Small and Medium Enterprises: Motion

I move:

That Seanad Eireann:

notes with concern that 1,132 businesses have been declared insolvent since the start of the year;

notes that the rate of business insolvency is higher so far in 2010 than for the same period in 2009 and 2008 despite assurances that the economy was turning a corner;

notes with concern that small business are still having difficulty accessing credit through financial institutions for a variety of reasons;

recognises that the Government strategy of NAMA and bank recapitalisation has not produced a "wall of cash" in credit for small business;

acknowledges broken Government promises to introduce a credit guarantee scheme for small and medium-sized businesses;

recognises the success of such schemes in countries such as Chile and Taiwan that have delivered business growth and increased trade, while not burdening the taxpayer;

recognises that a loan guarantee scheme is necessary to achieve the goal of establishing strong and long lasting links between SMEs and banks and to encourage entrepreneurship; and

calls on the Government to introduce a loan guarantee scheme for small and medium-sized businesses based on the following principles: shared risk with financial institutions, using the resources of the financial institutions to assess loan applications, financial institutions bidding for loan guarantee contracts, and excluding financial institutions that develop a record of approving non-performing loans.

I welcome the Minister of State at the Department of Enterprise, Trade and Innovation, Deputy Kelleher.

The motion I propose is similar to the one discussed yesterday in the other House. It concerns small and medium-sized enterprises and their importance to Ireland's economic recovery. There is not much in the Government's amendment to the motion that I would disagree with, but pious platitudes are not enough for the SME sector. The amendment rehearses many of the promises made in the past few years to help the sector, but the statistics clearly reveal the importance of SMEs to the economy, as well as the number who have lost their jobs as a result of business closures in the past two years.

There are approximately 80,000 SMEs in Ireland, each of which employs an average of ten people. Leaving aside the 350,000 who work in the public sector, over half of the remaining people employed in the private sector work in small or medium-sized enterprises. It is, therefore, a significant sector and it is important that we promote and develop it. Fine Gael recognises that we must promote job creation if we are to get out of our difficulties. The beauty of the SME sector is that it reaches into every village and parish in the country. By employing neighbours, friends and, in some cases, family members in local communities, these businesses provide employment for 800,000 people. I am sure the Minister of State will acknowledge that our recovery will be secured through maintaining jobs in the sector, as well as by developing it to ensure those with new ideas are able to set up enterprises.

We are all familiar with anecdotal evidence of the difficulties SMEs are facing in accessing credit. The 2010 Forfás report supports this evidence with its finding that access to finance is the single biggest challenge facing Irish enterprises. A recent ISME report states 42% of the companies which applied for funding in the past three months were refused credit. I acknowledge that in some cases the proposals made were not good enough, but 42% is a very high figure. The report also states that 83% of firms are finding it increasingly difficult to access finance. That is the reason I commend the motion to the House. Even if the Government is unable to support it tonight, I hope it can implement the principles outlined in it.

Every time the Minister for Finance has intervened in the banking crisis in the past two years we have been promised that credit will flow as a result. Sadly, however, credit is not reaching ground level. We are speaking about real jobs and businesses at a time when 450,000 people are out of work. We must ensure that as many as possible of the 800,000 working in the SME sector keep their jobs.

Over 1,100 small and medium-sized enterprises closed in the nine months to September 2010, compared to 1,000 in the same period in 2009 and 500 in 2008. By their nature, such businesses experience a high turnover because many new initiatives involve an element of risk. However, long established businesses which would otherwise have a viable future are facing serious difficulties in accessing credit. While the Government has spoken about the need to get credit flowing to individuals and enterprises, that is not happening.

Fine Gael was criticised in the Dáil for proposing to expose the taxpayer to a further potential liability, but our proposals mirror the systems in place in more than 100 countries. Britain has in place a mechanism under which the risks are shared but which protects small businesses. Our proposals would have a real impact on every parish, town and village in the country. We do not propose to open the floodgates in order that every small enterprise with an idea for expansion would automatically be granted credit. Business proposals would still have to meet stringent requirements before credit could be accessed. At present, enterprises cannot access credit to develop viable ideas. The banks are engaged in a necessary process to improve their balance sheets, but this means they are not prepared to support viable business proposals. The Government has not done enough to ensure businesses can access the credit they need to continue. In many instances, there is a shortage of working capital. I know the system that has been established in the UK to support the joint risk between the banks and the state also supports working capital. In other instances, it refers to investment over a longer period to increase employment within those businesses.

Today, I seek a real discussion and debate on the issues, not what happened in the other House yesterday, which was just mud-slinging from one side of the House to the other. The Government has outlined proposals and suggestions as to how we might get credit flowing but the reality is that none of it has worked yet. Perhaps tomorrow it will be working properly, or perhaps it will happen sooner rather than later, but we need to ensure that we are not back here in seven or eight months with another 1,200 to 1,500 small and medium-sized enterprises closed. If 1,200 more close with an average of ten jobs in each business, that will be another 12,000 people on the live register, which we could desperately do without. Ultimately, if we are to get out of our economic difficulty, it will be by getting people back to work and retaining current jobs. I am not convinced the Government has done half enough to ensure that those valuable enterprises throughout the length and breadth of the land are supported in the difficult times they are experiencing. I urge the House to support the motion.

I second the motion. We had a contribution in the House this morning from Senator Ellis stressing the importance of thinking positively about our future and encouraging job creation. He went on to say that supporting job creation was an absolute necessity if we are to recover from the difficulties in which we find ourselves. All of us would wholeheartedly agree with the position Senator Ellis adopted earlier today. Consequently, it is a pity that when the Opposition proposes such a measure that would most certainly lead to job creation, Senator Ellis and his party choose to dismiss it.

In recent years, Fianna Fáil has incessantly criticised every innovative suggestion the Opposition has made in both Houses. It then comes looking for consensus to help it out of the mess it has created. However, I do not believe for a moment that it is genuine in seeking that consensus. My doubts, and those of many others, are borne out by the tabling of an amendment to our motion this evening. If Fianna Fáil Members were genuinely seeking consensus, they should instead have welcomed that motion, included it in the suite of options they are offering in their amendment and, at least, as Senator Phelan said, outlined constructively how a loan guarantee scheme might or might not operate.

What is particularly sad about this approach from the Government is that two Ministers for Enterprise, Trade and Innovation, the current one and the previous one, both supported the concept of a loan guarantee scheme when it was first mooted. In fact the Minister, Deputy Batt O'Keeffe, when he spoke at the annual conference of the Small Firms Association last month said that such a scheme was being explored and confirmed that it would be "finalised very shortly". He went on to say that Ireland was one of the few nations in the EU that does not have such a scheme.

Last week, the Taoiseach, Deputy Brian Cowen, confirmed that the Government had done another U-turn and had abandoned any plans for a loan guarantee on the basis that the banks had been sufficiently recapitalised to begin lending again. Where is the credibility in this type of haphazard, slipshod approach? How does it console the 1,132 small business owners that have ceased trading since the beginning of this year? More importantly, how does it build any confidence in those remaining members of the small business community? Bear in mind that, far from turning the by now infamous corner, that figure of 1,132 failed businesses this year is worse than the figure of 1,003 for the same period last year, which completely dwarfs the figure of only 480 for the same period during 2008.

As Senator Phelan said, small and medium-sized enterprises are the very backbone of our economy. Up to 80,000 small firms employ approximately 800,000 people in every city, town and village in this country. In the contribution they make, I hope Senators Carty and Dearey speak from their own experience of running small businesses. I have lost count of the number of small business owners who have contacted me during the summer stating that the very life is being squeezed out of their businesses by the banking system. These businesses contribute billions of euro to the national economy but remain largely absent from Government thinking and policy, and always have done. For the most part, the Government does not consider the consequences when it increases charges and imposes duplicate layers of red tape on small firms.

I spoke last week about the punitive commercial rates regime that is strangling small businesses throughout the country and noted that, despite a commitment by Government in 2001 that all 88 rating areas would have their valuations revised, only three out of 88 such revisions have taken place in almost ten years. I also spoke about the unnecessary bureaucratic burden on small businesses. Three years on from the publication of the Government's own Business Regulation Forum report, only 4% of the targeted red tape reduction on business has been achieved. The forum estimated that Government regulations are costing businesses up to €500 million each year. The sad part is that this cost could be avoided. In today's fiercely competitive business environment, that is €500 million business cannot afford to part with. To date, only €20 million of a saving has been achieved.

During the Dáil debate on the NAMA legislation last September, the Minister for Finance, Deputy Brian Lenihan, stated:

NAMA will ensure that credit flows again to viable businesses and households by cleansing the balance sheets of Irish banks. This is essential for economic recovery and the generation of employment.

That was exposed as little more than bluster just a few weeks later when Eugene Sheehy, someone with practical experience in banking, dismissed them by saying "If people think the day after NAMA that the country is going to be awash with money — that is not going to happen." How prescient his words have turned out to be.

Research published by ISME in September this year showed that 42% of companies which applied for funding in the last three months were refused credit by their banks. In addition, it reported that 83% of firms outlined that banks are making it very difficult for SMEs to access finance. Research by Mazars into SME lending reported a fall of 1.2% in SME lending by banks for the last quarter in 2009 compared with the previous three months and a 3.6% fall when compared with the same quarter in 2008. We can see a trend emerging. Rather than opening up a credit lifeline to our SMEs, the banks are actually squeezing ever tighter in an attempt to shore up their own balance sheets and protect their own futures and no one else's.

Credit and partial credit guarantee schemes are not a new idea. There are today on average over 2,250 schemes implemented in different forms in almost 100 countries. However, not all schemes work well and the success of a scheme is dependent on how well it is structured. In introducing a loan guarantee scheme in this country, we are very fortunate in that we do not have to reinvent the wheel. Instead, we can look at the positive and negative experiences of other countries and come up with the best possible scheme.

Fine Gael has spent considerable time researching the experiences of other countries and we believe a scheme we have devised will work. In particular, it will benefit the micro and small business sector, the sector which I believe should play a major role in our recovery. Micro and small businesses, by their very nature, cannot offer a level of collateral to be able to acquire their first small loans from banks. Therefore, they find it very difficult to build up a credit rating to allow them to access more credit. This is extremely acute in the Irish situation as, during the boom years, banks were only interested in collateral linked to property as it was an easy method to offset risk. Following the collapse of the property market, banks do not have the knowledge or experience to assess alternative collateral or business plans. Property will never again be at the centre of our financial system and a new lending system for SMEs needs to reflect this.

A properly thought out and well executed loan guarantee scheme will ensure the survival of many small Irish businesses and, I am sure, encourage the creation of many more. That is the opinion of ISME, the Small Firms Association, the OECD and, until last week, it was also the opinion of two Fianna Fáil Ministers for Enterprise, Trade and Innovation. If the Government is really seeking a consensus that is in the best interests of the country, it needs to walk the walk and honour the commitment it gave earlier in the year to introduce such a scheme.

I move amendment No. 1:

To delete all words after "Seanad Éireann" and substitute the following:

"welcomes, in particular, the Government's five year integrated trade, tourism and investment plan, Trading and Investing in a Smart Economy, designed to help all Irish businesses compete on global markets and create 300,000 jobs across the Irish economy in both exporting and locally trading firms;

notes the intensive work under way within the Government in relation to further SME credit initiatives while at the same time ensuring that banks fulfil their commitments given to Government to lend to this sector.

Recognising the important contribution which small and medium enterprises make to economic growth and employment creation, commends the Government for the priority it has given to introducing new and specific initiatives aimed at improving the business environment and supporting directly the further development of the SME sector, in particular;

the measures taken to ensure the continued operation of a sustainable banking sector as a provider of credit to viable enterprises in the State, including

the introduction in 2009 by the Financial Regulator of a statutory code of conduct for business lending to SMEs,

securing a commitment by both AIB and Bank of Ireland to make available not less than €3 billion each for new or increased credit facilities to SMEs in both 2010 and 2011, including funds for working capital,

the establishment of the Credit Review Office to measure compliance with the banks' lending commitments, to examine the lending practices of the recapitalised banks and to review refusals of bank credit,

providing continued capital funding of €15 million in 2010 to the county and city enterprise boards to assist micro enterprises and promote entrepreneurship and recently providing an additional capital funding of €3.3 million to the CEBs, creating more than 450 jobs;

providing financial support to almost 2,000 companies through the employment subsidy scheme and the enterprise stabilisation fund;

improving the cash flow of SMEs by requiring Departments to pay their business suppliers within 15 days of receipt of a valid invoice;

the provision of €278 million to Enterprise Ireland in 2010, representing a 26% increase on the outturn for 2009, to stimulate the development of new businesses and facilitate the expansion of existing companies through a broad range of initiatives including direct financial and non-financial supports;

the commitment through Enterprise Ireland to invest €175 million through the Seed and Venture Capital Programme 2007-12 for companies at the early and growth stages of development;

establishing the €500 million Innovation Fund Ireland to support entrepreneurs so that they can create jobs;

establishing the employer job (PRSI) incentive scheme to reduce business costs associated with hiring new employees;

the provision of €425 million for the implementation of the LEADER Rural Development Programme 2007-2013 to promote sustainable employment creation in the rural economy; and

preserving a low tax regime for business.".

I welcome the Minister of State, Deputy Kelleher. He has come before the House on a number of occasions and I am sure he does not want to become too used to sitting in the seat he now occupies. The Minister of State always makes a measured contribution when he appears in this Chamber.

It is a matter of regret that a number of small businesses have closed in recent years. It must be placed on record that there are a number of reasons for this, particularly in the retail sector. With multinationals establishing operations in towns and in view of the fact that consumers are careful with regard to what they spend, major pressure has been exerted on retail businesses. Some such businesses have been owned by the same families for two or three generations. It is unfair to state that the Government has not done anything to assist businesses. A number of businesses in my area that are involved in manufacturing are doing quite well. Only those businesses which were involved with the construction sector — where there has been a decrease in activity — are experiencing difficulties. The latter are, thankfully, the only business concerns that have been affected, certainly in the part of the county in which I live.

Access to credit is vital for viable businesses, particularly small and medium-sized enterprises, to ensure we emerge from the current recession. During the past 20 months the Government has created a fit banking system and has taken action to sustain the banks and ensure the flow of money to the economy. The banks must be sound to ensure the financial needs of businesses and householders can be met. The Government has put in place the bank guarantee and recapitalisation schemes, it has nationalised Anglo Irish Bank and passed the National Asset Management Agency Act. This was done to ensure we have a sound banking system.

A code of practice on lending to SMEs was put in place as part of the recapitalisation scheme. Explicit provisions, the purpose of which is to provide support for SMEs, were introduced last March. AIB and Bank of Ireland have each been ordered to make not less than €3 billion available for new or increased credit facilities to SMEs in 2010 and 2011. This must include funds set aside for working capital for businesses and should foster growth. The Government has promised to keep the position under review, particularly as needs change.

Since he became Minister for Enterprise, Trade and Innovation, Deputy Batt O'Keeffe has informed the banks what he and the Government expect in return for their being kept afloat with taxpayers' money. He has left them in no doubt with regard to what they are required to do in current circumstances and also in the future. Even though some in the banks do not recognise it and have still not come to terms with the grief they have caused to people involved in business, it must be recognised that the good old days are over.

The county enterprise boards will be given €3.3 million in funding before the end of the year in order that they might assist in creating 450 jobs in small firms. This money is additional to the €15 million already provided this year. County enterprise boards adopt a hands-on approach and their members are aware of what is happening in their areas. It is interesting that in a recent edition of "Prime Time", to which the Minister of State made an admirable contribution, the majority of the entrepreneurs interviewed praised the enterprise boards and IDA Ireland for their guidance and assistance. There was a certain amount of criticism but most of this was aimed at the level of bureaucracy attaching to the various schemes. Let us be honest — where public money is involved, there must be corresponding regulation. However, common sense should also play a part. Bureaucracy must not be allowed to lead to the suppression of schemes.

High quality, sustainable jobs are being secured by attracting foreign investment and supporting Irish companies. In the first six months of the year, IDA Ireland and Enterprise Ireland made over 50 announcements in respect of over 4,000 jobs to be created throughout the country. I compliment the Government, the Minister for Enterprise, Trade and Innovation, IDA Ireland and all other agencies on ensuring that Hollister could expand its operations in Ballina, County Mayo. There was stiff competition for the work involved from other countries across Europe and in Asia. It is only right that the management at Hollister should be complimented for developing their operations in Ballina during the past 35 years. The company has a proven record and its staff are excellent at what they do. The creation of 250 new jobs at the Hollister plant in Ballina underlines what I have said. The advent of this number of jobs in Ballina is similar to the creation of 2,000 new jobs in Dublin.

What happened in recent days was good news for Ballina, for Mayo in general and also for Ireland because it proves that we are as good as the best. It is great that this company decided not to move its operations elsewhere. The CEO of Hollister stated that the 12.5% rate of corporation tax was an extremely helpful consideration. What he said underlines the fact that we cannot allow anyone — suggestions have been made in this regard by some in Europe — to tamper with our corporation tax rate. The Minister, Deputy Batt O'Keeffe, when speaking at the function to announce the 250 new jobs at Hollister, provided an assurance that the Government is not for turning in respect of our 12.5% rate in this regard.

The Government has provided a strong commitment to attracting jobs, to assisting entrepreneurs in creating employment and to providing various companies that are already based here with leadership and financial support. It must continue with its work in this regard to ensure small companies continue to survive and provide employment. By doing this, it will ensure that Ireland remains at the forefront in the coming years.

I support the amendment, though not necessarily because a loan guarantee, of itself, is a bad idea. Clearly that is not the case. There are many countries which have loan guarantee schemes in place. However, I am of the view that a loan guarantee scheme should be an action of last resort which should only be introduced when all other efforts to try to re-establish a vibrant and viable SME sector have been exhausted. There is no doubt the SME sector is under pressure.

When speaking in recent days, Mr. John Trethowan of the Credit Review Office appeared quite sceptical, partly on the basis of the level of resources and time that would be required when so many other pressing issues are being dealt with by the Government, in respect of how a loan guarantee scheme might work. Mr. Trethowan referred to the potential need for a double assessment in respect of every application and highlighted the sheer level of manpower that would be required to facilitate this process, which would run in parallel to that already being operated by the banks.

Mr. Trethowan has his finger on the pulse when it comes to reviewing the availability of credit to the SME sector. He pointed out, in a rigorously logical way, that if a business is viable and good for a loan, then it ought to qualify and if it is not, then an artificial construct, which in some instances a loan guarantee scheme could prove to be, could form a prop for businesses which would otherwise not survive. I accept that Senator Cannon stressed that any loan scheme would have to be really well designed. In light of the issue relating to resources, there is a real prospect that the operation of such a scheme could not be guaranteed to be as optimal as we might wish.

I acknowledge the existence of schemes of this type in other countries and the potential advantages to which such a scheme, if established, might give rise in this jurisdiction. However, I re-emphasise that setting up a loan guarantee scheme is probably an action of last resort. Many of the other measures the State has implemented, which are itemised in the amendment to the motion, ought to be fully exploited before a loan guarantee scheme is put in place.

The motion tabled by the Opposition is quite carefully crafted. I fully acknowledge that the scheme envisaged would not constitute a blank cheque for small businesses. Should such a scheme emerge, the principles contained in the Opposition's proposal would probably be the correct ones. They include shared risk with financial institutions, using the resources of the financial institutions to assess loan applications, financial institutions bidding for loan guarantee contracts, and excluding financial institutions which develop a record of approving non-performing loans. That might exclude all financial institutions operating in the country at this stage. It is worth noting nonetheless that Fine Gael's motion proposes a set of guiding principles which, by and large, are correct.

Given the tightness of resources, our exposure to debt, the fact that guarantee schemes also increase the levels of default — although they also ensure businesses which would not otherwise be able to access it receive credit — and the very onerous demands on human and financial resources, the motion is premature. Therefore, the amendment, with the menu of proposed options, ought to be given a full chance to take effect before we revisit the issue, if necessary.

Another pressing issue is that overdraft facilities have been withdrawn from small businesses. I am aware of cases in which this has happened and the issue must be examined. I understand most of the work of the Credit Review Office is focused on this area, rather than the provision of a loan guarantee scheme. Having access to working capital, as opposed to a loan to fund investment in equipment or productivity measures is important. The UK scheme is focused on proving productivity is improved rather than a loan just being for the building of an extension or shop front. One looks to improve output in terms of each unit of labour.

I look forward to the measures proposed in the amendment being introduced and hope they will provide appreciable and measurable support to ensure the survival of small businesses. It is critical that people start spending again and show confidence; in a sense, they should stop saving. There must be a return to positive sentiment among consumers to help the 83,000 small to medium-sized enterprises we are discussing. Some 98% of businesses in the retail sector are small and medium-sized enterprises. People must stop hoarding because they lack confidence and begin spending again. Liquidity in the real economy, rather than an artificial construct, will be of much benefit to the SME sector. From my reading of the amendment, that is where it is hoped the targeted measures will have an effect. Many of the businesses which are suffering owing to a lack of demand and reduced spending and which are operating on the basis of sub-optimal services in shops, outlets and hospitality units might see a change to positivity when sentiment turns, with people starting to spend again and employment growing. Senator Phelan outlined a scenario in which there would be increased unemployment among SME employees, but this can be turned around in order that businesses will begin hiring again.

There are measures we could take. I outlined an example yesterday in which employers and potential employees would be given freedom to negotiate for one year a rate below the national minimum wage. The national minimum wage may be desirable, but for some it is a blockage in entering the labour market. Such a measure, as confidence returns and spending increases, could be a real boon in employment creation.

I welcome the Minister of State, Deputy Kelleher.

The Labour Party supports the Fine Gael motion. Many small and family businesses cannot access the loans they need to keep afloat. Paying wages and suppliers is a major struggle for many such companies. Viable, profitable and well run businesses are going to the wall because they cannot access credit.

More than two years on from the introduction of the blanket guarantee scheme the banking system is still in crisis. We were promised that the guarantee, NAMA and the recapitalisations would result in credit flowing, but contrary to what the Government promised when it announced the guarantee, the banks are not lending. According to the bank watch survey conducted by the Irish Small and Medium Enterprises Association, at the beginning of this year 55% of businesses had been refused funding by their bank. Some 58% of those refused had been with their bank for ten years or more.

Banks like to create the illusion that they are lending and often quote statistics to the effect that nine out of ten loan requests are approved. That is not the case and is completely misleading. According to the chief executive of ISME, Mr. Mark Fielding, the figure of nine out of ten loan requests being approved is spin by the banks and needs to be knocked on the head, as it relates specifically to fully completed formal applications. The majority of SME owners and managers never reach that stage of the process, as they are discouraged, either over the telephone or at first meeting stage.

The banks remain critically undercapitalised and risk averse. The Labour Party has been calling for the introduction of an SME working capital guarantee scheme for more than 18 months. Therefore, we are happy to support the motion tabled by Fine Gael which contains similar proposals. Deputy Burton has asked both the Minister for Finance and the Minister for Enterprise, Trade and Innovation to explore the options for introducing such a scheme to help to address the small business credit famine and save jobs. As other Senators mentioned, similar schemes are operated successfully in the United Kingdom, Japan and Hong Kong, to name just a few locations. What we envisage is a co-guaranteed, risk sharing scheme under which the banks would make the lending decisions but the Government would step in to guarantee perhaps 50% of the loan. The beauty of such an arrangement is that there would be an alignment of interests between the loan originator and the guarantor. Where the banks' capital was under pressure, as is the case in all of our commercial lending banks, the availability of such a guarantee would reduce the level of the risk weighted asset. By extension, the level of capital needed to back the loans would also be reduced and the expected loss, through bad loans, would be likely amount to less than 5%. Therefore, the volume of loans that could be supported through such a guarantee would be significant. Such a loan guarantee scheme would see the Government acting as guarantor to facilitate individual SMEs in securing loans from participating lending institutions to acquire business installations, equipment and working capital. A working capital guarantee scheme would provide greater flexibility for companies in managing their cash flow and make an important contribution to their survival. A loan under such a scheme would assist companies in maintaining adequate cash flows to meet their vital day-to-day operational needs. As I stated previously, such schemes work elsewhere. Therefore, this is the time to embrace something similar here. It might not be the same as our proposal or that of Fine Gael, but the purpose of the motion is to seek a commitment that something will be done.

Some 700,000 are working in approximately 230,000 SMEs. These small companies are dotted across the country with perhaps three or four jobs in every parish, village and town. They play a pivotal role in securing the lifeblood of these areas by allowing people to work close to home. When these areas experience job losses, they are not headline losses and go unnoticed nationally; they usually do not make the main evening news bulletin, but they add significantly to the live register figures. A loss of nine or ten jobs in a small rural area is the equivalent of 500 or 600 in a major town. It is important that people be kept in their localities so they can contribute to the vitality of the area and maintain essential infrastructure like schools, churches and sporting teams. Finally, the proposals from the Labour Party and Fine Gael represent positive contributions and should be taken on board by the Government. We support the motion.

I welcome the Minister of State and commend him on his appearance last night on "Prime Time" and his defence and support of Government policy. He is doing tremendous work in the Department of Enterprise, Trade and Innovation. I was in the same Department for four years. His work is not recognised, unfortunately, and he will probably get no recognition in his constituency for the amount of work he is doing at home and abroad. He has made a great impact on trade delegations throughout the world. I understand he was in Russia recently. I congratulate him on the opportunities he is opening for a lot of people.

The motion is quite interesting. I commend the Opposition for putting ideas and thoughts together in a coherent manner. I am confident that, even though we have an alternative motion, if it was worded in a more careful manner there would be nothing which we could not support. It is not possible to accept some parts of it at this stage. I recommend to the Minister of State and the Department that I would have no hesitation in borrowing and using any part of the motion which is worthwhile in order to stimulate employment.

In the spirit of consensus.

Indeed. If there are good ideas they are worth taking as far as I am concerned.

It is important to welcome the opportunity to discuss the reality of where we currently are and the current challenges being faced by the business community and putting forward some constructive solutions. I commend the Opposition in endeavouring to put forward constructive solutions. The Fine Gael motion is framed in a somewhat uninspiring manner but I look forward to Members of the Opposition outlining and expanding on the ideas they have put forward.

The fact is that we are dealing with national, European and global challenges. There is no doubt about that and the Minister of State knows the situation in Britain today. The cutbacks there are no help to us here as it is one of our largest export markets, alongside Europe and America. Britain has always been one of our main markets and Ireland is also a very important market for Britain. People may not realise that we are one of its best customers.

For the past two years the Government, with the support of its Green Party colleagues, has taken brave, tough and decisive steps. These steps have been recognised by international commentators and our European and international partners as necessary and pragmatic. We are seeing a positive effect as a result of the decisions, which is borne out by a plethora of reports. Employment rates are creeping up. The level of unemployment is stabilising. Manufacturing output has increased by almost 13% in the past year and exports have increased by almost the same percentage. Again, the Minister of State is leading this campaign. The growth will be in exports which are key to employment.

Small and medium-sized businesses must be able to reaffirm themselves and take advantage of recalibrated and repriced markets. Small businesses are vital and the motion is correct from that point of view. The vice president of the US multinational company Hollister, at the announcement of the expansion of its Ballina plant, complimented the Government on the priority it has given to job creation, the support given by the employment creation agencies and our educated workforce. As a former Minister of State I was at the Hollister plant outside Chicago and it is a fantastic operation. The fact that Hollister has recommitted itself to the project in Ballina is a boost to the economy in Ballina and as Senator Carty said, not just to Mayo but to Ireland.

Senator Phelan is correct in highlighting credit flow as the most important factor for the survival of small and medium-sized enterprises. I hope he would agree that I am not being dramatic when I say small and medium-sized enterprises represent a family, town or village and their failure or demise would be a very serious matter. There is no doubt that they are a vitally important part of our industrial employment. The Government is serious about credit flow and bank lending to such businesses. The Government amendment to the motion mentions the recent smart economy strategy which is focused on job creation and has the objective of creating more than 300,000 jobs over the lifetime of the programme.

Other initiatives are also being taken, such as the Credit Review Office, which is equipped to assist small and medium-sized enterprises, and a good report was given on the people contacting the office at our Ardilaun think-in, including farmers and sole traders who find themselves refused credit by banks. It is not oversubscribed but I understand the work of the office will be promoted. At the end of the day, it is vital that we increase production, encourage and support small and medium-sized enterprises, encourage inward investment, which is vitally important, utilise Enterprise Ireland as far as trade is concerned and utilise the new markets which are opening up for Ireland throughout the world.

We are an open economy but we are extremely well respected as far as our products are concerned. We need to encourage small and medium-sized enterprises to expand into Northern Ireland, which is part of the country, or Britain which is a very close market in which to get a foothold, the Netherlands which is a very attractive gateway to Europe and is very receptive and utilise the offices which are available to Enterprise Ireland. It supports young companies and will provide a desk and backup. I ask that the Minister of State ensure that companies are well aware of the facilities which are available. Information can be found on the website of Enterprise Ireland.

I commend our President for her leadership of a trade delegation to Russia which was supported by the Minister of State. It was well received. It is a tremendous market. The Dublin Airport Authority has tremendous outlets throughout the world, as far as shops are concerned. They are the types of expansion which we need to consider. The Minister of State is considering the potential of the Olympic Games which are being held in Britain. That has been exploited very well.

I developed a programme where people were encouraged to make in Ireland and build in England. Components for the building industry were manufactured in Ireland and exported in packages. It is currently being done but the more of that kind of expansion which takes place the better. We are a good manufacturing base and we can develop the industry. We should not give up the ghost.

If one considers the figures which were put forward by the Government in regard to its support for small and medium-sized enterprises over the next five years, one finds the figure is at least €1.5 billion, most of which is to be front-loaded in the next year or two. There is also an expectation that the banks will provide €3 billion in loans to small and medium-sized enterprises. With that sort of money expected to be going into small and medium-sized businesses, one would have to ask if there is any need for this motion.

The reality is that the Government is a little bit like Hitler when he was moving tank divisions around the eastern front in late 1944 although a lot of the divisions did not exist. A lot of the Government's commitment to enterprises does not seem to exist. Businesses are still closing at a faster rate this year than in the previous two years and small and medium-sized businesses are still worried that the Government does not understand their concerns. We are still seeing fairly solid businesses — we are not talking about funding businesses which are basket cases and will not survive — which have reasonably good business plans and need a bit of support which they are not getting from the banks and they do not believe the Government is buying into it either.

The Government has not done anything radical to make business easier, reduce the amount of Government interference and help businesses to work more efficiently. There is a need for that. At the height of the boom we had regulations for everything. For example, how much change does the Minister of State envisage is required to NERA? It is seen as the bane of the lives of some businesses. In fact, the more one runs one's business properly, the more NERA can be seen to be a troublesome Government agency than if one paid no heed to regulation at all. This comes from my experience of the concerns that have been raised with me about regulations and legislation promoted by the Government. There is a need for the Government and the Department of Enterprise, Trade and Innovation to take notice of people's concerns. In recent years, the Government has paid a great deal of lip service to what it can do for small and medium-sized businesses, but I do not get the sense that it has bought in to their concerns and this has also been conveyed to me by many business people in that sector.

Last week, we discussed CAP reform and over recent years one dramatic change that has taken place in agriculture in this country is the development of small artisan businesses which produce specialised foods or cheeses. The Department of Agriculture, Fisheries and Food and the Department of Enterprise, Trade and Innovation have not quite bought into how much can be done in this sector. They do not have the same vision as Sir Anthony O'Reilly did in the 1960s, when he was made chairman of Kerrygold and brought to that organisation a vision that made Kerrygold a brand leader in butter throughout the world. Prior to his intervention we mass-produced butter, packaged it with no labels or branding and exported it to the UK. We did not get the maximum value for the product. We need the same drive to be innovative and to help small and medium-sized enterprises.

The Government response is that it is giving so many million euro to Enterprise Ireland and to county enterprise boards. This is like a continuation of what was done in the Celtic tiger, which was to throw a few million here and there. The Minister of State needs to explain to us how the money is being spent and what governance is overseeing it. How will he tell us that the money is being well spent? One thing we see from the Comptroller and Auditor General's reports is that much of the money spent in the past decade was not spent very sensibly. We need a new focus and to make every euro count, whether in research and development, marketing or helping these companies to structure and organise themselves properly.

There is a need for smaller government and the Minister of State should drive this forward. Look at all the regulations and rules. Some of them are necessary and have a role to play in protecting workers and standards but others seem to be long past their sell-by date and best got rid of. There is also a need to buy in people's help. People refer to the Government's initiatives on the smart economy as the smart alec economy. They do not see the Government as doing much with regard to the smart economy apart from making announcements about it. They do not feel the Government knows what it is talking about when it discusses a smart economy and what it will do for the country.

A large number of small very specialised companies work with software and micro-engineering, which I do not quite understand. We could assist them in a far more positive way but, instead, we seem to have a big notion of a smart economy, which we keep speaking about. The smart economy is quickly going the same way as the announcements on 300,000 jobs to be created over five years. I remember prior to the most recent general election there was a big announcement of 300,000 jobs to be created over a number of years. The same five Ministers were lined up in front of the cameras to have their pictures taken. Unfortunately, what has happened is that we have lost 300,000 jobs, but that is a story for another day.

There is a need for the Government to put forward proposals the public can buy into and can believe will happen. Proposals are often put to Ministers which are a bit different or difficult to understand. People in the business community have a sense that Ministers are great at paying lip service but do not seem to have the inclination to follow through and drive forward some of these projects. This motion is about showing that Government policy is failing because businesses are failing faster and showing how difficult it is to obtain credit. The Minister for Finance poured cold water over some of these proposals in the Lower House. There is a need for the Government to be more open-minded and to try to identify what works. There is also a need for it to change how it does business and realise we are in a different environment and that we need to knuckle down and get things done.

I welcome the Minister of State back to the House. I was amused listening to the previous speaker because we always lose sight of what this and previous Governments have achieved. He mentioned the Government having no credibility with the people. Not that long ago, complexions of this Government delivered jobs at a phenomenal rate. We have lost sight of things. Yes, there has been an international economic downturn——

Yes, international.

——and we have to deal with those problems. I listened attentively to Senator Twomey's speech because he spoke about the 1960s when Kerrygold was launched as an international brand. Now, it is well marketed and internationally recognisable as an Irish brand. It reminded me of the indomitable Irish spirit that can, for a small country, get out and market good products very well. As well as having a good product, one needs a good sales person and sales team, and that is what we have managed to have. Our ability to attract and become the biggest provider of software at a particular point in time was also quite remarkable. Irish politicians and business people did this.

The 300,000 jobs are mentioned as though the Government's integrated strategy will never be achieved. The proof of the pudding is in the eating. What have complexions of this Government delivered previously? We have delivered that level of employment and no one can argue with those facts. The notion that we do not have a hope of delivering anything again is an awful message to be sending out. The Opposition must get tired of delivering this negative message time and again. Ireland has got out of recession before and, against all types of odds, we have succeeded and led the way in many innovation areas. We will do so again. What we need is a belief in ourselves.

This goes to what happens in a team talk midway through a match when things are not looking good. One motivates one's people and team to get out and win and really go for the last bit because it will be over at a certain point. This is what I cannot understand about the Opposition. Consensus is breaking out to a certain degree, and that is welcome. We are beginning to no longer confuse the economy with the Government. The Opposition tries to kick the Government, but it should not kick the economy because we all have a responsibility for it and need to look after and protect it. No one will look after the economy better than the people. At least we are making progress in so far as the Opposition is keen not to fool or mislead the public into thinking there will not have to be hard choices. It is commendable that it is willing to participate in recognising the extent of the savings that need to be made.

This co-operation needs to come out in terms of job creation. The people who will build this economy are the Irish people, each and every one of us, through spending on home improvements or buying another car.

We are depending on each other to bring ourselves out of economic stagnation. The political class in this country likes to talk down the economy all the time. That does not inspire confidence in anyone. We have a particular responsibility with regard to job creation. I am sure many Members of this House know from experience in their own family lives that unemployment can have a debilitating effect on people. We need to avoid it at all costs. We can help to create employment by encouraging confidence in the economy.

I hope Senator Buttimer has been inspired by my speech. I hope he will deliver something positive. He is a positive individual, by and large. His instinct is to talk a good talk. I look forward to hearing him speak. I am sure he will not play the doom and gloom card. We all have the responsibility I have mentioned.

I wish to speak about the availability of credit to small and medium-sized enterprises. When we discussed the importance of the SME sector issue in the Chamber last week, we said it was important not to get complacent about the positive developments that are beginning to emerge. Other speakers have alluded to the improvements in access to credit. The Credit Review Office is a good invention. We can all come up with anecdotes, but they are not of much use if we are constantly listening to the same story. The Credit Review Office is asking people to provide tangible examples of where credit has been refused and to suggest how the question of access to credit can be dealt with. This small and cost-effective measure is offering great solace to businesses that are frustrated by credit flow issues. During last week's debate, I mentioned an engineering company that is unable to get access to a modest sum of money. As a result, it may have to make people redundant. That is really not what we are about. That is why it is important that SMEs can access credit.

I will conclude by referring to the Construction Contracts Bill 2010 which was before the House yesterday. I thought it would be discussed on Second Stage, but that did not happen. If I had spoken on the Bill, I would have made a point that occurred to me during last week's discussion, which I have mentioned. It is interesting that the Bill ensures that certain facilities are provided to the construction industry to make payments easier for builders. I welcome that provision because no one likes to see money tied up in any place. That said, I do not understand why the same facilities are not being provided to small and medium-sized enterprises, which we discussed last week. I will make that point again during the Committee Stage debate on the Construction Contracts Bill 2010. I hope it can be amended to give SMEs an opportunity to operate on the same level playing field. All businesses should receive the same treatment under the law.

Cuirim fáilte roimh an Aire Stáit. I was struck by Senator O'Malley's euphoric speech. I wish her well with her colourful revisionism.

The facts are the facts.

The facts are the facts. The Senator is dead right. Governments of various hues since 1997 have brought us to where we are. Small and medium-sized enterprises, which are the lifeblood of our communities, are in serious trouble. I agree with Senator O'Malley that we need to get our house in order. We need to ensure this country's SME sector survives. I am concerned we will have nothing left.

I wish to refer to an e-mail I was sent by a friend of mine who owns a small enterprise in Cork. In the section of the e-mail dealing with the issues that affect him, he says that "costs are still too high". He mentions that his turnover has receded at a higher rate than costs like rent, rates, bank charges and energy costs. He asks legislators to force banks, energy companies, local authorities and insurance companies to realise that small businesses are the lifeblood of many local towns and that the services and employment they provide "must be preserved". He accepts that business people must endeavour to fulfil their obligations to the various institutions. That is the balance we must try to strike. We must allow SMEs to sustain, create employment and survive. The institutions must allow revenue to be generated and the banks must provide liquidity.

In the e-mail I mentioned, my friend also refers to the importance of allowing long-term leases to be amended to protect tenants in circumstances in which the level of business is not what was anticipated in the original business plan. Rightly or wrongly — he is approaching it from his own point of view — he calls on landlords to negotiate with lenders in order for them "to be able to service any borrowings." During the Celtic tiger years, the price of property was astronomical, rents went berserk and people lost the run of themselves. The fundamental task that faces all of us is to maintain and preserve the jobs we have, to create new jobs and to keep businesses afloat. This must be done. We cannot favour special interest groups or friends — we must look after all of our people. The other difficulty we have relates to consumer confidence. There is money in our country. People have money but they are afraid to spend it in advance of the budget. They are worried they are facing into four years of doom and gloom, brought to them in the main by Fianna Fáil and its friends.

The motion before the House notes that "1,132 businesses have been declared insolvent since the start of the year". That represents an increase of 12.5%. If that rate is sustained, almost 1,500 businesses will be gone by the end of the year. I listened to Senator Mooney's comments about the construction industry during the earlier debate on the banking sector. The construction industry is suffering the most. It is worrying that businesses in the services sector are also being affected. Almost 200 of them have gone out of existence. A further 140 businesses in the retail sector are also gone. We were told the establishment of NAMA would provide liquidity, ensure credit would flow, help to create viable businesses and households, allow our country to get moving again, enable people to get back to work and encourage consumer spending. Sadly, that has not happened. We need to send our banking institutions a message to the effect that credit must be allowed to flow. Approximately 40% of firms that have applied for credit facilities have encountered credit refusals. That is twice the refusal rate experienced during normal economic times. None of us wants bad business plans to be activated. At a time when viable businesses need to be able to access liquidity and credit, it is not good enough that so many of them are being refused. The Minister of State is familiar with this problem from his previous portfolio. I am concerned that the banks have become so insular and have retrenched to such an extent that they do not understand what they are doing.

Senator O'Malley spoke about pride. We all have pride in our country and want to see it rise Phoenix-like from the ashes to become a vibrant economic force once again. However, for that to happen leadership is required, as is a commitment and a willingness to reward entrepreneurs and help small and medium-sized enterprises, including that of the person who sent me an e-mail and whose small business is struggling.

The Minister of State is familiar with the Cork City and County Enterprise Boards. They carried out a confidence survey in which 61% of those surveyed said the level of credit availability was the same, which meant it was poor, while 36% said they believed bank credit facilities had deteriorated in the previous six months. That presents a massive problem in terms of confidence. Bank clients cannot access credit or pay suppliers and have outstanding debts. At a recent meeting between the Credit Review Office, the creation of which I welcome, and the Cork Chamber of Commerce there was a very clear indication of the need for businesses to use the Credit Review Office.

It is important that we establish the facts. The Financial Regulator and the Government can only do so much. The banks must play their part. We have bailed them out by giving them billions of euro. They, in turn, must help the economy to flourish and our entrepreneurs, not the big fat cats but the small business person whom the Minister of State and I both know and who is struggling to survive.

I am delighted to speak to the Private Members' motion. Small and medium-sized enterprises are the backbone of the economy. This has been well established by the statistics for the numbers they employ and the goods and services they provide for larger companies. This is critically important.

Senator Carty referred to the need to attract foreign direct investment. Having a small and medium-sized enterprise sector is hugely significant in attracting foreign direct investment because such businesses are capable of servicing the needs and requirements of such companies.

It is because of the important role small firms play and in recognition of the challenging environment in which they have operated in past two years that the Government has placed support for the sector at the heart of its strategy for economic recovery. The Opposition will be well aware of the Government's jobs strategy discussed in the Oireachtas recently. It is clear that the best way to support business and create jobs is to fix the banks, address the deficit in the public finances and improve our national competitiveness. These actions are not aimed at firms of a particular size, in a particular sector or in a particular ownership; rather they are aimed at improving the overall business environment in the country in order that all firms can survive and grow. Central to this strategy has been the repair of the banks which are the key facilitators of business transactions in the economy on a daily basis. Specifically, credit for the enterprise sector, especially small and medium-sized enterprises, should primarily come from a properly functioning banking system. This is critically important.

There were statements in the House earlier on the bank guarantee scheme and the Minister for Finance's statement of 30 September. Some are already beginning to rewrite history in terms of what happened two years ago. The following point is hugely significant. If the banks had not been guaranteed in 2008, there would have been a catastrophic meltdown in the financial institutions in this country. This is accepted by independent commentators. The bank guarantee scheme was hugely important in ensuring that we, at least, retained some element of integrity in the banking system. The supports offered thereafter in the context of recapitalisation of the major banks, the nationalisation of Anglo Irish Bank and other supports ensured that, at least, we had the bones of a functioning banking system. With support from the taxpayer, through the Government, we now have a system under which we can begin to get credit flowing to the small and medium-sized enterprise sector. If the bank guarantee scheme had not come into effect on that fateful night, the banks would have been incapable of borrowing on the wholesale money markets, would not have had access to credit to lend to small and medium-sized businesses, could not have cashed employees' cheques or provided short-term credit. It would have been catastrophic, in particular, for the small and medium-sized enterprise sector which depends on short-term credit on a continuous basis. It can only access credit through the banks. The most important step, therefore, in recent times was the introduction of the bank guarantee scheme to retain the integrity of the banking system. I acknowledge the role the Minister for Finance has played in trying to support the banks to prevent what would have been a huge meltdown in the Irish banking system. If we are to address the problems we face, we must accept the reality and try to move forward.

There is also the backdrop of the international recession, which most people do not want to accept. The last time I looked at the globe Ireland was on planet Earth, not anywhere else. It is an integral part of the world economy. For that reason, it is critically important our small and medium-sized enterprise sector is able to compete throughout the world and, more important, that the markets to which we export pick up. Until there is an upturn in our major trading partners, growth will be sluggish. For that reason, ensuring our competitiveness is critically important and that is within our remit. We must try to reduce the burden on small and medium-sized businesses, get credit flowing, stabilise the public finances and create an environment which can support and stimulate the small and medium-sized enterprise sector. It is critically important that the world economy picks up because we export more than 80% of everything we produce. The Government, through the State agencies, has put a lot of effort into trying to find new markets, keep current markets open for the small and medium-sized enterprise sector and encourage the internationalisation of the sector in order that we will not be solely dependent on the UK market and that we look further afield to try to find new markets. This is hugely important.

I refer to the code of conduct which has been established, the bank guarantee scheme, the recapitalisation of the banks, the nationalisation of Anglo Irish Bank and the establishment of the National Asset Management Agency. With other Senators, Senator Buttimer said he believed that once the National Asset Management Agency had been established credit would flow. The purpose of NAMA was to look at the balance sheets of the banks to see how impaired they were and address the problem by transferring the impaired assets to NAMA in order that the banks would have balance sheets which would allow them to access credit on the money markets to enable credit to start flowing again to the small and medium-sized enterprise sector. We stated at the time that this was not a quick-fix solution to the credit difficulties being experienced, bearing in mind the position in 2008 when we faced a possible meltdown of the banking system.

The primary objective of the code of conduct for lending to small and medium-sized enterprises is to facilitate access for sustainable and productive businesses. The code promotes fairness and transparency in the treatment of the small and medium-sized enterprise sector by all regulated entities. It applies to those areas of banking of key importance to small firms such as overdraft facilities and term loans. It is specifically aimed at regulating the relationship between small firms and financial institutions and is not optional. Regulated institutions must comply as a matter of law. Not only has the code addressed how banks lend to small firms but the Government has also secured commitments on the actual levels of credit the banks must extend to the SME sector. The House will be aware that the Government secured a commitment from the main lenders, AIB and Bank of Ireland, to make available a sum of not less than €12 billion in total for new or increased credit facilities to the sector in 2010 and 2011, including for working capital. When it comes to honouring this commitment, the Government will not be prepared to simply take the banks' word. The Credit Review Office is making a major contribution in dealing with the outflow of credit not only in reviewing cases in which credit has been refused but also in reviewing bank lending policies and driving the process in providing businesses with a proper professional banking service.

The Minister for Enterprise, Trade and Innovation, Deputy Batt O'Keeffe, has made it a priority to regularly meet the banks to discuss the availability of credit for businesses, especially small and medium-sized enterprises. With the Minister and the Ministers of State, Deputies Conor Lenihan and Calleary, I have travelled around the country to meet businesses to hear about their experiences at first hand to ensure the Government hears both sides of the story. For my part, I attended a regional meeting in Shannon in August and I had 12 regional meetings in the year previous to that. In fact, I attended one in Athlone in July 2008 as well.

The concerns of business regarding credit availability have been conveyed to the banks. The banks are fully aware of the Government's view, not only in the context of the recapitalisation and the code of conduct, but also in the feedback from these regional seminars on how their lending practices could be improved and ensuring the considerable investment of the taxpayer in funding and supporting the banks for the purpose of lending to small and medium-sized businesses is continued.

Some Senators raised the issue of the banks' expertise in the area of assessing business plans. Enterprise Ireland has made available its expertise in this area to the banks and has put key staff into the banks to train up their personnel who for many years would have based lending policy on property values as opposed to the commercial merits of the proposition in front of them.

That we have someone of Mr. John Trethowan's calibre monitoring the banks and assessing their policies is having a positive and meaningful impact on this aspect of banking performance. Mr. Trethowan stated this month that the worst is over for small and medium-sized borrowers and that the situation was much more positive for bank customers than it was six to nine months ago. It is important to recognise that there is definitely an easing of credit to the small and medium-sized sector. There is a great deal more work to be done but we acknowledge that there is a start to this process. Having the Credit Review Office overseeing not only individual applications that may have been refused by the banks but also the lending policies in macro terms is critical as well. This echoes the views that have come back from small and medium-sized business representatives as well. In recent surveys they have stated that the flow of credit is beginning to filter out into the economy. As a practising politician who meets business representatives continually, however, I accept there is still much to be done in this area.

While fixing the banks has been a key element of our recovery, the Government has, in parallel, focused on maximising direct and indirect supports to enterprise with a specific emphasis on SMEs. The SMEs in Ireland benefit not only from the direct financial supports available through the county enterprise boards and Enterprise Ireland but also from foreign direct investment activity supported by IDA Ireland right up to the multi-billion multi-annual capital investment programme. The Government has targeted interventions and supports for small firms but they also benefit from our initiatives in the wider economy.

Regarding targeted support for entrepreneurs, the House will recall last week's announcement by the Taoiseach and the Minister, Deputy Batt O'Keeffe, of the provision of additional capital funding of €3.3 million for the county and city enterprise boards supporting more than 450 new jobs in small firms. This is in addition to capital funding of €15 million provided in 2010 to the enterprise boards. The Government responded quickly to the rapid economic downturn by providing financial support to almost 2,000 companies through the employment subsidy scheme and the enterprise stabilisation fund.

The public sector, as a large procurer of goods and services provided by small firms, must do what it can to improve the cash flow of the small and medium-sized sector as well. I mentioned in the House in the course of an Adjournment debate on Thursday last that all Departments are now required to pay their business suppliers within 15 days of receipt of a valid invoice. This directly impacts on the cashflow of the SMEs and there is scope to see this approach extended more widely.

Small firms in existence today are the product of the creativity and effort of entrepreneurs who believed in their ideas and worked to make them a reality. Government assists these risk takers, in particular, through the programmes provided by Enterprise Ireland. In 2010, Government increased the funding available to Enterprise Ireland by 26% on the outturn for 2009. We did this to stimulate the development of new businesses and facilitate the expansion of existing companies through a broad range of initiatives, including direct financial and non-financial supports. We are also investing in small firms in the earliest stages of development via Enterprise Ireland's €150 million seed and venture capital programme. We are committed to developing the venture capital landscape further and we are doing this through the €500 million Innovation Fund Ireland.

As I stated earlier, SMEs benefit from our targeted investments but also from initiatives in the wider economy. The Government's new integrated strategy for trade, tourism and investment creates a platform for small firms to maximise their potential, either as suppliers to exporting firms or as exporters themselves. The strategy sets a number of priorities and targets to be achieved by 2015. It will increase the number of new export focused jobs by more than 150,000 in manufacturing, tourism and traded services, with a similar number of indirect jobs also being created; increase the value of exports by indigenous companies by 33%; diversify the destination of indigenous exports; increase overseas visitors to 8 million; and secure an extra 780 inward investment projects through IDA Ireland.

The UK market, which is key to many small indigenous firms, will, along with the US, continue to be a key market for Ireland. There is also considerable potential to expand business with our eurozone partners and the new and exciting potential growth markets such as Brazil, China, India, Russia, Japan and the Gulf states. Our small firms will face obvious barriers such as language and cultural attributes as well as different business practices and regulation. The co-ordinated effort of all agencies will be focused on helping our small firms overcome these barriers, win new business, succeed in new markets and reach their potential. In doing so, Government is both providing leadership and taking action in support of small firms. Of course, these facts are absent from some of the Opposition's analysis of the Government's economic strategy, and I can understand that as well.

One point that has come across strongly in my dealings with small business owners is that they thrive on confidence. This is most significant. Senators O'Malley and Carty and others referred to it. We need to be honest and open in debates in this House. I have stated time and again that the negative narrative that permeates the Houses of the Oireachtas and the media is having a damaging impact on confidence. Less confidence leads only to less investment and less spending which equals more job losses. We have an obligation, not only in this House and in the other House but across society, to try to be as positive as we can in facing the adversity in a challenging way with optimism to prevent the nay-sayers from having their day because this is having a shattering impact on individuals, families and businesses. When one looks at the amount of money going into deposits in recent timesvis-à-vis the times of exponential growth in the economy, savings are up rapidly and that is because people are frightened and fearful. I do not want to downplay the significant challenges that exist but this country has developed itself into one of the wealthiest countries in the world, whether people like to admit it or not. It has one of the best social welfare systems in the world, it has a good education system, it continually turns out top quality tradespersons and graduates and it has a good health system. We would like to do more in all these areas but we have achieved a great deal. The State is only 90 years old. Getting from the pillage of colonialism to where we are today in 90 years has been a considerable achievement. It has been achieved by one means only — the resourcefulness of our people. We have very little other than the resourcefulness of the people on this island.

It is critical we send out a message that Ireland is in a challenging position but can overcome the adversity. We have done this previously. I left school in 1985-86 when there was a workforce of 850,000 and almost 20% unemployment. There are now 1.8 million in the workforce and living standards have improved dramatically in that 25-year period. It is not as if we have lapsed back to where we were. There are significant challenges. Unemployment is stubbornly high at 13.6%. We want to ensure that changes and we start to expand the economy and drive down unemployment, but it will not be achieved, or certainly will not be helped, by the continuous negative narrative that is pervasive in commentary across the airwaves. This is not about shooting the messenger. This is about explaining that confidence helps people to spend, invest and create opportunities and employment, which themselves create further confidence. We did this in 1986-87 when we started a programme of renewal in the country and people had an appetite for change and a belief in their determination and in themselves. I am definite that people still have belief. It is just that it must be turned on again.

I make that point because it is something I genuinely and passionately believe. As I stated in this House previously, I have more at stake as a father of three young children in ensuring the present Government proposals work and bring us through these challenging times than I will ever have as a Minister of State, and I mean that passionately. We have an obligation to be confident, to lead people and make them believe they can come through these difficult times, as the people have done on numerous occasions since the foundation of the State.

Good news is important and there have been positive signs in recent weeks. Redundancy claims have declined and recruitment agencies are indicating there has been a healthy increase in the number of jobs advertised. I was informed recently by a financial services company that it will recruit 300 people by Christmas and it hoped to recruit a further 200 people after Christmas. Opportunities are available, even in these challenging times. Three quarters of the jobs advertised are for newly created positions. More important, the number of job placements increased by 55% in the third quarter of this year compared with the third quarter of last year. These figures come on the back of Ireland's improved trading performance. The value of exports, for instance, increased by 12% in July compared with the previous July.

Notwithstanding whether people are prepared to admit it, the recession was international. If that were not the case, Irish exports would have continued to grow. They did not increase because the economies of our trading partners, including Germany, the United Kingdom, the United States and most other eurozone countries, shrank. The contraction in world markets damaged our export potential. Enterprise Ireland has indicated, however, that its firms will recover approximately 70% of the export earnings lost last year in the deepest recession the world has seen since 1929. This and other messages will encourage small business owners and consumers and engender the confidence required to get the economy growing again.

I have referred to the daily negative rhetoric which discourages potential investors, entrepreneurs and consumers in Ireland. One cannot take small and medium-sized businesses in isolation. Foreign direct investment is of major benefit to the small and medium-sized enterprise sector which services and feeds off the large multinationals. SMEs also create a critical mass among themselves. If we continually highlight negative factors without referring to positive factors, we will dissuade people from coming here to invest or explore potential markets for investment and discourage tourism.

While we must acknowledge and address the position we are in, we must do so in a manner that demonstrates a belief that we can emerge from the current circumstances. As the Minister of State with responsibility for trade, I travel abroad to promote Ireland as a location for foreign direct investment and a country that exports goods and services. The negative commentary reported daily around the world has a damaging effect.

The Government recently announced a trade strategy, Trading and Investing in a Smart Economy. People frequently ask what is a smart economy. The answer is not scientific. A smart economy is simply one in which one does things in a smarter fashion, whether making agricultural trailers in a more efficient and design friendly manner or using the highest end technology. It is about being smarter, thinking outside the box and using technology, innovation, creativity and imagination. Having a smart economy is a straightforward approach in which one uses all available resources in the most intelligent manner possible, breathing competitiveness and efficiencies in one's production lines right through to the end product and delivery to the customer.

The Fine Gael Party motion claims the Government has broken a promise to introduce a loan guarantee scheme. This assertion is completely at odds with information provided by the Minister for Enterprise, Trade and Innovation, Deputy Batt O'Keeffe, in the Dáil last week. The Minister indicated that his officials are working with their colleagues in the Department of Finance, the Credit Review Office, Enterprise Ireland and Forfás to address access to credit for viable small and medium-sized enterprises, including the option of a targeted loan guarantee scheme. The most recent meeting was held on Monday of last week. A range of issues relating to SME credit was discussed and follow-up action is under way. These meetings are aimed at building on the already substantial progress that has been made in identifying the critical elements for further initiatives. It is important that any new initiatives complement rather than substitute the main banks' lending commitments and activities under the recapitalisation package and provide value for money from the perspective of taxpayers.

Taxpayers have stepped up to the plate by supporting the banks. We do not want to introduce another scheme that would impose an obligation on taxpayers to underwrite more risk. We must, therefore, strike a balance to ensure any loan guarantee scheme does not displace credit a bank would otherwise lend.

The activities I have outlined can hardly be described as equating to a broken promise on the part of the Government. On the contrary, they are evidence that the Government will take every step necessary to ensure small firms have access to the credit they require. This will be balanced with ensuring the banks meet their obligations and taxpayers are spared undue risk. I am concerned at the implication of the motion that initiatives should be progressed in haste and a blind eye turned to outcomes expected from the banks in light of the measures taken, as outlined by the Minister of State in his earlier statement to the House on the announcement of the Minister for Finance on banking.

Even more worrying is the Fine Gael Party's pursuit of a strategy that overlooked the potential exposure to the taxpayer. The main source of credit for viable businesses is through a functioning banking system, which has been well supported by the taxpayer. The Fine Gael Party motion implies that we are willing to put taxpayers' money at risk by promoting an all-pervasive loan guarantee scheme and allowing the banks to get off the hook. The motion would redirect responsibility from the banks to the taxpayer. The Government, on the other hand, is focusing on targeted measures for business that are critical to the economy and indigenous export growth.

It is obvious the Government has a multifaceted approach to supporting small firms. Our strategy ranges from one-to-one advice and grants provided through county enterprise boards to a range of supports from Enterprise Ireland delivering spin-off benefits from IDA Ireland and Science Foundation Ireland activity. In addition, we have a €40 billion capital stimulus programme and ambitious strategy for international trade and investment.

Government is a complex business and no single initiative will solve all the financial concerns of our enterprises. The Government recognises this and has provided leadership and a broad range of policies to restore our economic fortunes and support our enterprises, especially the small and medium-sized enterprise sector. It will not be distracted from its path and will not follow the lead of the Opposition in taking a populist, narrow stance, rather than demonstrating an understanding of the complexity of the broader business environment.

The motion is welcome in that it allows the Government to outline the initiatives it is taking. We have heard much about the need for inclusiveness and to support the Government's initiatives in a challenging environment. The issue is not that the environment is challenging politically but that it is challenging for Ireland inc. and Irish people. We need to ensure there is a broad political consensus for a buy-in to the four year plan.

The British Chancellor of the Exchequer today outlined his four-year plan to the House of Commons. The United Kingdom, which is also in a challenging position, has established a four-year plan. While the plan is opposed by the Labour Party, it gives citizens, investors and business as much certainty as a forecast can give that a pathway to economic recovery is in place. Under the plan, the budget deficit will be reduced, public finances stabilised and the generations to come will not be shackled with a high level of debt.

That is what the Government here has done.

That is what would happen if the Government shied away from its responsibility. The House heard a number of veiled references to the Fianna Fáil Party. As a practising politician, I will accept some blame for what my party did or did not do. That said, we cannot airbrush the fact that my party has been at the centre of building the economy and trying to ensure we are competitive, have a strong domestic economy and good investment in social services, health, education and infrastructure. This cannot be forgotten lightly. If we want to discuss how we should address our current problems, some commentators will have to acknowledge that the Fianna Fáil Party was central to many of Ireland's positive achievements. More important, these achievements were not secured by a political party but by the people. We simply created the environment in which they were secured. People are Ireland's greatest natural asset and one of the few raw material resources on this island.

Exactly. There is nothing else left.

For that reason, I believe one should try to put forward a view of confidence and optimism, even in these challenging times. One should state quite clearly to the small and medium-sized business sector, the trade union movement and all the country's stakeholders that it is possible to get through these challenging times by pulling together as well as addressing and facing up to the reality of our present position. Moreover, political parties also have an obligation in this regard. There is no painless way out of the present difficulties and everyone must shoulder a certain element of the burden. Obviously, a political party or a Government would wish to ensure those who can carry the most will do so and the most vulnerable will be protected as best as possible. Those who spread myths and fantasy to the effect that there is an easy or painless way to address our problems do a disservice to themselves and, more importantly, do a great disservice to the people and to the honesty of a debate that is required on how we should face up to challenges and obligations as a Government, as a Parliament, as political parties and as a people. I commend the amendment tabled by Senator Carty. I take into account the views expressed by Opposition Members. As the Minister, Deputy Batt O'Keeffe, stated last week, this proposal has not been dismissed but is being analysed and examined. Other issues must be taken into account, however, to ensure we do not simply replace one form of credit with another, thereby simply putting the burden back on the taxpayer.

I welcome the Minister of State to the House and welcome his positive demeanour although I wonder whether we live in the same country. I also am pleased his children are young because it will take so long for the country to recover from the mismanagement of the Celtic tiger that it is to be hoped that they will benefit from the recovery that will take place in years to come. The Minister of State referred to change and the change I seek is for Fianna Fáil and the Green Party to be out of office. I seek an election in order that Fine Gael will be the party in power that can rebuild trust in this country because the Government has betrayed the people. Almost 500,000 people are unemployed and I find it extraordinary that the Minister of State speaks to Members about being positive when, after 13 years in government, Fianna Fáil has destroyed this country. I find this incredible. I attended a meeting last night at which a young man stated that all of his class will be obliged to emigrate. As no apprenticeships are available and there are no jobs for graduates, whom the taxpayer has spent so much money educating, they all must emigrate.

I commend Senator Phelan on tabling this motion because Fine Gael is concerned for the small businesses of Ireland. NAMA certainly has not encouraged credit to flow. While the Minister of State stated that recapitalisation eventually will cause credit to flow, that has not been the reality thus far. Two years have elapsed since the banks were recapitalised by the taxpayer. Why can a loan guarantee scheme not be put in place to recapitalise and get credit flowing for small businesses? Every single job created by a small business generates money for the local community and for families and means taxes are paid to the Government. The Government is not helping to keep open small businesses. Local authorities insist on their rates, a 5% increase in energy costs has been imposed and in some urban areas there certainly has been no reduction in rent. I do not know what country the Minister of State is living in. I have a small business and in my experience it is impossible to make ends meet. I spoke to a lady today who has an art framing business. She told me she has not paid herself since last January but is lucky because she got a job for three days a week that now sustains her business and helps her to put bread on the table for her family.

A total of 1,132 businesses have been declared insolvent since the start of the year. While I would love to be positive, I live in reality whereas the Minister of State appears to be in cloud cuckoo land. People are going out of business every day of the year. This is the reason that, similar to Deputy Perry in the other House, Fine Gael Members in this House have proposed that a loan guarantee system be put in place to ensure credit flows to try to help people to stay in business. We have proposed that this should happen rather than the continual bailing out of the banks. It is all right for the taxpayer to do that and the Minister of State asked what would have happened had this not been done. In my opinion it would have been a fine day had Anglo Irish Bank been allowed to go to the wall.

That is not the opinion of the Governor of the Central Bank.

I did not interrupt the Minister of State. The Government begrudges bailing out small businesses that provide revenue and sustain the economy in small villages or towns. This proposal is about keeping small, incidental jobs, not those of big bankers or the Galway tent people about whom the Minister of State has been congratulatory. In addition, he congratulated the Minister for Finance while our country is going down the tubes. This is an outrage.

Two years ago, I spoke in this House about the possibility of setting up a bank for the poor. Mr. Muhammad Yunus of Bangladesh won the Nobel Peace Prize having set up a bank for the poor, whereby small businesses such as window cleaning or cleaning businesses would be able to get a small sum of money and be sustainable. Although I suggested this a long time ago, it has fallen on deaf ears. The Minister of State, Deputy Mansergh, was in the House at the time and although he promised to look into it, he never reverted to me about it.

Why should the Minister of State say consistently that one must be positive when so much negativity exists? Were the Government to put in place a system whereby credit could be given to small businesses, one could then be positive. It is to be removed from reality to speak about confidence and being positive in the face of so much heartache in respect of businesses going to the wall. One need only consider the boarded-up shops in any provincial town. One will see streets where windows are empty as shops have departed and formerly thriving businesses have closed down. This is the reason Fine Gael has tabled this motion requesting the Government to set up a loan guarantee system that would help capitalise such small businesses in order that the single jobs that I believe are so important can be retained.

Is Senator Butler offering to speak?

I just want to——

I advise Senator Butler that if he is offering to speak, he will have five minutes.

May I make a contribution?

I will say a few words because it is only fair——

Can the Acting Chairman confirm that I will get a chance to speak?

As the Acting Chairman, I must offer the speaking slot to the opposite side of the House. Consequently, Senator Butler is in control of the time now.

Perhaps we could share a couple of minutes each.

Senator Butler could take three minutes.

Is it now being put to me that Senator Butler wishes to share time?

Yes, I will share time with my colleague.

The Senator has five minutes in total.

Perhaps we could have two and a half minutes each. I ask the Acting Chairman to notify me when my time has expired.

On a point of order, may I check——

Time is running out. Is the proposal to share time agreed to?

It is agreed but can the Acting Chairman can give me a little additional time, given that I was going to look for something?

I cannot because the Minister of State must attend another meeting and I need to call Senator Phelan.

Very well. I accept that.

I will be quick about this. It is not fair to say any Government, especially the present Government, is responsible for mishandling the economy when there was a complete collapse of the banking sector and the worldwide economy. A further bad situation resulted when the construction industry bubble burst. That made things much worse for this country. Therefore, the Government had no choice but to support our banking system to ensure our economy could function.

I would be the first to agree we must support small businesses. The only way to get out of the trouble we are in is to support the small entrepreneurial businesses that take on five or ten people. They will be the backbone of the country and get us out of the trouble we are in.

We have gone beyond the blame game. We — and I include the Opposition in this — have reached a reasonable consensus that we must do things together and ensure we put on the green jersey and get the job done. I believe the country will come out of the deep recession it is in.

We have turned a corner. While the economy is still fragile, it is important we bring in strategic budgets over the next four years and ensure we get our deficit down to 3% of GDP and below. It is important the Government take stimulus measures in these four budgets in order that we will see growth in the next four years.

It is also important to look at mortgage holders. Banks should take a 20% or 25% stake in the properties of each of the 36,000 householders who are in trouble. That would help to reduce mortgage payments and remove negative equity, which could be sold on if the householder moved. Banks must take responsibility in that regard. The Government has put safeguards in place to ensure people cannot be turfed out of their houses.

I appreciate Senator Butler's sharing his time with me. I thank the Minister of State for being in the House once again. I will tell the story of a business whose owner has written to me.

The Minister of State does not like to be accused of being out of touch. I will not tell him he is out of touch because perhaps I am out of touch as well. We have said the blame game is over. If that is so, the Government must consider real solutions that could save business. I compliment Senator Phelan on his motion and the minutiae of the solutions he proposes. I ask the Minister of State to listen. The Government met the leaders of all the parties today and Ministers said they are interested in consensus. Let us be genuine about it.

Business is in real trouble. Here is an account sent to me by the owner of a recruitment firm:

As an indication of what has happened in some private sector companies let me briefly outline what has happened in this company. Since 2008, 13 of the 27 employees have had to be let go. The remainder had their salaries reduced by 30% and had their commission arrangements cancelled. I, as the managing director, took a 70% pay-cut, as I could not see how I could impose 30% pay-cuts on my staff if I did not take a much larger cut myself. I also ceased any pension provisions I had been making. I see no particular virtue in what I or my staff had to do. It was pure pragmatism, as we did what we had to do to keep the company afloat and to retain a salary, however depleted. We reduced the expenditure of the company until it matched the income of the company, as did all other private companies who started to lose money in 2008. Two years on, and even with these pay-cuts the company is in a precarious position but at least we have done everything we can to stay afloat, so far, and to get through this crisis.

The actions taken in this company have been taken in SMEs all over Ireland. This is not being seen in the CSO figures, which are being distorted as they are aggregated with some of the more successful companies in the multinational sector, many of which have not had to endure any pay-cuts.

There is a reality. Some 200,000 people have lost their jobs in the private sector since 2008. The Minister must accept some real proposals. What is this person proposing? He certainly condemns the farcical benchmarking without outcomes. He is also seriously condemnatory of the way this House has brought in rules to make fat cats of Ministers and Deputies. Expenses have been abused in this House by our own colleague, Senator Callely. It has been absolutely appalling.

That matter is before the courts.

Please withdraw what you are saying, stick to the facts and do not mention names.

I am sticking to the facts. I withdraw the name but the Member is in this House. It is absolutely appalling. We have a banking crisis that will result in a debt which will cost us €6 billion just to service by 2014.

The Minister of State should get real and listen to the real issues affecting business. I do not ask him to listen to me but to the account I have read of the struggle of a business that is still in place, giving employment and paying taxes which go towards paying Members of this House. I will hand over to Senator Phelan, who has some real proposals. If the Minister of State is genuine, he will implement at least one or two of them.

I thank the Minister of State for his comments on my proposals. No copy of his speech was circulated, which is unusual. The sentiments expressed in the Government amendment are not very different from those expressed by Fine Gael in the original motion. The Minister of State spoke about how the Government's endeavours are not aimed at any particular sector or group within the economy. We are talking about the 800,000 people who work in small and medium-sized enterprises. That is more than half of private sector jobs. The Government should be focusing on that area because those jobs are in every parish.

Successive Governments, including those led by my own party, have focused on attracting large industries from overseas to provide huge numbers of jobs. There was a good announcement in Ballina in that regard this week. If we are to affect real communities everywhere in the country, however, the SME sector is the one that deals with real people. I have listened to comments made here and in the other House. We are talking about the local shop or pub or the local carpenter who has a few people working for him. The Government should be focusing on that group.

The Minister of State and speakers in the Dáil referred to John Trethowan's comment that the worst is over. I wish we had a euro for every person who said the worst is over.

I have just come from a meeting where we discussed figures contained in an ESRI report which clearly indicate that the worst is far from over. The number of small businesses that closed in the last nine months compared with last year and the previous year has risen. This clearly indicates that the worst is far from over.

It is important to set targets. I reject the Minister of State's comment that the Fine Gael motion was proposed in haste and should not be acted upon. We acted in haste, correctly, to save our banking system. It had to be done. These proposals were not drawn up in haste. There have been large-scale closures in the SME sector over two to three years. There is nothing hasty about this.

I agree with much of what Members on the Government side said but the initiatives outlined in the amendment are not having an impact on the ground.

The Minister of State criticised the Opposition for its daily negative rhetoric. We are not indulging in rhetoric; we are putting forward genuine proposals. Almost 100 countries, including our nearest neighbours in Britain, have similar loan guarantee schemes. Neither Deputy Perry nor I would for a second claim our proposal is perfect but the Government's efforts are not working. We have to reflect the views of the people we meet on the street who are involved in small businesses and who tell us about their difficulties in accessing credit. That is not negativity; it is the truth. We have engaged in the blame game over recent months but now we are all agreed on the need for consensus and progress. We know what has to be done but I am not convinced the Government's proposals to maintain and create employment have borne fruit.

Amendment put.
The Seanad divided: Tá, 27; Níl, 21.

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Carroll, James.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Dearey, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Leyden, Terry.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • Mooney, Paschal.
  • Ó Brolcháin, Niall.
  • Ó Domhnaill, Brian.
  • Ó Murchú, Labhrás.
  • O’Brien, Francis.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Sullivan, Ned.
  • Ormonde, Ann.
  • Walsh, Jim.
  • Wilson, Diarmuid.


  • Bacik, Ivana.
  • Bradford, Paul.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Cannon, Ciaran.
  • Coghlan, Paul.
  • Cummins, Maurice.
  • Doherty, Pearse.
  • Donohoe, Paschal.
  • Fitzgerald, Frances.
  • Hannigan, Dominic.
  • Healy Eames, Fidelma.
  • McCarthy, Michael.
  • McFadden, Nicky.
  • Mullen, Rónán.
  • O’Reilly, Joe.
  • Phelan, John Paul.
  • Regan, Eugene.
  • Ross, Shane.
  • Ryan, Brendan.
  • Twomey, Liam.
Tellers: Tá, Senators Niall Ó Brolcháin and Diarmuid Wilson; Níl, Senators Maurice Cummins and John Paul Phelan.
Amendment declared carried.
Motion, as amended, put and declared carried.

When is it proposed to sit again?

Ag 10.30 maidin amárach.