I move: "That the Bill be now read a Second Time."
I apologise for being delayed. I cannot up run up the steps in this Chamber as quickly as I can those in the other Chamber.
I welcome the opportunity to present the Loan Guarantee Schemes Arrangements (Strategic Banking Corporation of Ireland) Bill 2021 to the House. This short, technical Bill will enable the Ministers for Enterprise, Trade and Employment and Agriculture, Food and the Marine to enter into agreements with the Strategic Banking Corporation of Ireland, SBCI, to facilitate access to finance for qualifying enterprises. The new Brexit loan scheme is being put in place as part of the Government's response to Brexit and enactment of this Bill will allow us to launch this scheme in mid-2021. The Brexit impact loan scheme will be an important support to Irish businesses throughout the country that are facing challenges from Brexit, while also dealing the disruptions that have arisen due to the Covid-19 pandemic. It will be available to SMEs, including those in the primary agriculture and seafood sectors. To bring this loan scheme to the Irish market in the coming weeks, it is imperative that the Ministers are granted the necessary powers to enter into the agreement with the Strategic Banking Corporation of Ireland in June this year. That includes providing the necessary executor funding.
This scheme is an important component of the Government's Brexit mitigation measures for businesses as it will provide businesses with the opportunity to borrow for periods of up to six years for liquidity, working capital and investment purposes. The State-backed borrowing currently available to SMEs is related to the Covid pandemic or, for Brexit, is for shorter terms of up to three years. The new Brexit impact loan scheme has been developed to provide an appropriate option for access to finance for SMEs based on the dual impact of Brexit and Covid. It will provide for more affordable lending relative to the standard market rate and will help viable but vulnerable businesses, including farmers and those in the fisheries sector, that are impacted by Brexit and experiencing liquidity challenges or business owners who wish to invest in their businesses.
The Brexit impact loan scheme will be underpinned by a counter-guarantee through the European guarantee fund, which is managed by the European Investment Fund on behalf of the European Commission. The effect of the counter-guarantee is to allow for a scheme of up to €330 million in lending to be made available at a maximum executor cost of €29 million. This relates a multiplier effect of State funds by more than a factor of ten. The scheme costs will be covered on a 60:40 basis between the Votes of the Departments of Enterprise, Trade and Employment and Agriculture, Food and the Marine. The Department of Agriculture, Food and the Marine will contribute 40% of the costs on the basis that it is anticipated that of the order of 40% of the scheme will be used by food businesses and primary producers.
The counter-guarantee, through the European guarantee fund, offers a 50% risk cover which will be matched at 24% by the Government through the Strategic Banking Corporation of Ireland to provide an 80% uncapped guarantee to lenders participating in the scheme. The scheme is to be operated by the Strategic Banking Corporation of Ireland on behalf of the Ministers and the Attorney General has advised that primary legislation is needed to provide the necessary powers to both Ministers to enter into an agreement with the SBCI to deliver the Brexit impact loan scheme. The enactment of the Loan Guarantee Schemes Arrangements (Strategic Banking Corporation of Ireland) Bill 2021 will enable the Ministers to implement the Brexit impact loan scheme and provides the potential for the Ministers to enter into further agreements with the Strategic Banking Corporation of Ireland in the future, if needed. I will now briefly go through the heads of the Bill.
Section 1 defines the "relevant Minister” as the Minister for Enterprise, Trade and Employment or the Minister for Agriculture, Food and the Marine, as they are the Ministers entering into the agreement with the Strategic Banking Corporation of Ireland, SBCI, for the Brexit impact loan scheme.
Section 2 provides the Minister for Enterprise, Trade and Employment or the Minister for Agriculture, Food and the Marine with the power to enter into agreements with the SBCI with the consent of the Minister for Finance and the Minister for Public Expenditure and Reform. This includes providing the necessary financial contribution from the Irish executor and limiting this to an aggregate total of €50 million, should the Ministers wish to implement additional schemes concurrently. At present, the ask is €29 million. It also includes the discharge of any additional fees and expenses. Definitions for "qualifying enterprise", "SME" and "small mid-cap" are also referenced here.
Section 3 provides for a review of the operation of the Act after four years following the passing of the Act. Section 4 provides that expenses incurred in the administration of the Act be paid out of moneys provided by the Oireachtas. Section 5 provides for the Short Title and commencement provision.
In conclusion, this short Bill is important as it will allow the Minister for Enterprise, Trade and Employment or the Minister for Agriculture, Food and the Marine to enter into an agreement with the SBCI to implement the Brexit impact loan scheme, which we believe is a critical component in our response to Brexit and recognises the changes that have happened in recent years since the initial Brexit loan scheme.
Essentially, the Brexit impact loan scheme provides for loans of up to six years for liquidity, working capital and investment for SMEs, including primary producers. If we want to ensure that our businesses throughout the country succeed and prosper in the face of the fundamental challenges of Brexit and Covid-19, it is essential that we take the necessary steps to ensure appropriate loan schemes such as this are in place for businesses. Again, the whole premise of having the loan guarantee is that the powers are made available at a reduced interest rate and on better terms and conditions. We have seen an average 2% to 5% reduction in the interest rate with other schemes we have administered and we would expect to see something similar here.