minister and his staff for their work on this Bill. It is hoped the fund will be a huge success. I have no doubt it will be. I know from speaking to people on the ground that they are looking forward to having this funding available.

I welcome the opportunity to contribute to the debate on the Microenterprise Loan Fund Bill 2012, which is a welcome measure. I have no doubt the Minister, Deputy Bruton, will ensure it is innovative. More than 6,000 people are employed in the SME sector in Ireland and they are the lifeblood of the economy. It is great to see the multinational sector doing well but the SME sector is a huge driver of the economy. What many of those in the sector have in common is that they are risk takers. Many of those establishing small businesses have been successful and taking enormous risks is part and parcel of being in business. At present, the banks are risk averse. This is part of a suite of measures to help the SME sector. The loan guarantee scheme was published by the Minister and I very much welcome it. We now have the microenterprise loan fund through which microenterprises and start-ups employing no more than ten employees will be able to obtain loans of up to €25,000, which is a tremendous amount of money for businesses in the start-up phase. The Department of Jobs, Enterprise and Innovation will put €10 million into the fund and over time this can be increased to €25 million and I hope it will reach this level. I also welcome section 9 of the Bill which states the fund will be able to accept gifts of money, the purpose of which is to the benefit of the fund, and upon such trusts or conditions as may be specified by the donor. However, we must have transparency with regard to the source of the money and the purpose of the fund.

This is a venture capital fund for newly established small and growing businesses. Ireland is risk averse and does not reward risk-takers in the SME sector. If people fail in business for whatever reason, it is seen as a black mark. They should be seen as people who pick themselves up and move to another business. Many entrepreneurs throughout the country failed in their first and perhaps second business. However, risk-taking is part of their make up and they are willing to enter areas into which other people will not go. Recently I met representatives of a US company which employs people who were self-employed and may have failed, because invariably they understand business. One of our silver bullets will be the SME sector. This proposal is geared towards providing funding for projects with a larger element of risk than the banks are willing to accept. We need to support these enterprises and put this measure in place.

I hope this will be up and running by early autumn. The terms and conditions and the cost of the money should not be so onerous that it will be impossible to qualify. This is a venture capital fund on behalf of the State to drive the SME sector in establishing businesses in high-technology areas, areas with potential for growth and, in particular, with potential for job growth.

In his reform of the enterprise boards and the new business element in the Department of Jobs, Enterprise and Innovation, the Minister is considering the cohort of enterprises which employ between ten and 50 people. Until now the enterprise boards have looked after companies which employ fewer than ten people while Enterprise Ireland has looked after those which employ more than 50 people.

Through this Bill the Government is entering an area which is exciting and cutting edge. It will work hand in hand with business to create jobs, to foster those taking risks in business and, above all else, to drive Ireland towards full economic recovery in the years ahead.

I thank Deputy O'Donnell and the Minister of State, Deputy Kehoe, for sharing time. I congratulate the Minister on bringing the Bill before the House. It is a good news story although some Deputies always want to talk down good news stories.

Small businesses are at the heart of every community with the local sole trader who provides the newspaper, the local butcher who provides the Sunday dinner and the local coffee shop where one can have a weekly catch up with the girls. These business owners know their customers and they depend on them. Many of them provide credit. Most of these business owners are not out to become rich. They want to be part of and serve the community. In many cases they want to earn a living so they can rear their children.

Like every other Deputy I have been contacted by people with a great business idea who have been refused finance and business owners who wants to expand and have been refused credit even if it is a viable business. Ireland is known for its entrepreneurial spirit and the Government must support entrepreneurs in establishing companies. The Government must assist businesses to succeed and encourage business expansion. Many of these businesses first start in a kitchen or garage. This fund will be a lifeline for a small start-up company or an existing business trying to expand. The Microfinance Fund Bill is part of a range of Government initiatives to support businesses of various sizes and in various circumstances. The adoption of the personal insolvency Bill and the Credit Guarantee Bill will also provide assistance. The Bill will assist 5,500 viable businesses to obtain credit. These are businesses which would not have received credit otherwise. A total of 7,700 jobs will be created, meaning 7,700 happier people and families.

The Government is serious about job creation. The plan will improve support for businesses creating jobs and will remove barriers to employment creation throughout the economy. We have made progress on the foreign direct investment front. IDA Ireland success stories include a net 6,000 increase in jobs in supported companies. Enterprise Ireland also has success stories with a 15% increase in the number of high potential start-ups in 2011. However, we must also help small indigenous businesses and the domestic market and the Bill will do so.

We also have success stories in Dún Laoghaire-Rathdown. In a recent survey conducted by Dún Laoghaire enterprise board 56% of local businesses and companies stated they expect to expand in 2012. I congratulate Dún Laoghaire enterprise board on the 2,000 jobs in existence as a result of its work over the past number of years.

Sometimes it is easier to see the positives when one is on the outside looking in. The 2012 IMDWorld Competitiveness Yearbook ranks Ireland’s overall competitiveness in 20th place which is up four places from 2011. It ranks Ireland first in the world for investment incentives, the availability of skilled labour and the flexibility and adaptability of its people. Many of my former students would be thrilled to know they came first in the class and this is what the country is trying to achieve.

I absolutely reject what Deputy Donnelly said last night about our young graduates. He quoted but did not name some CEO who said that his company could not take on our graduates. I have met many CEOs in Dún Laoghaire, in our county and around the country who are delighted to employ our young graduates. If he walks around our universities, Deputy Donnelly will see many fine young people. This Government is working to make Ireland the best country in the world in which to raise children, to grow old and to do business.

I welcome the Bill and I compliment the Minister on his initiative. We are all aware of the huge pressure on businesses and enterprises across the country. Time and again, we hear of businesses being forced to close their doors as they continue to be put under pressure due to the poor domestic economy. We are faced with a litany of closed businesses and lost jobs and as the days pass, more of those businesses are being lost in rural towns and villages. The boarded up and closed shops in town centres are a sight familiar to everyone. These closures are not a reflection on the viability of the business, but rather a reflection on the impossibility of continuing to trade in this challenging environment. A key factor in this is the lack of readily available credit to assist companies in these arduous times. Any steps introduced that ease the burden on small and medium enterprises must be welcomed, and implemented as a matter of priority.

The requirement for further assistance in supplying credit to smaller businesses cannot be doubted. The need to protect, shelter and advance our domestic enterprises must be a priority. Small and medium enterprises are the backbone of our economy. The difficulty is that these businesses are floundering due to the limited availability of credit and the continued rejection of their loan applications from banks and other financial institutions. Companies may be seeking financial assistance to establish and develop the business, or they may simply require short-term credit as working capital to tide them over while they are awaiting payments. Many of these businesses find it impossible to meet the stringent requirements in place to access funds from financial institutions. I frequently meet local business people, producers and entrepreneurs who have founded and developed microenterprises which have the capability to flourish to the benefit of the entire local economy. I am told time and again that these business owners are urgently seeking access to credit from any available source, and often face a brick wall in accessing such. I am told by people from nine out of ten businesses that the greatest hurdle they face is the impossibility of accessing finance.

In its quarterly bank watch survey, ISME found that while demand remains steady at 37% of those surveyed, the refusal rate of the banks has now risen to 54%. This is a deterioration on the success rate previously recorded. Even more worrying is the statistic that 82% of businesses which applied for funding found that the banks were making it more difficult for them to access that funding.

It is clear that the market has failed adequately to provide credit to viable microenterprises and so there is a clear need for intervention at Government level. This Bill will not solve all the difficulties faced by companies, but it will go some way towards tackling this problem by providing a lifeline to start-up companies, sole traders and existing microenterprises which have faced a gruelling task in accessing finance. Restricting credit to SMEs is not only damaging to the individual company affected, but also to the overall economy. As businesses are starved of credit, they cannot invest. They are prevented from further development and growth, and in many cases their hand is forced into closing the business or downsizing considerably.

All businesses need credit to stay afloat and to increase the size of their operations. The ability of our smaller businesses to grow and develop underpins our future potential. These small businesses can, if supported, make a real impact on the community and the economy at local level. They may employ a few people locally, source supplies locally and spend money in the local economy. Additionally, they provide a significant saving to the Exchequer in terms of employment sustained and created, the removal of employees from reliance on social welfare payments, and increased direct and indirect tax payments.

I welcome this Bill as a positive step forward in helping our small businesses in these testing times. We must treasure those businesses which have the capacity to hold their own, and we must continue to bring forward legislation that seeks to assist our enterprises, ride out the storm and return to growth. Therefore, I welcome the Bill and the initiatives within it, and I hope the Bill will have a positive impact on small businesses and start-up enterprises in particular.

Deputy Tom Fleming is sharing ten minutes with Deputy Seán Conlon.

This is very welcome news. It is the most significant development in job creation for a number of years. It is anticipated that there is €90 million available for 5,500 microenterprises for over ten years, creating up to 8,000 jobs. I think the figure could be doubled, because that kind of promotion and activity should generate even more jobs. The vast majority of microfinance applicants are involved in the provision of local services and in small businesses. This stimulus to small employers engaged in viable job growing potential businesses is long overdue. Many small businesses were the backbone of their local communities until the economic downturn and the employment they provided, however small, was vital to the survival of their local communities. The demise of many of these companies over the past few years has been a hammer blow to their existence. It also impacted severely on the economic and social life of the communities in which they were located. Many people had long-term full-time employment with these small and medium enterprises. Their demise also contributed to emigration, while there was no lifeline for many of the redundant workers. There was often a lack of opportunities for both employer and employees on age grounds, and they faced the bleak prospect of never getting back into the job space again.

There are almost 200,000 small firms in Ireland, while 13,810 new enterprises started in 2009. Small firms employ almost 544,000 people, accounting for 45.7% of the total employed in business in Ireland. When we take into account the proprietors and family members directly engaged - they may not be drawing a salary as such, but would contribute to the business - more than 655,000 people are involved. Over 90% of these small firms employ fewer than ten people, while 49% are sole owner entities. They are involved in a wide range of activities, many of which are employment intensive including tourism, retail, construction and a host of other professional businesses and personal services. Prior to the recession, over 172,000 net jobs were created in services between 2000 and 2007.

There is a mindset that in the last two to three years it is futile to seek finance from the banks. That became part of the public consciousness and many just gave up after an initial inquiry, or did not appeal the initial refusal. However, there is an anomaly in this microfinance scheme for small businesses. They first have to go to the bank and be refused. Ironically, the State is giving the guarantee to the receiver and is thereby taking the full risk, so there is no risk for the bank. I do not know what has been happening in the banks in recent years, with all the different State guarantees of which this is another. That is one of the few faults I find in the legislation.

I believe this will be a significant stimulus and injection for all those engaged in small firms. There is also production in agriculture, horticulture and fisheries, yet these are excluded from the scope of the scheme because of certain restrictions and rules. I ask the Minister and Minister of State to consider this point. Where there is growth potential in these sectors perhaps they might look at this again and include them.

The Microenterprise Loan Fund Bill 2012 is a further strand of the suite of finance packages being put in place by this Government, to support the SME sector in its efforts to survive the current recession and begin to move forward again and develop so that they can continue to play the crucial role they have played in the past in creating much needed employment. This is ongoing proof of the Government's commitment and determination to deliver on its programme for Government by ensuring that avenues of funding are maintained to support viable SMEs, especially the more vulnerable ones that are currently experiencing difficulties in accessing the finance needed to develop new ideas, create employment and preserve existing jobs.

I acknowledge the efforts of the Minister, Deputy Bruton, and the Minister of State, Deputy Perry, in finding innovative ways of kickstarting the economy in the current very difficult climate. The funding in question is aimed at small enterprises with fewer than ten employees and with an annual turnover not exceeding €2 million, that are in the precarious position of having been denied access to bank funding through the normal channels. It is vitally important that every effort is made to keep these small enterprises in the game in order that they, too, can play their part in the recovery that will come, despite all the negative reports to the contrary.

There is unquestionable proof that banks are refusing loans to credit-worthy and viable SMEs. There is evidence to this effect from such reputable institutions as the Central Bank, where researchers have verified such practices, from the Credit Review Office, which is in daily communication with and has first-hand experience of the sector, and from the Irish Small and Medium Enterprise Association which deals with these problems every day.

This scheme seeks to remedy a situation in which the Central Bank has found evidence that a moderate decline in credit applications is contrasted with a very large increase in credit rejection rates, that run at 15% to 18% ahead of comparable eurozone rejection rates. The inability of many in this sector to secure so-called letters of credit, which do not involve any credit at all except in the case of default, is having serious implications for many as it renders it impossible for them to engage with direct suppliers abroad. This has the unfortunate effect of making it necessary for those affected to buy their raw materials, or whatever, from third parties, adding a layer of expense they cannot afford to the transaction.

I am glad to see this funding programme is being delivered through Microfinance Ireland, which will be a subsidiary of the Social Finance Foundation, an organisation that has considerable expertise in the area of funding enterprises that are experiencing stress. Its expertise and experience will stand the organisation in good stead in successfully undertaking this important task. It certainly is an important task because the organisation will hold the fragile hopes and dreams of a nation in its hands.

The recovery in this sector is our ticket out of jail, especially in constituencies such as Cavan-Monaghan where SMEs are the only thing standing between our people and the dole queue or the aeroplane. There are viable enterprises in the sector which will not survive without this crucial help. It is incumbent on us, as a Government, to ensure the survival of these enterprises which, collectively, are responsible for the employment of hundreds of thousands of people throughout this country. It is our responsibility in Government to get this legislation in place and ensure these small enterprises survive to take up their rightful place in carrying this country forward. They are the rock on which the country was built, they can be relied on and they are constant. They are not going anywhere because they are already at home.

The Minister may speak in reply until 2.30 p.m.

That is a very generous allocation. First, I thank the many Deputies who contributed to the debate, all 33 speakers. That is one in five of all Members, if one deducts the Ceann Comhairle, and shows a good level of interest in the debate. I am not surprised. Everywhere I go - the Minister of State, Deputy Perry, reports the same - the issue that comes up repeatedly is access to finance. It is the burning issue in people's minds.

The new Secretary General in the Department of Finance has taken an acute interest in this matter. The work he has done with the Minister of State in touring the country and getting much closer to business, finding exactly where the shoe is pinching with the credit institutions, has brought in a great deal of extra information that we can put in front of people. It allows the Government to hold banks more accountable. It has been complemented by the work of consultants such as Mazars and the Central Bank, from whose reports many speakers quoted.

The truth is blunt. It is there for the banks and everybody else to see. Our credit system is not working as it should. There are many reasons for that. We know there is an enormous legacy of bad property debts, and so on. In addition, however, the skills needed to lend to small business, especially business oriented towards the export sector, have been lost in the banking system and are having to be rebuilt. Enterprise Ireland, the Minister of State, Deputy Perry, and small business interests of various kinds are helping the banks to rebuild. This is an urgent and important role. That is why Government has insisted that a €3.5 billion target would be set for each bank to deliver into the small business sector this year. We want to see that delivery.

What we are doing here is not a substitute for that role. The banks have to fix this problem; that is their duty and we will hold them to account for it. We recognise, however, there are also real failures in the market. Some speakers mentioned how small this scheme was but people need to look at the bigger picture, at what the Government is doing in the sphere of access to finance. Yes, this is a fund of €40 million over the coming five years but look also at the loan guarantee scheme which has the potential to reach €450 million over the coming years. There is the developing capital fund of up to €150 million in the same period. There are the innovation funds which, cumulatively, will come close to €400 million on the commitments already made. There is the Silicon Valley alliance, announced by the Minister for Finance during the week, another fund of €100. There is Enterprise Ireland's seed capital fund, which, at €650 million, is the biggest fund managed in the seed area anywhere in Europe. There is a quiet transformation going on - one might almost say revolution - in the way access to finance is being stimulated and force-fed into the system by Government. It is not that the Government is standing back and allowing the problems in access to finance to fester.

Totted up, these schemes come to some €1.3 billion to €1.5 billion, across the board of different initiatives that are there to support industry to expand and grow. A feature that characterises them, which fits into much of what Government is trying to do, is that it is not always the huge pots of State money that are needed. The loan guarantee scheme is a relatively small amount of exposure to the State but it levers up these funds. In every one of the schemes we will seek to get private sector money to join and complement what Government is able to put into it. It is about thinking smart and being innovative and that is true of this scheme, too. We are putting in €10 million in equity but we will be borrowing from the banks and will exploit the European Investment Fund as a partial guarantor. It is a way of playing a little smarter in order to make up for weaknesses in our banking system.

Many people will look enviously at the likes of Germany with its famous Mittelstand companies, where banks traditionally have been really strong in supporting the family-owned business. The backbone of German industry, which has been such a success in recent years, has been built on a banking model that has been well suited to those sorts of smaller scale companies. It allows them to grow and export. We have not had such a banking system. Even with the best work by the banks, we are in a difficulty. They have difficulties in providing the sort of international stretch we need to build our companies. As a result, we are now obliged to step in, as a State, and support that change. I welcome the broad support for this, even among those who were critical. There was nobody who said it was not worth supporting. I acknowledge there has been difficulty. I would say my officials have grey hairs they did not have 12 months ago because of the difficulty in getting this through the system.

They are looking very well.

They have done extremely well. The truth is that this measure is different. We have to examine how to legally protect the State's interest and the structures that will be put in place. This involves the State taking on the risk. As Deputy Eoghan Murphy said, the State does not normally get into this sort of risk business and that is true. We need to get partners who are experienced in this area and we have used the Social Finance Foundation as that partner. We have relied heavily on First-Step, which has been a small player in this scheme. It has pioneered the work and it has been very valuable to us. To build something that is robust takes time. The work that has gone into to this make this initiative robust has been well worthwhile.

Some Deputies asked about the board. It will be appointed by the Social Finance Foundation. We will lean on people with real experience in this area. I can assure the House its members will not be political people and it will not allow any political interference in the decisions that will be made, which was a point raised by some Deputies.

Many Deputies emphasised the need for mentoring and advice. It will be crucial that those applying under this scheme, either through the county enterprise boards, local enterprise offices or through financial advisers, put forward a credible proposal. Obviously, this is about hard business, helping people with good business ideas to set up sustainable businesses that will be viable in the long term. It is not about half-baked ideas. It requires the work to be put in and the advice to be obtained in order that a good plan is put forward. We recognise that these proposals will be higher risks. We are building into this an expectation of a 20% failure. That does not represent charity by the State but recognises that the start-up projects in this niche area are risky. It is in the State's interest that people are given the courage to have a go. We want to do that but we want to do it in full prudence in the knowledge that it is taxpayers' money with which we are dealing and we will require proper rules to be applied.

A number of Deputies said that the schemes that are in place are not well enough known. I assure the House that I and the Minister of State, Deputy John Perry are putting in place a much stronger information campaign around many worthwhile schemes that are in place, of which Deputies may be aware but which they do not promote. I do not want to take up the time of the House going through them but I will mention one or two. The seed capital scheme, of which the Acting Chairman, Deputy Catherine Byrne, will be aware, is one where a PAYE worker can reclaim his or her tax for the past six years and put it into a company that he or she sets up to start a business. The take up of that scheme numbered only about 70 people last year, even though thousands of new businesses were formed. We need to promote that scheme.

Another scheme is the Revenue job assist scheme where an employer can get double wage tax relief for three years if he or she takes on a person who has been more than a year unemployed. The take up of that scheme only numbered a few hundred last year. A large cohort of people are leaving the live register and being taken into employment but the scheme is not being used. There is a good case to promote these and we will take that up. We need to get that information out and to use Enterprise Ireland, local enterprise offices, the Company Registration Office and chambers of commerce to spread the news. Many start-up companies talk about going into the valley of death when one's start a new company. It is challenging and there are many pitfalls but those starting up a business should use the props and the supports the State has put in place to help them find a secure passage through the process. We will take up what a number of Deputies said. Deputy Ann Phelan quoted a report from the interparliamentary group on that matter.

Some Deputies said they did not know about this scheme. We are developing it and I invite people who are interested to arrange to talk to my Department and we can go through it. Essentially, no sector will be excluded. Deputy Fleming referred to the loan guarantee scheme which excludes certain sectors under state aid rules but no sectors will be excluded from the microfinance scheme.

Some Deputies asked about what the interest rate will be. That depends on the money we get. We will have to lever up our equity by lending from the banks. We have to negotiate a keen deal with the banks. We also have to negotiate with the European Investment Fund to get a guarantee. I can assure Deputies that we will be trying to keep it as cheap as possible but we do not have a fixed price.

Some Deputies asked about the duration of the scheme and how long an applicant will be allowed to borrow, there is not a fixed duration. We are not putting a termination period on it. Obviously, it will hinge on the business plan that is put forward, the viability of the business and the length of time it is likely to need the money.

Deputy Ó Cuív raised the issue ofde minimis rules on European state aid and if we are constrained by them. We are not in this instance constrained by them but we are interested in seeking to get higher de minimis rules, which is a matter in which the Deputy is interested.

Some Deputies asked if we will let other intermediaries do this, whether it will just be a wholesale facility in which other intermediaries will play a part. The microfinance institution that we will set up will be the provider and it will deal with advisers, whether they be local enterprise offices or other business advisers, but it will not have other partners delivering loans on its behalf. The reason for that is that we want to get access to the European Investment Fund guarantee. That requires that we can vouch for oversight and the due diligence in this respect. We need to keep that tight and in-house.

A number of Deputies, including Deputy Catherine Murphy, asked if this facility will be surrounded by bureaucracy. That is not the culture we are seeking to develop. Anyone who has experience of First Step will be aware that it has been very successful. The company where we launched this initiative last week is an example of its success. The couple who set up the company were refused a loan by the bands but they got one from First Step. They started out at farmers' markets and now they are setting up their own café, Ducks & Co., in Temple Bar which will open in July and I encourage colleagues to go down there. That company employes seven people on the back of a microfinance facility. We hope 5,500 such little businesses will get up and running. It is a very worthwhile scheme. I do not pretend it is a solution to our economic challenge. As Deputy Perry continually says, small business is at the core and heart of what will create employment. There is a segment in the microenterprise sector to which must give a battling chance to create employment and surviving and that is what this is about. I thank the Acting Chairman for her indulgence and the many Deputies who spoke. I look forward to Committee Stage where hopefully we can iron out the remaining queries.

Question put and agreed to.
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