Microenterprise Loan Fund (Amendment) Bill 2020: Second Stage

Minister for Business, Enterprise and Innovation (Deputy Leo Varadkar)

I move: "That the Bill be now read a Second Time."

I am pleased to bring forward the Microenterprise Loan Fund (Amendment) Bill 2020. This is the first Bill introduced into this House by the new Government. It is important legislation and forms part of the Government's efforts to help our smaller enterprises meet the enormous challenge presented by Covid-19. The purpose of the Bill is to make certain amendments to the Microenterprise Loan Fund Act 2012, as amended, and the European Investment Fund Agreement Act 2018 to help businesses access additional finance.

Let me start by explaining why the Bill is necessary. As we all know, Covid-19 has had a devastating impact on our society and economy. Lives have been lost and livelihoods ruined. Our small and medium-sized enterprises have been dealt an enormous blow. Many have had to close their doors for months with revenues drying up overnight. As a result, hundreds of thousands of people are out of work and many people have seen their wages or hours reduced. Therefore, we must act now to avoid mass unemployment and a wave of insolvencies.

While the number of people on the pandemic unemployment payment is falling week-on-week, the scale of the crisis is unprecedented. Despite the challenges we have faced to date and those that are yet to come, with returning customers comes renewed hope for our small businesses and their staff. Like so many others, last week I enjoyed the simple pleasure of getting my hair cut and going out for a meal for the first time in four months. Getting small businesses like hairdressers, barbers, cafés, restaurants and gyms back open is not just vital for our economy, it is also important for the emotional well-being of our people.

Since I took up the role of Minister with responsibility for enterprise, trade and employment ten days ago, my focus has been on preparing the July stimulus package. As I said on the floor of this House last week, it will be radical of scale and speed. While no final decisions have been taken and the Cabinet sub-committee will meet for the first time next week, we are looking at a range of possible actions such as an enhanced restart grant to help businesses reopening, lower-cost long-term loans, reductions in some business taxes and extending the wage-subsidy scheme.

I have previously expressed my concern about the very high level of youth unemployment and the inequality that could emerge as a result between younger people and older people, those working in the public sector and big businesses and those in the private sector and small businesses. Poverty and deprivation rates have been falling in Ireland for more than five years. We are one of the few countries in which income inequality has reduced in recent years. We do not want it to go in reverse.

The July stimulus package will have a particular focus on sectors which employ large numbers of younger people, such as hospitality, retail, tourism and leisure and perhaps construction as well. Radical and immediate action is required if we want youth unemployment and unemployment generally to fall.

I would be happy to hear, as part of this debate, Members' ideas and proposals for the July stimulus package, or for the longer-term national economic plan that will be published alongside budget 2021 in October.

My Department and its agencies have worked hard since the arrival of Covid-19 to help businesses and employers overcome the challenge presented by the pandemic. The impact on small and medium-sized enterprises, SMEs, in particular, has been enormous. In many ways an economic pandemic followed the health pandemic. In May 2019, there were 238,000 SMEs in Ireland, employing more than 1.3 million people, out of a total workforce of 2.3 million. Groups representing the SMEs and microenterprises explained the need for assistance early in the crisis, with a particular focus on liquidity. This was backed up by research from the Central Bank, which indicated the likely need for some form of external liquidity for firms if they were to reopen once the Covid restrictions were eventually relaxed. My Department had already begun expanding existing schemes and developing new actions to help SMEs and microenterprises to access that crisis liquidity.

As part of the initial response, we reprioritised and repurposed existing programmes. This has included repurposing the Enterprise Ireland online retail, continuity voucher and financial planning grant schemes; the local enterprise offices' business continuity and trading online voucher schemes; InterTradeIreland's e-merge and emergency solution schemes; the credit guarantee scheme; the working loan capital scheme; and the microfinance loan scheme.

My Department has been focused on coming up with practical solutions to help businesses. For example, in addition to the existing credit guarantee scheme, a new Covid-19 credit guarantee scheme was developed using the flexibilities allowed by the European Commission. This allowed for credit guarantee schemes to include small mid-caps and primary producers as well as SMEs, but the temporary framework is due to expire on 31 December 2020, meaning that any loan guarantees, underwriting lending to enterprises from the financial institutions, must be in place by the end of the year in order to qualify. It is vital, therefore, that it is put in place as soon as possible to help as many businesses as possible in the timeframe available. Amending legislation is necessary and I look forward to returning to the House to talk about that very soon.

Today we are here to talk specifically about Microfinance Ireland and expanding its capacity to extend loans for microenterprises - businesses with nine or fewer employees - which cannot access bank finance. It has a high risk tolerance and provides essential funding to start-ups and other small businesses. Just under 80% of its loans were made to businesses outside of Dublin. Therefore, this Bill is also of real importance to rural Ireland.

The nature of Microfinance Ireland lending changed significantly with the onset of the Covid-19 crisis in March. In response to an urgent need for liquidity in the face of an unprecedented collapse in economic activity, my predecessor, the Minister, Deputy Humphreys, announced a €20 million Microfinance Ireland fund for affected microenterprises, which would make loans of up to €50,000 available, with reduced interest rates of 4.5% to 5.5% following a six-month interest-free period. Microfinance Ireland has experienced significant and growing demand since this loan was launched on 13 March 2020. As of 26 June, 581 loans have been approved amounting to a total of just under €16 million. I expect this demand will continue to accelerate as our economy reopens.

The proposed amendments to the Microenterprise Loan Fund provide a legislative basis for increased funding for Microfinance Ireland. This will ensure it can continue to lend to small businesses and help people get back to work. Given the exceptional circumstances that have ensued from the Covid-19 crisis, it is reasonable to increase the legislative ceilings so Microfinance Ireland can continue to fund very small businesses for as long as may be required. Given the urgency of this Bill, these increases have been included as amendments in the Bill as presented for publication.

The amendments to existing sections and the addition of one new section to the Microenterprise Loan Fund Act 2012 will make increased funding available to Microfinance Ireland, MFI, so it can continue to provide short-term credit facilities to businesses. In addition to increasing grant aid to Microfinance Ireland, the amendments will allow it to source efficient and affordable financing through the Strategic Banking Corporation of Ireland. The unprecedented nature of the shock caused by Covid-19 makes the need for these changes even more imperative, and even more time-critical. This is particularly important as our society and economy continue to reopen. The level of demand for funding from microenterprises has been so large that MFI had to pause its lending from the beginning of last week. Lending will resume when increased funding can be made available, once this Bill has been enacted.

The Bill also amends the European Investment Agreement Act 2018 to allow the Department to enter into new arrangements with the European Investment Bank, EIB, group to underpin financing schemes for SMEs and small mid-caps. The European Investment Fund Agreement Act 2018 allows relevant Ministers to enter into agreements with the European Investment Fund, which have a cumulative contribution committed up to a limit of €75 million. The amendment included in section 8 of this Bill will increase that limit to €500 million.

We want to be in a position to enter new agreements with the European Investment Fund for the benefit of small, medium and microenterprises. Increasing the Irish limit is necessary to allow expansion of schemes such as the €500 million future growth loan scheme which will provide for the longer-term lending needs of SMEs such as farmers and fishermen who are exiting emergency liquidity and want to reinvest in their businesses.

Given the significant demands on the resources of the EIB group, this funding may not be available to Ireland at a later date. Therefore, it is prudent to put this legislation in place to facilitate negotiations with the EIB group on this €500 million expansion of the future growth loan scheme as quickly as possible. Amendment of the European Investment Fund Act will enable Ireland to draw down further funding from the EIB. This would include schemes which facilitate business investment in climate action. Ireland is committed to the European Green Deal. As our economy begins to recover, we must take advantage of the opportunities presented by moving to a low-carbon future.

My predecessor, the Minister, Deputy Humphreys, was very active in her efforts to help businesses respond to the pandemic.

This included the urgent drafting of the Bill that we are considering today, the publication of which was approved by the outgoing Government on 29 May.

I am pleased to take this Bill through the Oireachtas so we can put in place the necessary measures for this vital cohort of the economy. In the past, SMEs in Ireland have proved themselves to be resilient, and their responses to this crisis have shown businesses are determined to adapt, revive and thrive. This Bill will help small businesses to bounce back, retain their staff and serve their communities. I hope that all of us across the House agree on the importance of the SME and microenterprise sector in Ireland and approve this Bill without delay.

Deputy Louise O'Reilly

I will be sharing time with Deputies Pa Daly and Pearse Doherty. I will take this opportunity to wish An Tánaiste all the best and good luck in his new role.

I welcome the Bill that is before us. I have spoken to people such as hairdressers, mechanics, tattoo artists and others who run microenterprises in my area. I know that those people are going to be eagerly watching proceedings here this evening. They face, and have faced, unprecedented challenges as a result of Covid-19 and the extraordinary public health measures that were undertaken to protect us from the virus. As a result, microenterprises have experienced losses which threaten their very survival. Those losses, in conjunction with domestic and European economic contraction, have created a daunting and almost insurmountable challenge for these businesses. As a result, firms have faced substantial cash flow problems, the resolution of which will determine their capacity to withstand the current crisis and operate successfully as they reopen. Liquidity supports and access to credit lines are essential in assisting microbusinesses and SMEs in the coming months.

In the weeks and months since Covid-19 brought society and the economy to a standstill, attempts were made by the caretaker Government to provide liquidity supports and credit lines. Unfortunately, those supports have proven to be generally inaccessible and ineffective to microenterprises and SMEs. The supports did not meet their needs. It is incredibly important that credit and working capital are made available to SMEs but it is equally important that such supports are accessible. While a significant amount of money has been made available, and more will be available if this Bill is passed, the application of commercial level interest rates to Government loans has made many of the loan schemes unattractive to microenterprises and SMEs.

I have submitted an amendment to ensure that moneys loaned to microenterprises will be interest free and with zero repayments for the first 12 months of the loan, and that interest rates on such loans be capped at 2%, with interest only being applied to cover the overheads of administering the scheme. Obviously, there is a provision of limitation on time there as well, which is important. However, the Tánaiste can change this through secondary legislation and deliver lower interest rates. The page regarding interest rates for Covid-19 business loans on the Microfinance Ireland website has today been taken down. I hope that is an indication that the Tánaiste is going to lower those interest rates.

If we look across the sea to Britain, we can see positive elements of its loan schemes. There are no repayments for the first 12 months under the British scheme, not six months as is the case in Ireland. Additionally, the British Government covers interest payable to the lender for the first 12 months, not six months as is the case here. Interest rates in the UK are set at 2.5% per annum, not the 4.5% to 5.5% that is charged on loans under the Government loan scheme in Ireland. It is little wonder that data published today show that more than 1 million bounceback loans, worth £30.9 billion, were released to microenterprises and small businesses in Britain. There is no doubt that aspects of it could be improved but the positive aspects of the British scheme should be replicated for schemes in Ireland.

Mr. Frank O'Connor, director of funding and debt management at the National Treasury Management Agency, NTMA, was before the Special Committee on Covid-19 Response this morning. He stated that his belief and that of the NTMA is that borrowing rates for sovereign nations in the eurozone area will remain low for the foreseeable future and that he is comfortable with the outlook over the coming years. Therefore, I call on the Tánaiste to pass the low interest rates at which we can borrow on to microenterprises and SMEs.

The eurozone area has had an interest rate of 1% or lower since around 2012, moving towards 0% interest rates and negative interest since around 2014. Surely, these low interest rates can be passed on to those accessing Government-backed loans through the variety of available schemes.

Furthermore, microenterprises and SMEs have stated that there are significant issues surrounding banks using the same risk assessment for loans as if the Government was not guaranteeing those loans, thus leaving thousands of SMEs unable to access loans or credit. These stories have tallied with work carried out by Mr. Sean Pollock in the Sunday Independent. The newspaper spoke to several businesses and advisers who shared concerns over the State's Strategic Banking Corporation of Ireland scheme. A litany of problems were listed, including long processing times for applications, an overly complicated process, repayment terms charged by the banks, some companies being rejected and some being told that the scheme was already fully allocated.

There is no doubt that these issues are a result of the Department that funds the scheme playing no role in the application or decision-making process which is fully delegated to the participating lenders. As the Unite union outlined in its paper Hope or Austerity, we have a situation where the banks that administer the scheme also make the decisions as to whether to issue loans based on their own criteria for loan issuance and not those of a Department trying to keep microenterprises and SMEs afloat during a global pandemic. Therefore, there is little wonder that microenterprises and SMEs have accused these schemes of having been designed with the interests of banks in mind and not those of the wider economy and its employment levels.

There is significant disquiet among microbusinesses and SMEs over the early stages of the response by the State to the challenges that they face. They feel that their voices are not being heard. They feel that the Department is not listening to them or responding to their needs. They want to be able to reopen and restart their businesses. They want to be able to plan for the future but they need the assistance of the Department to be able to do that. All the indicators we have and the research from the representative bodies of microbusinesses and SMEs suggest that if the response by the State and Department does not pick up, there will be significant implications for employment levels now and into the short, medium and long term. This is worrying, given the enormous challenges that lie ahead as the country emerges from the shutdown.

These and many other issues surrounding the working of different Government schemes have been pointed out by Sinn Féin, SMEs and their representative groups. The longer the issues go unaddressed, the more it looks as if it is Government policy to state that it is providing funding for microenterprises and SMEs while making that funding almost impossible to access.

Sinn Féin welcomes this Bill to expand the Microfinance Ireland Covid-19 loan scheme and the future growth loan scheme. We will work to ensure that the Bill is passed quickly. I know that the Tánaiste will tomorrow meet with his colleagues on the Cabinet committee on economic recovery and investment. I reiterate that rectifying the issues with Government schemes that microenterprises and SMEs have outlined, streamlining access to working capital and delivering a fair and sustainable economic recovery for workers and SMEs must be top of the agenda for that Cabinet committee meeting tomorrow.

The Tánaiste mentioned the issue of youth unemployment. In the immediate aftermath of the most recent recession, we saw that as people went back to work, youth unemployment remained persistently high. Very often, what was on offer for young people were jobs at very low rates of pay, on precarious contracts or in the so-called gig economy. That is a term I cannot abide. The gig economy sounds like the kind of place one would love to be but it is an awful place to work. It is awful for people to be in that precarious situation, and as everyone emerges from the shutdown, there will be people with significant debt who have just about managed to maintain themselves. When we talk about job creation and investment, we must invest in decent jobs that are sustainable and will provide futures for those young people to be able to build, grow and plan for a sustainable future.

They cannot do that on week-to-week contracts. They cannot do that when they are on precarious, hour-to-hour or if-and-when-required contracts. They need decent contracts and to be able to plan. As we emerge, this is not just about supporting business but has to be also about supporting decent work that young people can access. While young people are not the only people going to be impacted by this, we need to be mindful of the lessons from the previous recession and to know that youth unemployment remained stubbornly high. That cannot happen this time around. We have to be able to ensure that we can do better than that. When we talk about investment, it must be investment in decent work, decent jobs and a proper, decent future for these young people.

Deputy Pa Daly

I would like to express my gratitude to Deputies Pearse Doherty and O'Reilly for their speeches and for their work on these issues. I support the amendment proposed by Deputy O'Reilly. Although the Bill is somewhat welcome for the expansion it will bring in the credit available to small enterprises, it remains only a smaller part of the wider picture for businesses in these difficult times. It has limitations for a number of reasons which have been raised with me by constituents in Kerry over recent weeks and months. I have heard from people in bed and breakfast establishments, family-run restaurants, hotels, and tourism-related transportation businesses across the county who are desperate for assistance to reopen their businesses. The concerns centre on three main areas. First is the fact that what is being offered is in fact a loan that must at some point be paid back. The Bill may be intended to offer an outlet for those businesses that cannot pass some of the credit risk checks of traditional lenders, but we must acknowledge that businesses are leveraging all available sources of credit and cash. A loan under the terms of this Act is unlikely to be their first source of debt as a result of the crisis. In many cases owing to the size of these businesses and the fact that many will be small traders, these are likely to be debts personally guaranteed by the business owners and operators. Many business owners in Kerry in particular have expressed anxiety and hesitancy about applying for the credit available as a result.

Second, the requirements to access Covid business supports in many cases have had the effect of excluding the seasonal businesses. Established areas particularly in south and west Kerry which rely on tourism such as Annascaul, Dingle, Waterville and Killarney are feeling the brunt of the pandemic, with some being forced to remain closed for 2020 because they cannot afford to open. Others are effectively excluded from the wage subsidy scheme owing to the seasonal nature of their businesses, where workers were to commence work at the exact time or shortly after the restrictions began. More effective and flexible conditions for these businesses in terms of other supports may help them to avoid having to turn to loans such as the one the Bill provides.

Third is the uncertainty surrounding the present crisis and its duration. This year, 2020, is less than half a season for many tourism operators. Revenue will be down by up to 80% for many I have spoken to, and the outlook, unfortunately, for 2021 is increasingly uncertain. Although we have seen welcome calls for Irish people to holiday at home this year, Sinn Féin's proposal for a €200 voucher to be spent on hospitality would do much to assist those wishing so to do. There will continue to be losses for businesses on the island and particularly in Kerry, the county most negatively affected by the pandemic. As we know, the total tourism loss to the county will be up to €400 million. It affects thousands of jobs, particularly for seasonal workers. Applying for loans from Microfinance Ireland requires a projection of cash flow for the next 12 months, a daunting task for anyone at the present time and doubly so for those in the tourism and hospitality sector. Accordingly, we must consider the Bill within this context and not shy away from going as far as we can in supporting small businesses. Merely expanding the amount of credit available, as the existing Bill provides, does not go far enough. As a result, I will be supporting Deputy O'Reilly's amendment which should be supported by all Members of this House who wish to provide some form of relief to the sector.

Deputy Aodhán Ó Ríordáin

I congratulate the Tánaiste on his appointment and look forward to working with him over the coming period. His remarks are welcome for the emphasis he has placed on young people. I am glad the Government is aware of this. We have only just in recent memory come out of the last economic collapse, which was quite painful and bruising. Many small business owners will have just begun to look forward to the next period of their lives and their businesses' lives. They may have extended themselves on the feeling that things were improving economically and now they have been hit with this Covid disaster. It is much easier to retain a job than to create a new one.

While we welcome this Bill and note that it is enabling legislation, there are elements to the microfinancing project that could be enhanced and improved. Comparisons have been made with the bounce back microfinance operation in the UK. The bounce back scheme makes loans available at 2.5% with no repayment for a year. The Government pays the first year's interest. The loans are 100% State guaranteed. Loans of up to 25% of turnover are available with a term limit of six years and a maximum of £50,000. In the Republic, Microfinance Ireland offers a six-month interest fee repayment holiday, a term limit of three years and a maximum of €50,000. The Labour Party's suggestion is that €50,000 is inadequate and could be increased to €100,000. The interest rate of 4% is considered to be too expensive. In previous times, when the State was getting financing at somewhere similar to that rate, it could be in some way justified, but finance is available to the State now at a much-reduced rate and it would follow that a much-reduced interest rate should be applicable here. The term limit of three years is quite short compared with the UK bounce back scheme term of six years. We would like to give businesses a sense that they have five or seven years or maybe longer ahead of them to recoup and start afresh.

Before Covid, we had very encouraging employment statistics and the economy appeared to be going in the right direction. However, the statistics and economic analysis have clouded the reality of being a low-pay economy. About 23% of Irish workers pre-Covid were in low pay according to OECD statistics. That is a very large figure, as the Tánaiste can appreciate. As has been said, about 40% of young people were in insecure work. Those sectors of low-paid and insecure work were the ones most affected by Covid. We in the Labour Party feel that we cannot return to that type of economic model which is so dependent on low pay and insecure work. We want to work with the Government to provide a better and more secure model for workers.

It is much appreciated that the Tánaiste outlined the youth unemployment element in his address. We feel that this will at least be a significant part of the July stimulus. James Doorley from the National Youth Council of Ireland gave a statistic over the weekend that 45% of young people under 30 years are currently in unemployment. That is a staggering and incredibly worrying figure. We have all seen the damage the last economic collapse caused. We have potential now with support from lenders not to make the same entrenched and damaging mistakes that many of us made ten years ago and in the years after that. We appreciate and support the Bill, but if we look at what is happening in other European states and the UK, there are other models that are probably more generous. We could make this much more generous.

I have spoken about the interest rate, term limits and amounts involved.

Unemployment is not just an economic cost or a statistic that we try to bring down, as the Tánaiste knows, it is a real human cost to the person's sense of worth to his or her family and to society. We cannot reduce it to economic terminology.

We will support the Bill but we feel it must be more flexible and give voice to the fact that we are in a very precarious economic situation, and that is without mentioning Brexit. The debate until now has focused on Covid, and justifiably so. Covid has given rise to a health crisis that has caused economic collapse. While, Brexit has an influence on identity, security and other matters, including the Good Friday Agreement, it is also an economic threat. With both of those things, we also have an unemployment crisis. That is why we feel that Microfinance Ireland requires a greater capacity to lend larger amounts at lower rates over a longer period to those businesses which probably only turned the corner a few years ago in order that they can stand on their own two feet. I emphasise that we cannot return to the model of low pay and the grinding, humiliating existence that too many of our workers endure. That 23% of workers are on low pay is a damning statistic. It is not something over which we can stand or to which we would want to return. If, as my colleague, Deputy O'Reilly said, so many people are in insecure work, that must also be challenged. There are many mechanisms we can use to challenge that but it is an economic model to which we do not want to return. I want something that is better not only for the economy but also for society in general. The Labour Party will support the Bill and I look forward to the Tánaiste's response to the points which have been raised.

Deputy Catherine Murphy

I also wish the Tánaiste well with his new Ministry. It will be one of the very important offices if we are to stabilise the level of unemployment and grow in a different way that is more sustainable for our environment, the well-being of people employed here and the businesses themselves.

The small-to-medium business sector is a huge employer. If we are to avoid high levels of unemployment after the Covid pandemic, it is essential that supports are put in place to retain as large a number of people as possible in employment. Some sectors have been later to reopen and the lockdown has had a more extreme impact on some areas. There will have to be a targeted approach with some of the supports put in place. Some businesses exist on very tight margins. Taking on debt will be the difference between businesses surviving or not. Vibrant towns and villages require a small-to-medium sized sector not only to survive but also to thrive. Digital platforms for the sale of goods and services were rolled out during the crisis and are very welcome but shops, cafés and restaurants add to the vibrancy of our towns, as well as collecting and contributing vital taxes to run our public services. Nor is it only the businesses themselves at stake, but also their suppliers when it comes to job protection.

The nature of the SME sector varies and includes very many employees. Investment in the sector must be used to ensure that there is a job-rich recovery, and quality employment should be at the heart of the investment package. Figures published last week show that 80% of income tax is being collected, with some €650 million, or 2%, being warehoused. Particularly in the case of companies that do not survive, there may be tax revenue that is not paid over, in which case it is essential that those from whom the deductions have been taken do not lose their entitlements. Better paid workers pay more tax. Our aim should not only be to recover but to ensure that the recovery can deliver well-paid and secure jobs.

The additional money being provided through the microfinance fund is welcome. The interest rate is key for those availing of the fund. There are two levels, with a zero rate for a period, which may be the difference between people taking on debt or not. We need to examine how it matches against some of our European counterparts. What we do now is important in avoiding, as much as possible, the cost of creating new jobs, including training, supporting people on social welfare with the ancillary costs of medical cards, housing assistance payments and other supports. Young people will be disproportionately impacted. With the safety valve of emigration absent, they could pay a very high price. It is important that they are front and centre when it comes to the recovery. For some firms, including sole traders, taking on more debt is not an option. They will require support in other ways. I am thinking of the sound engineer who contacted me. He had a very viable income built up over many years but losing big events has meant that when he returns to work, it will be very gradual. I also think of the tour operator who specialised in bands, etc., coming here and who delivered significantly to the local economy. We want those types of business to return but they will have to be warehoused for a time because they will not be viable. There is a great variety among those affected.

Last week, the Special Committee on Covid-19 Response heard from representatives of the small-to-medium sector. They were highly critical of landlords who are seeking the full rent for the entire period of the lockdown. They were also very critical of utility companies. It is not all about the State. Some of the burden must be shared. It would be awful to see firms borrowing to pay a vulture fund, for instance, which might have no interest in sustaining our economy but only in putting its shareholders front and centre. How this fund is used will be important. There is no balance when a utility company can cut off a business. Pressure must be put on these companies to bring about some level of sharing the burden.

The recovery must be fair and also reduce the damage to the environment. I hope that the green new deal will support this.

I have looked at the profile of the microfinance fund which was introduced in 2012. It provides for an increase in the ceiling of Exchequer funding to Microfinance Ireland. That is welcome and the Social Democrats will support that. The Bill also provides that borrowing can come from other lenders but there may be different interest rates, depending on the source of the money. Firm with between one and nine employees and a turnover of €2 million per annum constitute 90% of Irish business which employ 400,000 people. A very large number of people are involved and microenterprises contribute nearly 20% of gross value added in the business economy.

Most microenterprises are mature businesses, which probably comes as a surprise, with the average firm operating for 25 years. Two thirds are family-owned and half of those are home-based. While we tend to think of the medium-sized sector as being the exporter, it is impressive to note that more than 40% of microenterprises export. More than 70% of owners wish to keep their businesses at their current size. While they do not have an ambition to grow larger, they have an obvious desire to survive.

Some 47% of microbusinesses in Ireland use external finance from banks and other lenders. The interest rate differential will be a key issue. In pre-Covid times, the microenterprise loan fund scheme reported a 44% approval rate in its seven years of operation. The approval rate will be an issue if people are marginal as regards being approved or not being approved. This needs to be looked at thoroughly because it could be the difference between some businesses surviving and not surviving.

Only 55 loans, comprising 2% of all applications, have been approved to young entrepreneurs. Businesses are often excluded from loans because they do not have a track record. They may be viable businesses providing employment. Some 59% of all applications were made directly to Microfinance Ireland. The approval rate was 38% and the interest rate was 5.5%. However, the approval rate for those who applied to the local enterprise offices, LEOs, was 41%. It may well be that the LEOs are better at taking people through the process. We need to examine the reason for this differential in approval rates, even if it is not huge, because it is important. Given that the local enterprise offices offer lower interest rates, why would people not apply to them in the first instance? Some LEOs are better than others. When someone in a local enterprise office is very good, that LEO can become a reference point for other people as to the kind of support available. We all want to be in a position to encourage people to go their local enterprise office and advise them where to go because this is the kind of issue that is raised with all Deputies from time to time.

The 5.7% interest rate for non-financial corporation loans of less than €250,000 compares with an EU average interest rate of 2.5%. If we are to compete and survive, we must accept that a level of investment is needed. If we can borrow for less, we should not be imposing higher interest rates on businesses that are struggling.

Demand for financing was most common among small firms and lowest among microfirms, which may not be able to sustain additional borrowings. Some 48% of microfirms made credit applications for the purpose of working capital. This would be of great importance for liquidity. These may well be very good businesses that could sustain themselves but need working capital to do so. Microfirms have experienced high rejection rates for financing. In September 2018, that rate stood at 22.9%. We need to look at that profile to understand what might happen. This contrasted with rejection rates for bank loan applications for small and medium companies, which stood at 15% for small firms and 6.25% for medium firms. The size of the firm matters with regard to approval rates. This will need to be looked at given the level of employment in the microenterprise sector.

When we consider the post-Covid environment, a recent Central Bank study estimated that SMEs in the Republic may need up to €5.7 billion in emergency liquidity to help them through the Covid crisis. I do not know where that money will come from but it seems like an enormous challenge, which will certainly not be met through this fund alone. In a risk averse lending environment, credit is restricted for all businesses but SMEs are most affected. Sometimes this is about having a cohort of people in a company who have expertise in applying for funding and putting proposals together.

The economic epicentre of the pandemic has been SMEs, with 85% of businesses in the sector having closed to some degree and 34% having shut completely during the lockdown. Companies could not have factored in the coronavirus because it came out of the blue. As such, they could not have prepared to any degree.

Interest rates will be a significant issue. Given that we can borrow very cheaply at the moment, we have to match that borrowing against the cost we would have to sustain supporting people on social welfare. I reiterate that we need job-rich growth but these must be quality jobs. This must be a central principle guiding the various supports that will be given to the business sector because there are many layers to this, including employees and also suppliers.

Deputy Richard Boyd Barrett

I wish to take the Minister up on his earlier offer to listen to ideas for the July stimulus package. I will focus on a few specific groups. The pandemic and the lockdown affected huge numbers of people in terms of their income, employment and livelihoods but particular groups have been hard hit and are likely to be hard hit for the foreseeable future as long as Covid-19 remains with us. As well as big, broad measures and schemes, such as the Microenterprise Loan Fund (Amendment) Bill 2020 before us, we need to be specific in looking at sectors that are particularly hard hit and which are not specifically captured by big, broad policy moves.

It is even more important to make that point on the day that is in it because I have been receiving calls from individuals in two of these sectors all day. I raised repeatedly with the Minister in his previous Government role - he is still in government but it has been in slightly different form since the establishment of the new Government - the position of taxi drivers and people in the arts, light entertainment, music and the gig economy. Today, many of them found that their pandemic unemployment payment had been cut from €350 to the €203 rate. This was due to a failure to recognise the specifics of their particular situation. I warned the Government that this was coming. People whose incomes, livelihood and future have been devastated for the foreseeable future as a result of the Covid pandemic are being kicked while they are down. There is no other way to describe it. They were kicked this morning when they received letters informing them that their pandemic unemployment payments were being cut. More of this is likely to happen next week when people who do not jump through a number of other hoops will also have their payment cut.

I will be more specific in this regard. Taxi drivers whose income was deemed to be less than €200 face a cut in their payment. This will affect a huge cohort of taxi drivers, in part because the income is based on the figures for 2018, which is a random selection in its itself, but also because taxi drivers have very significant outgoings that reduce their income, which outgoings continued during Covid when their income disappeared and against a background where if they do return to work - there is pressure on them to do because their payment is being cut and some of them might not want to do because they are still concerned about the health situation - they will be returning to an employment where their income is not likely to cover to anything even close to pre-Covid levels for the foreseeable future.

Deputy Catherine Murphy mentioned sound engineers. People in the arts, live entertainment and music industry also will not benefit from this Bill as they will not be able to access these loans. They would not pass muster or even be considered for many of these schemes even though they are freelancers or lone traders. For the benefit of the Minister I will elaborate further. Prior to the Covid-19 pandemic a person who played music in the pubs and clubs in Temple Bar would have been paid €130 for two hours work. A person lucky enough to get a gig in Temple Bar now would be offered €30 for two hours work. This is not viable. People in this sector have also had their payments cut. What are they to do now? How do we help them?

People involved in organising live music events and so on and who, like taxi drivers, have ongoing costs in terms of insurance, equipment storage and repayments on loans for equipment they purchased, also have no income. Even if there is some recovery, and there is no likelihood that any time in the near future there will be a significant recovery, those costs continue for them. Many of the supports that are being designed are not available to them, but many of them are having their payments cut. Those are two particular groups I wanted to speak up for.

Specifically on the Bill, yesterday I had a conversation with a person who owns a business that is the definition of a business that is supposed to be covered by this Bill. The company makes sofas and it has eight employees, which is just below the threshold of nine required. This business is being told that it does not meet the eligibility criteria to access these loans and it is also concerned about taking on extra debt in terms of interest and so on. We need a scheme which works with microenterprises, taking account of the particular difficulties they are facing and tailoring the supports in that direction rather than rigid criteria, excessive interest rates and a debt burden that will result in the supports not being sustainable for those particular businesses.

I thank the Ceann Comhairle for his forbearance.

An Ceann Comhairle

I thank the Deputy and call Deputy Tóibín, who is sharing time with Deputy Shanahan.

Deputy Peadar Tóibín

Bhí mé chun comhghairdeas a dhéanamh leis an Taoiseach, ach tá sé imithe anois is trua.

An economic tidal wave is starting to hit the State. There is likely to be a budget deficit of approximately €30 billion this year and a continuing deficit over the coming years. Tens of thousands of individual businesses are in significant danger of closing. Hundreds of thousands of jobs could be lost over the next few years. We have an opportunity to prevent that happening. Currently in the State, foreign direct investment, FDI, is the glamorous domain of State enterprise policy. Unfortunately, SMEs throughout the country have in recent decades, from Fianna Fáil's and Fine Gael's perspective, been the poor relative in enterprise terms but they should not be. The SME sector is the bedrock and backbone of Irish enterprises. It is where most jobs are located and most taxes paid, yet it does not receive any of the same focus or help that the FDI sector does. The FDI sector is very welcome but it cannot be the primary objective of the Government.

SMEs are at the sharp end of this crisis, and most at risk in this crisis are the businesses that have been shuttered the longest. I refer to hands-on businesses, such as hospitality businesses, hairdressers' businesses, dentists' clinics and so on. Such businesses need direct liquidity support now - plain and simple. If direct liquidity support is not provided now, a chain of debt will simply crystallise. If a business needs €70,000 today, it needs that €70,000 because it owes it to another business. There will be a debt domino effect unless these companies and small businesses receive funding now. The average small business, according to current estimates, owes €75,000 in trade credit. Microfinance Ireland will not solve this debt and most businesses will not be able to trade out of that debt any time soon.

From what I have heard, I understand that credit lines to businesses from suppliers are starting to dry up. Suppliers are saying that rather than have a 30, 60 or 90-day credit line, they want cash on delivery. That means that businesses need that money now. The Government needs to do far more than the Bill provides for, and we need to go back to the idea of examining all the tools we have for getting cash into businesses. Our constituency offices throughout the country have been inundated with appeals from small businesses that are having problems with the Covid-19 working capital lending that the State has provided. These businesses have applied for that working capital scheme but many of them have been refused, albeit in some cases because of long processing times.

I have called the Department of Business, Enterprise and Innovation and the Central Bank to discuss the matter. One reason that money is not being lent on that provision is that the Central Bank is still using normal SME regulations to determine how banks can lend. If banks are being told they can lend only on the basis of pre-Covid SME regulations, that is akin to a doctor saying a patient can have the medicine only if he or she is healthy. What we need is to change those regulations to reflect the fact that we live in completely different circumstances where businesses are not able to show the same balance sheets or the same level of working capital that they were previously. It is absolutely bonkers.

Months after that scheme was announced, only €70 million of the fund, or about 15%, has been lent. Having spoken to those in the industry and even those in the banks, I know that that money will stay in the banks until the Central Bank SME regulation is changed to take consideration of the new reality. These loans, like the Microfinance Ireland loans, are too dear. There is a significant differential between the lending rates in Ireland and the rest of the EU. The issue has raised its head politically a number of times with regard to mortgage rates but it is also the case for small businesses. That banks are making a profit from emergency lending to be given due to Covid simply does not make sense at this stage, especially given that they are Government-guaranteed loans. The State is guaranteeing these loans for 85% of their worth, as far as I understand, and yet the banks are making a profit as a result of that.

I would like to see in the Bill a focus on the Central Bank and its regulations, but I also believe that the Government needs to talk about grant funding. It needs to find a process by which significant grants can be given to businesses so they can function. In the US, there are soft loans, whereby loans are given out and, if the business maintains its payroll for a couple of years, the loan disappears. It simply turns into a grant if the business fulfils its responsibility. The Netherlands and Germany, the so-called fiscal hawks of the EU, are pumping money into businesses to keep them afloat because they know there is a debt chain and that once debt is crystallised somewhere in that chain, it has a domino effect on the rest of the economy. The failure to provide grant funding will have a significant effect, not just on jobs and the closure of businesses but also on end-of-year VAT returns, income tax returns and PRSI returns.

While the Bill should address the differential between Irish and European rates, it should also be a little more ambitious and examine the whole credit system for the SME sector. A predecessor to the Tánaiste's Ministry, Michael Noonan, created a two-pillar banking system. Anyone who has studied leaving certificate economics will know that is a duopoly, where two large firms control virtually all aspects of the market, from where business is done to the terms and the cost of the credit. If the Government really wanted to allow for a better stream of credit into SMEs, it should have done what I would have thought was the Fine Gael instinct, namely, to create a functioning market with real competition. As for how that can be done, it would involve starting to free up the credit union system, which has access to significant chunks of money and to which the State has for years paid platitudes, saying that while it is a great organisation, the State does not really trust it when it comes to lending to the business sector.

The Government could also have taken a leaf out of Germany's book in respect of public banking. With the Sparkasse system, smaller banks, which are not systemically important if one of them does not survive, pour money back into their local enterprise system. I can never understand why such a successful banking and credit model as exists in Germany is such an anathema to Fine Gael's economic policy and why it does not allow that at least to become a component in getting credit into the system.

The Tánaiste mentioned online vouchers. Ireland is one of the highest online spending nations on the planet. Much more money has migrated online in just the past few months than ever existed before. Much of that money leaves and is lost to the country. The Tánaiste needs to be far more aggressive and ambitious about getting SMEs online, either in a marketing or e-commerce fashion. Whole towns and villages should be online so that when a person wants to buy a book, he or she does not go to Amazon but rather to a small to medium-sized bookseller in the local town.

Deputy Matt Shanahan

The old adage "health is wealth" is now a social and economic truth and one that we must continue to grapple with.

The necessary shutdown of our economy has taken a significant toll on business activity and employment. The life-support employment packages announced by the Government in response to Covid-19 have cushioned circumstances for many employees and employers but these supports will have to have an expiry date, as we know.

The overarching requirements in managing this disease outbreak in Ireland are getting disease transmission under control and adjusting future activity to the new norms of adherence to hand hygiene and social distancing infection controls. With the easing of restrictions, some positive developments have been seen, with enterprises beginning to open since May and a small number reporting an increase in turnover. For many businesses, specifically those in the areas of tourism, hospitality and the arts, a different reality awaits, however. Along with the new and required capacity constraints in the business offering, demand for the products of many businesses, particularly in tourism and hospitality, has fallen off a cliff edge. Many businesses in this sector depend on the flow of international travellers. Without their return, some businesses may never recover. In addition, the regions will be more adversely affected by the economic shock of Covid in light of the interdependency of many businesses within the regional economic network and the lack of a significant internal economy.

The Bill, the purpose of which is to expand the availability and supply of microfinance loans to the SME sector in particular, is welcome. In essence, the July stimulus package will signal whether the Government has fully understood the challenges faced by over 1 million workers in the State and the companies that employ them.

As a member of the Special Committee on Covid-19 Response, I have sat through several sessions dealing with the Government's response to the challenges facing the SME sector. The overwhelming takeaway for me was the lack of access for SME group representatives to senior Department of Finance officials over a sustained period. The message to the representatives seems to be that big government in Ireland has no interest in small business. This was fully captured in the comments of the senior departmental officials to an SME representative head, who at their meeting described those in the SME sector as only being interested in fiddling their taxes. Likewise, stakeholders representing the tourism and hospitality industry told us at a meeting of the Covid committee that they received ready access to the Department of Business, Enterprise and Innovation but none to the Department of Finance. Is it the case that senior, highly paid civil servants, some earning many multiples of an average SME employee wage, are unaware of who actually creates the profits and taxes that fund their gold-plated remuneration packages?

I question why SME groupings that represent the vast majority of small business owners have no direct seat at the Government's labour employer economic forum, despite resulting employee agreements being legislated for in respect of their businesses. Regional regeneration aspirations flagged in the programme for Government cannot come to fruition without the direct and sustained support of the SME sector. The sector, employing over 1 million people, will ultimately carry the heaviest load for any shortfalls we see in economic recovery after Covid-19. A vaccine may come to our economic rescue but, in the interim, we must deal with the present. The aspirations to apply liquidity to the business sector with devices such as expanding microfinance enterprise follow conventional economic planning but the range and rate of stimuli required have not yet been realised, according to most commentators. In addition, negative cost factors that were well flagged before Covid-19 still feature and still need to be addressed. I hope to see, as part of the July stimulus initiative, redress in these areas. Re-employment is the main measure of health and equity in the economy. Stimulus finance must find its way into and through the business sector as quickly as possible.

The Tánaiste asked for some initiatives. I offer to him the following proposals for his consideration. Based on the example of France, immediate Government-backed loan funding could be made available to SMEs based on previous tax paid or previous payroll expenditure. At the year's end, the receiving company would audit its losses due to Covid-19, and such losses would be offset against the loan finance provided. For companies still operating at a deficit, continuing support should be provided to allow innovative business initiatives to be explored. A commitment to employment numbers would be required in that instance. Forbearance and restructuring, such as an administration lite process, should be allowed so viable restructured companies can continue to trade without having the liability of seeking High Court protections and the unwelcome attention of fire-sale liquidators.

Insurance remains a bugbear for every business in this country. Surely it is now possible to produce a book of quantum that describes a reliable claims environment which can be established and which can offer transparency to both the insurer and insured. I hope this will be an immediate priority of the Government.

The treatment of people by landlords and utility companies must be reviewed. Some legal mechanism must be provided to ensure fair dealing and a process for managed legal redress or arbitration for those who have suffered in the Covid period.

For businesses operating specifically in the tourism, hospitality and arts sectors, VAT modifications must be considered. A 5% VAT rate until 2021, which would revert to 9% thereafter, should be considered for the sectors. In addition, the commercial rates waiver must be extended until the end of 2021, and then the waivers must be reintroduced on a tapering scale.

Commentary on the July stimulus is increasing but if we surround the July stimulus with red tape, the money will not find its way into local economies to mitigate the worst economic damage of Covid-19.

We stand at a crossroads with the Government now, but we have the benefit of hindsight. Another bailout is required but this time the decision is to bail out the Irish people and the economy. The issue is not whether we should do it but, rather, how we do it. The Bill comprises a welcome step along the road but far greater strides will be required to complete the journey before us. I hope, for the sake of our country, that ongoing financial planning is rooted in equitable treatment for every business sector and region. A large number of our previously working population are waiting to see whether their sacrifices and political choices will be vindicated. The answers to their questions lie primarily in the fiscal measures that the Government is considering.

Deputy Michael Collins

I am sharing time with Deputy Mattie McGrath. I will allow the Tánaiste a few minutes. He might be able to respond to some of the questions I ask. Businesses are in serious trouble all over west Cork and the rest of Ireland. Representatives of SMEs, to whom I speak every day, ask the same question, that is, how they are going to survive. The Tánaiste is not a miracle man with all the answers for me tonight but I sincerely hope that he has some.

I want to concentrate on the tourism sector. The hotel sector is struggling to hang on. Many hotels opened their doors recently but others in west Cork, and even some up here in Dublin, have remained closed for a number of reasons. In order for hotels located in rural Ireland to survive a difficult winter, they will have to see changes made in order to ensure that the wage subsidy scheme continues. It was announced last weekend that the scheme may include seasonal workers. This would be most welcome. What are hotels being promised in the context of the July stimulus package? The Tánaiste should remember that he will get one chance to save hotels in west Cork and throughout the rest of the country. I ask him them to give them a lifeline.

Hotels are desperate to find out now, but not in six months when they might be out of business, whether the rate of VAT will be, or can be, lowered to 0%. At the start of the Covid pandemic, I called for that, and many Fianna Fáil Deputies have called for it since. Am I standing on my own or will this Fianna Fáil Government deliver for the tourism sector?

The publicans are being given a raw deal. For many, the compensation package through the council has been worth a couple of thousand euro to date. What does the Tánaiste have in mind for these honest, hard-working people who provide 50,000 jobs in this country? The Taoiseach said on Monday that he is considering extending the closure of pubs throughout the country due to the carry-on of some pub owners, mainly in Dublin. This is totally wrong . He should not tar everyone with the same brush. Admittedly, there are a few publicans who believe that they can do anything they want but most genuine publicans throughout west Cork and the rest of the State are honest-to-God employers. Most of the pubs in question, being family run and without mortgages, say they face ruin and closure if they are not allowed to reopen and if the 2 m social distancing requirement is not reduced to 1 m in a way that is safe for them and their customers. What has the Tánaiste planned for these businesspeople in order that they can reopen their doors, although they are expecting a downturn in their business?

The VAT rate pertaining to the sale of alcohol could also be considered. Publicans are struggling in these times and they need assistance. I ask the Tánaiste to step in and basically save the businesses. This also applies to café and restaurant owners, whose sector is also struggling in a major way. They have to take on extra staff but they have fewer customers.

Whether it is a café owner in Schull or Castletownbere through to businesses in Innishannon, these people are struggling and need some kind of survival package quickly. Will the Minister give them any hope tonight?

Bus operators are barely hanging in there and are unable to operate in any fair way. I am thinking about those people who own or have bought their own buses and run routes where Bus Éireann does not. We should remember that Bus Éireann has been funded by the Government through this crisis but these operators did not have such funding. Has the Government looked at the case of these bus operators and what has it planned for them? The same point applies to taxi and chauffeur operations, as those businesses are hanging by a thread. What is planned for these businesses? I know they do not pay rates, but along with many other businesses that do not pay rates, they are severely affected by the Covid-19 crisis. Many of these businesses are asking the same question as to what the Government has in mind for their sectors. I would appreciate it if the Minister could lay out his plans for those businesses now. It seems my questions will not be answered, unfortunately.

Minister of State at the Department of Business, Enterprise and Innovation (Deputy Damien English)

I will take those questions at the end.

Acting Chairman (Deputy John Lahart)

The Minister of State will take them. Does Deputy Collins have other questions?

Deputy Michael Collins

No.

Deputy Mattie McGrath

I wish the Tánaiste well in his new role. I hope he gets down and dirty and understands business. As Deputy Collins has said, it is not all about the capital city, spin, Facebook and all the other platforms that the Tánaiste likes. Earlier I criticised the €20 million increase in spending for the Department of the Taoiseach, much of which is going on spin doctors to tell us what we already know. We are not fools in the country and we understand plain English. We did not need the former Taoiseach and his quotes from this and that writer or actor to tell us what we should do. It is patronising and insulting to the people in the country.

The purpose of the Microenterprise Loan Fund (Amendment) Bill 2020 is to increase the maximum amount that the Minister for Business, Enterprise and Innovation may grant to Microfinance Ireland and extend the powers of that body, which is very welcome. It would also increase the maximum aggregate amount of borrowings to Microfinance Ireland and amend the European Investment Fund Agreement Act 2018 to increase the maximum aggregate liability in respect of contributions committed by the Minister for Business, Enterprise and Innovation, as well as the Minister for Agriculture, Food and the Marine. These are very important actions.

The Taoiseach asked if we could give him ideas and we in the Rural Independent Group can give him plenty. We represent rural counties. I wish the Minister of State well in his new role and thank him for his engagement when he was a Minister of State dealing with housing matters.

We have seen great success already in Tipperary because of Microfinance Ireland. Loans are granted for working capital, which is vital to any small business, and start-up businesses in particular. They are also used for the fit-out of premises and purchasing of equipment, which is a major concern because of the cost of purchasing equipment and the standards that must be adhered to. Finance can also be used for information and communications technology, and this is one aspect where the Tánaiste knows what he is talking about. It is what he loves. Finance can also be used for promoting and marketing, and we could throw that aspect in for him as well as he might be good at it. It did not bring the benefits he expected in the election.

I will speak about my own county of Tipperary. Since 2012, there were 234 applicants to Microfinance Ireland funding, with 105 being successful and accounting for €1.29 million in funding for Tipperary businesses. Tipperary has the sixth highest number of successful applicants across the country behind Dublin, Cork, the Minister of State's own county of Meath, Galway and Limerick. I am proud of that and we have good support and business acumen. We are talking about small and microbusinesses.

The local enterprise offices, LEOs, are Microfinance Ireland's main referral partners. These LEOs should not be confused with the Tánaiste, who has just left the Chamber. There is an approval rate of 51% of applicants coming from LEOs, and these offices support applicants with relevant business training both before and after the application stage. The mentoring and assistance is very important.

I pay tribute to the office in Tipperary, including Mr. Anthony Fitzgerald, Ms Ita Horan, Mr. Michael Begley and Ms Mary Ryan, as well as the entire team at the Tipperary local enterprise office for the fantastic work they are doing to support businesses. This support is essential now more than ever as we face a very difficult period and uncertain future. Increased supports from Microfinance Ireland are very important and enterprise offices are essential in helping our businesses. They are standing ready and they are dealing with numerous calls.

There have been 2,403 loans approved, and of these, 1,304 were for start-up businesses. We must nurture and support such operations. Ní neart go chur le chéile. Is tús maith leath na hoibre gach lá. I support start-ups, which are extremely important, but existing businesses must also have strong supports in recovering during this very difficult period.

I addressed a point in the earlier debate on the Revised Estimate. The Taoiseach used the spin machine to indicate there would be a rates holiday, but my county, along with others, are compelled to send out the demand for rates for July onwards. It should not have been called a holiday but that was the title put on it by the Government. Not a red cent or shilling has gone to the coffers of Tipperary County Council to offset that initiative. It is a typical example of spin.

There is a major problem with standing charges and the Government should tackle it. There are 102 commissions, reports and bodies to be set up in this programme for Government. The Government loves these quangos as they are jobs for the boys and girls who can kick the can down the road. The Government does not deal with the ever-increasing charges forced on people. In reality, people are being robbed. Imagine that a hotel in Tipperary pays €30,000 in standing charges now but it is closed, dúnta, with nothing on except the lights on the reception. We have regulators for this, that and the other, and as I have said countless times, they are useless, toothless and fruitless. They have jobs for the boys. Money is being taken from people with no businesses. They are being forced to close but they have to pay these, what I call, cowboys. They provide no services. People are at the beck and call of utility companies, which can charge what they like. If people do not pay, they are switched off.

Insurance has been referred to by previous Deputies and it is a scandal the way insurance companies are blackguarding people. The former Taoiseach is partly guilty in this respect. We had meetings in Government Buildings when the crisis arose and I challenged the then Taoiseach on the refusal by insurance companies to pay out or even engage with customers about supports for businesses that closed because of the arrival of this so-called pandemic. The former Taoiseach said insurance companies are in the business of making money and operate on the basis that they pay out to one customer in ten. They have had enough good years and are making millions of euro in profit from the Irish people who are sweating blood. They must be held accountable.

There is a lack of finance from banks, which are dúnta. The doors might be open in some of them but the operations are not working. I have people ringing from all around the country, and particularly Tipperary, who had loan approvals and mortgages to build houses. We are talking about kick-starting the housing industry. These people have incomes. I know one couple where the mother of two children is a civil servant and her work has been unaffected, thankfully. The husband is a farmer but the bank will not give the loan to build a house. That is pure blackguarding and the banks are effectively closed.

Deputy Shanahan stated earlier that there has been a bailout for banks and it is now time to bail out the people who bailed out the banks. Their children and grandchildren will be bailing out banks for decades to come. The local authorities are penniless because of the rates holiday and there is nobody to back them up. They expected to get money from the Government but they have not got a penny.

We must also consider the arts sector, including country and Irish music. This includes people like sound engineers and promoters.

All of that suddenly stopped. They must be supported. They are one of the sources of entertainment and solace for people who go out to a céilí or country music dance. I always mention Big Tom, Lord have mercy on him, and I refer to his song, "Four Country Roads". These people operate on the four country roads. They have had the rug pulled from under them. They have huge equipment, insurance and transport costs.

As I said, the man with the van - the salesman on the road - does not pay rates so he is not getting any support. He cannot even apply for support. Deputy Boyd Barrett mentioned the taxi and hackney drivers. I refer to the people running the small community private crèches, and all the shopkeepers. The pubs are being blackguarded because of the distasteful carry-on the other night in Dame Street, here in Dublin. The vast majority of publicans in Tipperary are respectable. The previous Government tried to close them down, which the Minister of State, Deputy English, supported. They want to be allowed to open but now they are to be punished, according to our new Taoiseach, who drives from the country to come to Dublin and should know a bit more about it. He said he might not allow them open on 20 July because of the behaviour of people in Dublin. We are suffering in rural Ireland because of Dublin. We get the crumbs all the time. We get nothing other than the problems. When the Government wants to send down people to us that we do not want or introduce legislation, no impact analysis is done of its effect on us. We do not want that kind of blackguarding. I can give a guarantee, as can Deputy Michael Collins, that the vast majority of publicans in Tipperary, west Cork and everywhere else run their pubs correctly.

I was delighted to see the bar was open here this evening for food. I thank the staff here for the way they have managed our movement around the building in an orderly and careful fashion. We do not want to be punished because of what was done by people here in Dublin. We are seeing the different parties that are here. We are seeing the people on the Black Lives Matter marches give two fingers to all the health advice. With this new brand of neoliberalism, they can do what they like and to hell with the rest of us. "Let croppies lie down" is their attitude now; they are in charge. They can do what they want.

We need to increase the proportion of IDA Ireland supports given to the regions. We get nothing in Tipperary. We have had some good foreign direct investment in the past 50 years in terms of Merck Sharp & Dohme, Boston Scientific and Abbott in Clonmel, and we are delighted to have that. I want to support the regime but we need to deliver more resources to the country because we have seen it in Tipperary. The county has the fifth highest take-up of Microfinance Ireland funding since 2012. We are willing to do it. We want to be unshackled. The Government should take off the baggage and the red tape. We need schemes that are operating but we need cashflow right now. The Government will not deal with the banks. It failed spectacularly to deal with them in the past nine years because it is in hock to them. I do not know what it is but it is fazed and intimidated by them. The banks will not lend and they give two fingers to everybody else. We also need to get more support into Enterprise Ireland and also to the local employment offices in Tipperary.

Big businesses come and go. The small business owners are the backbone of any village, town or county, from Carrick-on-Suir through Clonmel, Cahir, Cashel, Tipperary, Nenagh, Thurles and up to Moneygall. They are businesspeople. They employ three, four or five people. They endure sleepless nights trying to ensure they have the workforce to meet their needs. I will conclude to allow the Minister of State time to answer some of the questions asked by Deputy Collins.

Deputy Damien English

I cannot answer until the end. It is Second Stage.

Deputy Mattie McGrath

Thank God. The Acting Chairman will allow me three more minutes. Good man.

Deputy Damien English

Keep going.

Deputy Mattie McGrath

Maith an obair. That is okay. Gabh mo leithscéal. I think Deputy Collins was misinformed on that and my office might have been to blame for that. I am sorry. One learns something every day.

The Minister of State is from a rural county. He knows what is needed. It is not the red tape and the lámh mór around money and finance. The banks are closed. We might as well forget about them. They will not look after anyone so it is up to the Government in terms of what it can deliver directly. It should not let the greasy paws of the bankers charge interest for it and for people to be forced to get the money from the banks. I have bank statements in my hand from today. There was nothing going on in my bank. I brought them in by accident and was looking through them earlier. They have standing charges for this and direct debit charges for that. The number of charges is scandalous. How can any ordinary businessman deal with that? The banks are getting away with this. Where are the regulators? What are they doing? They are not there, and they should not be paid. We need to deregulate and get rid of many of them.

Under the programme for Government, 102 new bodies are to be set up, various actions are to be taken, and quangos, citizens' assemblies, review boards - you name it - are to be appointed. That is the merry-go-round that is crippling this country and, quite frankly, the people of rural Ireland, and the people of Tipperary, are sick and tired of it. The Minister of State knows that. He saw that in the election. They are sick of the red tape, spin and promises. The saying is "Live horse and you will get grass" but all the horses are nearly gone, and the people who worked the horses are dead. It is time that reality was brought home to the quangos and senior public servants. They have their hands on the handlebars of power here. We should take them off them, with force if necessary, and let the people who want to do so work. Let the taxi drivers back to work. We should support them and not stifle them.

I thank all the businesses for opening. I thank the Government for allowing the barbers that shut and obeyed the rules to open again. I have no time for the people who flouted the laws during the lockdown. They were a minority but they did it. The black market was thriving but the people who used that are worse. I have great admiration for the ordinary small business owners. They want to pick themselves up and get off the ground, but they are facing huge costs. Bord Fáilte issued a 22-page document on how the pubs should operate. Bord Fáilte is a tourism organisation. Tourism is very important but why did it get that job? Was it simply that it came in to be handy? We want practical support.

The people of Ireland will be careful and will behave respectably but they want to be treated with respect and given support. We should let out the publicans, undertakers, butchers, barbers, small bus operators, taxi and hackney owners, small farmers, forge workers and all those people. They will do their business without the need for over-regulation and overreach. A one-size-fits-all approach is not suitable. I am shocked that the Taoiseach made a statement in which he said the reopening of all the pubs might be threatened because of the behaviour of people here in central Dublin where one might pay twice the price for beverages that one would pay in the country, and one would not get half the personal service. I like to have a beverage in some places in Dublin. I am knocking that but I am knocking the behaviour, and it appears we have to be punished for it.

Acting Chairman (Deputy John Lahart)

We move to the Independent Group. The first speaker is Deputy Marian Harkin.

Deputy Marian Harkin

I am happy to have this opportunity to speak on the Microfinance Loan Fund (Amendment) Bill. On a personal note, for me it shows a real connection between the EU and what goes on here because nearly ten years ago I was one of the rapporteurs in the European Parliament on the microfinance fund when we set it up to help microbusinesses. It was an Irishwoman, Marie Donnelly, who led for the Commission in those discussions and we managed to pull together a fund that helped us support microbusinesses. The reason was that we wanted to send a clear message that the EU would help to support small business. It is very important, therefore, that this fund delivers.

Everyone in this House will agree that SMEs are the backbone of the economy. I believe 99% of companies are SMEs but most people might not be aware that 90% of businesses in Ireland are microbusinesses so they employ fewer than ten people. If we want to see those microbusinesses grow to become medium-sized businesses or larger companies, we have to make sure that they can survive for this length of time. All around us we see the devastation that is caused by Covid-19 so it is crucial that these microbusinesses can access the liquidity they need and sufficient grant aid. I will not raise that issue now. I have raised many times the fact that we need a much better balance between grant aid and loans but today we are talking about microfinance.

I discussed with the former Minister, Deputy Humphreys, on the floor of this House the terms that are in place for the microfinance loans. I think the interest rate is 4.5% or 5%, and there is a moratorium or a holiday for interest for six months. I told the Minister about many European countries and used the example of the Netherlands where the interest rate on microfinance is 2%. I did a quick back-of-the-envelope calculation which will not be a million miles out. I refer to a company borrowing €10,000 over three years, and that is accepting the six-month interest holiday.

The difference between repayments owed by a company here and those owed by one in the Netherlands is between €400 and €500. However, a loan of €20,000 repaid over five years would see a much more significant difference, around €1,500. That is a rough estimate. Many microbusinesses may not be able to make that kind of money and thus repay their loans. In that context I was pleased to see the Sinn Féin amendment which would introduce a 2% interest rate and a 12 month moratorium on interest. Perhaps I am not supposed to discuss that now. I do not know what Stage we are at but I am in the middle of making the point. I suggest looking at either one of those two initiatives. The Government should cap the interest rate at 2%, the rate charged in the Netherlands. If it cannot do that, it should look at the possibility of allowing an interest-free period of 12 months instead of six months. That would be very welcome news to a lot of companies.

Like a lot of Deputies here I am looking forward to seeing what is in the July stimulus. I am hoping to see big things. However, this microfinance fund does not respond to the real needs of some of our microbusinesses. We need lower interest rates or a longer period before interest is paid. This would make a huge difference to microbusinesses. It would give them hope. A lot of business owners are wondering whether to apply for this loan. The answer will partly depend on whether they can afford to make the repayments. They are wondering if they will make enough money to cover their costs, pay their staff, meet the costs of pay-related social insurance, PRSI, contributions, tax, etc., and also make the repayments. A lot of businesses would look on this more favourably if we could lower those repayments by lowering the interest rate, allow a longer period without interest or both.

There is another important point. The Minister obviously wants these loans to be paid back. If the interest rate was lower, repayments would be easier and companies would be more likely to repay their loans. I am not suggesting that companies will not repay their loans, but lower rates would make it easier to do so. I will finish by calling once again for lower interest rates, a longer period of time without interest or both. Many microbusiness owners would thank the Minister for this change because it would make a real difference to their chances of recovery. They know that when they start trading it will take a significant period of time to get back to where they were. Their costs are mounting all the time, including utility bills, insurance and so on. They are borrowing to cover that and they know their businesses will not start back where they left off. A little bit of hope will go a long way for a lot of people out there who want to start working again and get their companies up and running. That is why I support the Sinn Féin amendment.

Deputy Catherine Connolly

I welcome the opportunity to speak on this. I do so in the context of 2.46 million cases of Covid-19 in Europe alone as of 2 April. Businesses are going under on a daily basis. I support the Bill. It is a positive Bill, but the amendment from Sinn Féin has great merit. The points made previously by Deputy Tóibín on credit unions and a public banking system must be considered by any Government that considers itself progressive. By way of background I note that in the last Dáil we utterly failed to convince the Minister of the relevance and importance of a public banking system.

I thank the Oireachtas Library and Research Service for its excellent Bills digest. I have also looked at the Microfinance Ireland report examining the fund over the seven-year period from when it was started in 2012 to 2019. It is worth looking at. There have been many good initiatives from the Government to assist businesses. The failure is in analysing the difficulties in accessing them. There is a lack of evidence and data on how these initiatives succeed. Small businesses account for well over 1 million employees. Most of this funding will go to small employers with fewer than three employees.

This report is very interesting. The lack of proper analysis jumps out. For example, on page 11 the report states that three complaints were received by the business in the fourth quarter of 2019. That seems very small. Moreover, the number of complaints received since 2012 is 46. There are only two lines on this. The report does not tell us the nature of these complaints, the reason the number is so small or what Microfinance Ireland has learned from them. That seems crucial to me.

I refer also to appeals. There have only been 48 successful appeals out of 297. Again, we do not know what was learned from those appeals, why such a small number of appeals was lodged or why so few were successful. I say that in the context of other facts that jump out of the report. There is a gender issue. Of those accessing support under this scheme since it was introduced, 74% have been men and 26% have been women. Regarding the self-employed, I note that people on the back to work enterprise allowance accounted for only 290 applications in seven years. There is no analysis of what led to that. Some 346 businesses out of 2,085 failed, a failure rate of one in six. There is no analysis of why they failed, what the problems were, the total cost to the Exchequer or the loss of employment. The figures seem to show an extremely high refusal rate. Some 2,102 were declined. A certain number of applications were withdrawn and 2,403 were approved. Almost half were refused.

The Tánaiste made an interesting point, noting that there was a wide geographical spread. On the face of it that is true. Only 21% of approved loans were in Dublin and the rest were in other parts the country. However, the west of Ireland only got an 11% share. Other trends emerge when one looks at the figures. Throughout the seven years, only 128 applications from Galway were approved out of 275. It is worth looking at that trend to see how the scheme can be improved. Who are we meeting? What is the target group and are we reaching them? It seems that we are not.

The purpose for which the loans are given is also interesting. For example the arts sector accounts for just 7% of loans. The breakdown by sector shows that manufacturing accounts for 10% of loans and construction is at 9%. Wholesale and retail trade and repair of motor vehicles and motorcycles account for 22% of loans. However, arts, entertainment and recreation account for just 7%. Education is at 3%. There is a huge imbalance in the figures. I do not have enough information to examine that.

I can only look at the information that is there and it seems to me that it really needs further examination so that we can learn from it.

The interest being charged is totally unacceptable. I know there is a moratorium for a certain period, but rates of 4.5% and 5.5% are simply unacceptable. It is important to look at the background to what is happening here. The recent report by the regional assemblies highlighted that the west and the north west will come worst out of the Covid crisis. Furthermore, of the five cities the report looked at, it found Galway to be the most exposed. The report states: "Galway city and its suburbs have an exposure rate of 46.1%." That is higher - not by much, but still higher - than the rate for Waterford, Limerick, Cork and Dublin. In total, 1,532 businesses in Galway are in sectors that are faring the worst in the Covid crisis. That is just the cities. Social Justice Ireland has pointed out that rural areas have an older population, higher rates of part-time employment, lower medium incomes, higher dependency ratios and higher poverty rates than the national average. There are many more bullet points of information. An interesting one is that the driver of the rural economy has moved from the primarily agricultural to a more diverse space involving services, manufacturing, tourism and others. The document goes on to show that incomes for workers in these sectors are much lower than in others. I am sure the Minister of State is well aware of these facts. If the evidence is all there and the various organisations are telling us this, then we must tailor the supports we are giving to ensure they are picked up by those businesses that need them and where they will be most effective.

Finally, this scheme goes back to 2012. It seems to me that if we are going to learn anything from Covid, it is that we cannot go backwards. Urgent and short-term help must be aligned with long-term sustainable goals. However, it is not coming across in any speech by any member of the Government that there is a recognition that our efforts must be aligned with the reality that we have declared a climate emergency and that it is always the most vulnerable who suffer in a crisis. If we really are interested in justice and equality, now is the time to achieve it. We have the money and we are giving it out. Let us give it out in a way that leads to a better, more sustainable life, rather than giving money for the sake of money. I am 100% behind rural areas and small industries but the figures speak for themselves that the money is not getting to them and, when it does, there is a high failure rate and we are not learning from it. I see no evidence that we are aligning our financial assistance to the goal of a sustainable economy. Instead of growth for growth's sake, we should be aiming for growth for all and a much fairer and more just economy.

Deputy Alan Dillon

I propose to share time with Deputy Cathal Crowe. I welcome the opportunity to speak on this important Bill. Before doing so, I wish the Tánaiste and the Minister of State, Deputy English, success in their new portfolios, which will undoubtedly play a crucial role in Ireland's economic recovery. It is fortunate that we have such a skilled Minister and Minister of State with responsibility for enterprise, trade and employment, both of whom have relevant previous experience in Departments. I hope the Tánaiste can replicate successes such as The Gathering and the Wild Atlantic Way as we will require similar ingenuity in the period ahead. Both of those innovations provided a significant economic boost to the western region, and the Wild Atlantic Way continues to be a strong beating heart for tourism-related enterprises.

In terms of a regional focus, a new Action Plan for Jobs is something that must be given serious consideration. Despite the widespread economic uncertainty over the past few months, I am happy to report some good news regarding the advanced technology facility in Castlebar that was initiated by the former Taoiseach, Enda Kenny. As the Tánaiste and the Minister of State may be aware, that building has been occupied by Meissner Filtration Products and it went into operation in May. This was a real success story for IDA Ireland in Mayo which I hope can be repeated in the near future.

Agencies such as Microfinance Ireland will have an important role to play in our economic stimulus efforts. I noted the information in its most recent quarterly progress report that more than €1.1 million was lent to Mayo businesses since 2012 via 78 loan approvals. I was also interested to note that 79% of its loans were issued outside Dublin, which demonstrates the ability of Microfinance Ireland to contribute to balanced regional development. I am hopeful that this Bill will serve as an additional mechanism for small business owners to access credit, which has been a much-needed resource in recent months.

I have two suggestions for the Tánaiste and the Minister of State in respect of the legislation, beyond increasing the funding available to Microfinance Ireland for lending. The first is that consideration be given to a credit policy that would increase the loan approval rate of 44%. I am conscious of the need to be cautious with public moneys and to manage risks within any loan portfolio. However, if every small business throughout Ireland employed one extra person, it would result in significant job creation. My second suggestion is to build on the channels of loan referral to Microfinance Ireland. The local enterprise office structure remains the primary referral structure but efforts should be undertaken to increase the applications received via the bank channels and the Irish Local Development Network. Microfinance Ireland should consider holding roadshows, directly or in partnership with enterprise roadshows undertaken by commercial banks, to highlight the available finance options and potentially increase the number of loan applications. Some budding entrepreneurs may be unwilling to visit their local enterprise office or engage in formal settings but they may be willing to attend a roadshow or more informal event which could help them to build on their ideas and spark their entrepreneurial flair.

Deputy Cathal Crowe

I wish the Minister of State, Deputy English, the very best as he takes up his new portfolio. I look forward to working with him in the months and years ahead.

In many ways, microfinance loans have been transformative for rural Ireland. Small and medium enterprises provide the backbone of employment opportunities in counties like Clare. It is true that we have Shannon Airport and one of the largest industrial clusters outside the capital, but the adult population of Clare, made up of people who are all available and willing to work, depends hugely on the county's 8,700 small and medium enterprises. Most of those businesses employ fewer than ten people but, collectively, they have major firepower, providing approximately 35,000 jobs in the county. Given their considerable share of the labour market, it is right that these businesses should be supported by the Government as the country tries to get back on its feet and back to normal operations.

Small and medium enterprises, along with microenterprises, urgently need access to liquidity to ensure they can function, remain solvent and, we hope, emerge in a stronger position at the end of this economic crisis. While direct grants are always desired, access to loan finance forms an integral part of the solution. The key factors for business owners are the cost, by way of interest rate, and the term, that is, the length of time in which the loan must be repaid. In recent weeks, County Clare has seen a marked increase in applications to Microfinance Ireland as businesses seek liquidity to recommence operations. Some approved applications have enabled companies to keep their head above water and remain solvent. Others have enabled businesses to repurpose their operations in a new health-restrictive environment. Many business owners have successfully availed of loans but others, including a self-employed fisherman in the western part of my county whom I spoke with earlier today, have been told the money has run out. It is of urgent importance that we pass this legislation so that he and many others like him can continue to have access to money for their businesses. I pay tribute to Padraic McEllwee and his staff in the local enterprise office in County Clare. They have been an amazing source of support to fledgling businesses and to the business owners who have needed a great deal of advice in recent months.

I ask the Acting Chairman to indulge me in speaking very briefly on a pressing issue regarding Shannon Airport. It is hard to raise such issues because of the way business flows in the Dáil. I just came from the Department of the Taoiseach where the matter was under discussion. More than 230 people are directly employed at the airport and, as of yesterday, they are hearing talk of lay-offs, career breaks, redundancies and pay cuts. It is hugely devastating for them. Shannon is Ireland's second international airport but it is ailing and will need Government support. We have a task force reporting in about a week's time and we must have an intervention soon. I hope the Government will step up as far as Shannon Airport is concerned.

Deputy Bernard J. Durkan

I am glad to have the opportunity to speak on this important legislation. I congratulate the Tánaiste, Deputy Varadkar, on his appointment to his new portfolio. I wish him and his Cabinet colleagues well on the job ahead. They will face many challenges that are not new to us; we have experienced them in the recent past. However, there is a difference. The current situation was unexpected and without warning. We had no control over the tsunami that came ashore and washed everything before it. It remains a serious threat.

The microenterprise sector is of great importance because it affects every town, village and district in the country. The Bill offers a great opportunity to take a microscopic look at the way businesses, particularly small businesses, are operating and the challenges they face. Many small businesses are still recovering from the economic crash and will continue to feel its effects for some time to come. That is why the emergence of the virus has been particularly unfortunate and untimely.

LEOs are to be complimented on the way they do business. They are on the ground with those most directly affected by the pandemic and who require the assistance that is likely to be made available to them through this legislation. The LEOs are in a very good position to be able to assess the effect and efficacy of legislation and the loans that will be provided under it. It is one thing to look at things from a distance, but the LEOs are in a totally different situation because their staff are well equipped with the knowledge and expertise to make a determination on how the scheme is working, whether it is meeting requirements and any deficiencies it may have. That is one of the things that will need to be carefully considered. The Bill may be perfect, but if it is not and snags arise, they must be dealt with as soon as they become obvious, rather than that being postponed until some later stage.

Nobody knows better than small businesses themselves how things work and what is needed at a particular time. There has been much debate on the preference for grants over loans. However, a well targeted loan can be as effective as a grant, so long as it is not too costly or burdensome or subject to excessive penalties and so on. I hope it will be recognised that we are still suffering the fallout of the economic crash and that some companies, including some small businesses, are still being impacted by the domino effect of that era. I hope the Minister will keep that in mind as this loan fund is progressed. Its success will be determined by its uptake. It is to be hoped that it will be taken up completely. That will be the acid test. If it is attractive, viable and valuable, those who are working on the ground in the community will access the credit as quickly as possible.

Reference has been made to the interest rate that will be charged. It is worth bearing in mind that Covid has affected all of Europe, although some parts have been more severely affected than others. Not every country has comparable interest rates. That is a disadvantage about which I have spoken previously in the House, as have many other Deputies. I am not sure whether it is the answer to this issue, but one thing that is certain is that as a member of the European Union and the eurozone, Ireland is as entitled as any other member state to any concession that can be gleaned. There are plenty of excuses in the context of why that should not be the case, but the fact is that we are supposed to have a level playing pitch in the Single Market and enjoy the same access as other countries. We need equal access on these matters and the degree to which we can avail of them.

At the height of the economic crisis, confidence was lacking across Europe. A pivotal governor of the European Central Bank was asked for how long the supports would continue. He famously responded that they would continue for as long as it took. That is one of the lessons we learned. We need to take that approach now and ensure that confidence remains strong among the small business sector because any interruption of confidence could have serious and widespread consequences.

Simplification is important. Various Deputies referred to the importance of accessibility. That does not mean that people should borrow on the basis that they do not have to repay the loan. Everything must be paid back. We must recognise that nothing comes for free. A borrower who knows of opportunities of which he or she can avail should have no hesitation in borrowing for that purpose. The important thing is that the finance is available. If the scheme is too laborious, difficult or time-consuming, or involves such an amount of administration that the returns do not compensate for the effort made - I know that will not be the case initially, but it may occur in the future - it will be necessary to realise and recognise that we live in rapidly changing times. In changing times, one must be competitive in an increasingly competitive marketplace. By that, I mean that it is essential that whatever is available across Europe, and particularly in the eurozone, be made equally accessible to businesses here in a way that is likely to have the maximum positive impact on those businesses.

When we review the progress of the scheme, as we may have to do, it may be necessary to intervene, monitor its progress and try to ensure that its benefits are made equally available. Several Deputies made reference to rural Ireland being denied a fair chance. I hope that is not the case. I do not believe it is. Rather, the assistance is equally available, as it should be. There should be no difference whatsoever in the benefit to companies in different parts of the country. The scheme is more likely to have a positive impact on the smaller village, town and parish businesses that are dotted all over the country than any other legislation with which the House has dealt in recent times.

I wish to mention the part being played by the banks, whether that be positive or negative. I said some very harsh things about various lending institutions in the past. I hope I do not have to repeat them. When one has been a Member of the Oireachtas for a long time, one tends to see things repeat themselves. One says the same things about the same issues one addressed several years previously. I hope that is not the case in this instance. We have an opportunity to make a quick and positive injection at the right time and in the right place.

We must be conscious that this country recovered fairly quickly from the economic crash. I am not certain that will be the case in this situation because we do not know for how long this tsunami will go on. It may still be negatively affecting the economic development of our country in two or three years' time. As such, we need to realise the difference between the economic and other impacts of the virus and what happened in the crash.

We recovered from it relatively quickly. We need to be mindful that in this particular case, our people have nowhere to go. There was always a possibility of emigration in the previous era. That was not a good thing and not one we want to go back to again but it was a possibility. It is not possible any more and nor will it be because the virus is everywhere. One only has to look at the United States at present to see the havoc that has been wrought on that country. It is a big country with powerful resources and the virus continues to ravage it with an obvious impact. As well as that, it undermines public confidence in the ability of the system to withstand the shock. People are still thinking of a second wave and what that might do.

We all support this fund for the microenterprise sector. It is timely to say that again. I do not intend to go on for the full 20 minutes, the Acting Chairman will be glad to know, but I could do so if he wants.

(Interruptions).

Deputy Bernard J. Durkan

I could see the facial expressions of Deputies changing. I threw that remark in for a bit of levity, as the former Ceann Comhairle used to say.

This support can breathe new life into a sector that is suffering badly at present. It is timely. In the aftermath of the general election, we did not have a Government formed for quite a long time. Everybody in the country is glad to see that a Government has been formed at last. It is crucially important that we retain and maintain the confidence of the people and the business sector.

The last point I want to make is about how long this should go on. I mentioned it briefly before.

Acting Chairman (Deputy John Lahart)

Is the Deputy referring to his speech or the pandemic?

Deputy Bernard J. Durkan

I cannot see the expression of the Acting Chairman's face in the way I normally would. That puts one at a disadvantage because one cannot see the nuances one would normally expect. The key is that it should go on for as long as it takes. That does not refer to the speech but that might be useful some time too. The point to be made about the fund is its accessibility, workability and cost. By cost, I mean the costs of the loans to the businesses concerned. It is no good saying we have to take our handling fee out of it. We are in the European Union, the same as everybody else, and we are in the middle of the eurozone. We need to be able to say to our people that we have access for them to a loan system that is very cost-effective. It is the best there is and that is the way it should be because of the Europe-wide situation.

One should not pass the occasion without mentioning that all of the problems in society have not surfaced just yet. Brexit will be with us for a long time. In the next 12 months, and especially in the next six months, it will emerge in some way that will tell us the extent to which it will be negative. No matter what we do about it, it will not be positive. On this occasion, unlike the economic crash, we do not have all the countries in Europe pulling together. Some countries are gone and some are indulging in a little bit of nationalism. That is a sad, unfortunate fact, but it is a fact of life. I ask the Minister and Government to bear in mind that as the months roll by, we need to be able to find out at the earliest possible stage what Brexit will do to the small business sector across the length and breadth of this country, and to try to minimise and provide for it before it happens. As our friend in the European Central Bank said, we need to do that for as long as it takes. Nobody will come to our aid if we are docile and go under. We need to shoulder the burden of this no matter what it takes. We are part of that Union and will be affected more than any other country in Europe by Brexit. That will make itself obvious as time goes by.

I thank the Acting Chairman. I can see him getting a bit uneasy. I could go on for another 20 minutes or so but there are only four minutes left.

Acting Chairman (Deputy John Lahart)

Let the record show that the Chair is smiling warmly on the Deputy.

Deputy Cormac Devlin

I welcome the opportunity to speak this evening with the new Government in place. It is good to hit the ground running. This is essential legislation, as my colleague has just said. We have all received many calls from businesses across the country which are in need of a roadmap. There are roadmaps for health and schools, as we discussed earlier, and now there is a roadmap for business. This is an ambitious plan and the Bill will hopefully pass within the week. I urge my colleagues in the House to support this suite of measures. It is essential that we see it passed through this House and the Upper House.

The Bill is ambitious and has a broad scope. It will be welcomed. The Strategic Banking Corporation of Ireland and the future growth loan scheme are essential tools in recovering Ireland's economic prospects. This legislation is significant because it will see the expansion of the future growth loan scheme which has proven to be extremely popular among small and medium enterprises. For example, €11 million in lending was approved from the loan fund at the end of March for almost 400 small businesses across the economy. That is the first step. As the Taoiseach said earlier, we are looking at a July stimulus which we hope will be in place by the end of July. It is essential that it is. We need to ensure that businesses have certainty. In a pandemic, as we know, many people feel uncertain about their future. Sadly, there are people who have lost their jobs. Businesses want to reopen but cannot do so. There are challenges there. There are many other minute issues, some of which date to before Covid and some have arisen because of Covid. This Bill will go a long way to assisting those businesses and giving them the certainty they require.

The future growth loan scheme which was launched in 2019 provides loans of up to €3 million with terms of up to ten years to SMEs, including farmers and fishers. There was a rapid uptake of this €300 million scheme by SMEs with a broad reach across all sectors and regions, including for local family businesses, which is essential. The Government recently announced €200 million in lending, which was made available through the future growth loan scheme. This is a proven scheme that has worked. This Bill will see its expansion and it is essential that that happens.

As I said earlier about the July stimulus package, we will hear about the many measures contained in it from the Minister and his colleagues. It is essential, however, that we see a green light for this Bill, which we will hopefully be discussing tomorrow and over the next few days. I welcome any further clarification the Minister might have but it is essential that we see it passed.

Deputy Jackie Cahill

I thank the Acting Chairman for the opportunity to speak on this important legislation. If businesses cannot access funds in the traditional way, it says something about our banking system that these companies fail to get accepted by our pillar banks and have to turn elsewhere for funding. Reading the documentation that we have received, the success rate of these companies and the small number of failures show the importance of having such funds available to companies.

They have failed to get money through the traditional sources. Only 308 companies out of 2,174 that qualified for assistance have failed. For companies like these, that is an extremely small percentage and it shows that companies with proper help can succeed. There is not an enormous amount of money involved here, but to get a leg up on the ladder can make a significant difference to these smaller companies. It just shows what can be done for companies like this.

I wish to focus on the interest rate being charged. We hear that the Government at the moment with the Covid problems is able to access money at 0.2% or 0.3% interest. However, interest of 4.5% to 5.5% is being charged under this scheme. That needs to be looked at and improved on. These companies deserve better than that. This level of interest in the modern economy is far too high and that needs to be examined.

My county, Tipperary, had 220 applicants, 102 of which were accepted, an acceptance rate of only a little over 40%. We need to look at the parameters of the scheme. Thankfully, the scheme has only a small percentage of failures, but a very high percentage of unsuccessful applicants. If we have that level of unsuccessful applicants, the parameters of the scheme need to be looked at. The ones that sourced the money showed themselves to be successful and to be able to grow and survive.

This scheme has a very important part to play. With a few minor tweaks, it could be even more successful. The ceiling of help should also be looked at. There also needs to be more flexibility in interest-free repayments and even a freeze on repayments which is needed by companies. I know there is some scope for that. All those parameters could be looked at to make the scheme more flexible. We are dealing with small companies with a limited turnover. With help, these companies could play an important part in our economic recovery post Covid. Access to capital like this was never more important for these smaller companies.

I welcome the opportunity to speak on this Bill. It is definitely an initiative that has to be fully supported. As I said, I have concerns about the rate of interest being charged. With more flexibility on the terms of repayment, if that is needed by these companies, we could reduce the failure rate even further.

Debate adjourned.

Sitting suspended at 8.34 p.m. and resumed at 8.54 p.m.

Dáil Éireann debate - Tuesday, 7 Jul 2020

Microenterprise Loan Fund (Amendment) Bill 2020: Second Stage

Dáil Éireann debate -
Tuesday, 7 Jul 2020