As we embark on another year, it is appropriate to take stock. Before addressing the report of the advisory group for small business, I will comment briefly on the macroeconomic position. As everyone is aware, the domestic economy is in a poor state and employment continues to decline. Coupled with the latest international forecasts showing downgraded growth prospects in key export markets, this must give all of us, especially the Government, cause for great concern. Our trade with global markets has been our saving grace. Without it, the economic decline would have developed into a sustained economic depression with reductions in growth of more than 10% per annum. The weaker economic conditions in Europe will result in Irish export growth falling short of previous expectations. A report from National Irish Bank, for example, suggests exports will grow by only 4.5% this year, down from an earlier estimate of 5.5%. It is important to keep in mind the macroeconomic position to ensure we are able to see the real problems facing the country in their proper context. As the international economy continues to show weak growth, we cannot be confident the domestic economy will recover in the short term.
The advisory group report identifies 12 areas for action. I will not discuss each of them in the limited time available but will focus on two issues, namely, access to finance and labour market costs and flexibility. We constantly hear that access to finance and credit lies at the heart of the difficulties facing businesses. We focused extensively on the measures the previous Government took to restructure and recapitalise the banking system to ensure it provides for substantial new lending in the economy. However, we have not yet seen new finance reach the businesses that desperately need it. Only today, I spoke to a gentleman in the restaurant business who has reached the point where his business is turning a small profit but is crippled by debt. Having initially approved loans to allow him to refurbish his premises and get going, his bank later pulled back. The restaurant owner, who had gone in hope in the meantime, now finds himself with heavy debt and experiencing great difficulty accessing credit, despite being in a position to make a go of his business.
Before Christmas I discussed with the Minister cases where Revenue was putting the squeeze on companies. Even where banks were willing to provide a lending facility or lifeline for a couple of years, Revenue was foreclosing, as it were, on the companies in question. I wonder about the short-term thinking displayed by the banks and, on occasion, the Revenue Commissioners.
The Government's proposals under the jobs initiative include a commitment to ensure the Financial Regulator will rigorously monitor banks' activities to ensure credit is available to borrowers who meet reasonable credit standard requirements. Does the Minister of State have figures on the credit that has been made available to small and medium-sized businesses. Unless we tackle the dire need for access to finance by such businesses, we will be in trouble. I am aware of the work of the Credit Review Office which may challenge decisions by banks to refuse loans to businesses. However, on 13 October last, the head of banking supervision at the Department of Finance stated that the Credit Review Office was the most under-utilised part of the financial system open to businesses. How does the Government propose to increase uptake of this facility among small businesses?
On the issue of labour costs and flexibility, while it may be unpopular to say this, we should not view the work being done in the area of unemployment regulation orders and registered employment agreements as the be all and end all. I have no doubt this work will produce reductions in labour costs in the construction sector and some of the more labour intensive lower wage sectors. It would be naive to believe, however, that it is only labour costs which hold back job creation in retail, hospitality and construction. Market structure, a lack of consumer demand, the availability of credit and, above all, the devastated personal incomes of people in employment whose taxes have increased and earnings declined are the main drivers of the problem of the lack of job creation in the sectors to which I referred. While some people will regard the review of wage setting mechanisms as a priority, I am not sure it should be the highest priority. We should at least be cautious about viewing labour protections as a barrier to growth. An increasing number of voices in certain business and media sectors portray these crises as an opportunity to strip away labour market protections for the sake of flexibility, etc. While I realise the importance of being realistic and reasonable and recognise that a balance needs to be struck, I am also concerned that the current trend may be misused. For this reason, I urge the Government, in its zeal for reform, to avoid punishing workers unduly by removing hard-earned protections.
