Loan Guarantee Schemes Agreements (Strategic Banking Corporation of Ireland) Bill 2021: Committee and Remaining Stages

I welcome the Minister of State, Deputy English. It is good to have him here again. I remind Senators and the Minister of State that this item is to conclude, by order of the House, not ordained by me, at 2 p.m. I ask Members to be conscious of that in identifying what they want to speak on.

Section 1 agreed to.
SECTION 2

I move amendment No. 1:

In page 3, line 27, after “concerned” to insert “and such conditions may include social and environmental criteria”.

This amendment proposes that the conditions attached to the agreements which the State may sign with banks in respect of loans under this scheme may include social and environmental criteria.

I do this cognisant of the fact that this is effectively a co-funding and a co-sponsoring process whereby part of the guaranteeing process is done by European institutions which have set out eligibility criteria. The Minister of State may clarify for me but I believe it is 56% co-guarantee from Europe and 24% from Ireland, which comprises an 80% guarantee in total.

In the case of the European Investment Bank and other such financial bodies, when they bring financial instruments through, we have had clarity on the environmental and social standards which they are setting out in their loans because there is a recognition that all the funding that we have and all of these new measures of stimulus should be in tune with our overall goals of moving forward, for example, on the green deal and on recognising priorities of resilience.

For example, on the European side, there are the assessment and management of environmental risks, pollution prevention, biodiversity and ecosystems, cultural heritage, the rights and interests of vulnerable groups and labour standards, which are all part of the criteria that are being attached. I am simply asking that in the 24% that is being guaranteed by Ireland, we would have similar evidence of what conditions and of what kinds of criteria and considerations are being brought to bear.

I note with disappointment, and I disagree, with respect, to the decision of the Leas-Chathaoirleach that my amendment No. 10, which called for a report to look exactly at how all of these issues have been addressed by the loans given under the scheme, was found to be not relevant. It is deeply relevant, however, because these are standards which Europe-----

The Senator is to speak about this section and we will come to that amendment then.

In case I do not get the opportunity to speak to that section, given I have to critique-----

The Senator has made the point.

-----and the fact that this is a 30-minute debate. We are making decisions in respect of a €50 million fund, with potentially €29 million of State liability in a 30-minute debate which is inadequate. It would be appropriate and I hope that the Minister of State will indicate that he does intend to produce a report to deal with how these various environmental and social criteria have been integrated.

I am looking for transparency and information on this because it is one instrument in a suite of stimulus measures as part of recovery and resilience strategies across Europe. The Parliamentary Budget Office, which I note is not a left-wing think tank but a neutral office, issued a report which points out that Ireland has some of the lowest levels of parliamentary engagement in respect of the financial instruments on recovery and resilience strategies. In fact, of the four ways that there might be for parliamentary engagement on recovery and resilience strategies, Ireland was one of only seven countries in the 24 which said "No" to all four. We are, therefore, one of only seven countries that have failed to have parliamentary oversight on one of the largest and most important sea changes and moves towards stimulus, investment and recovery. According to the Parliamentary Budget Office, we may still barely have the option, although the time is tight, to have parliamentary and committee debates on our recovery and resilience funds. These are all options that other countries have taken up. That is why I am concerned and it is not sufficient that we simply have 30-minute debates on financial instruments going through with everybody hoping, as I do, that there is a good fallout and that good things happen for SMEs on the back of it but without thought and discussion about how it can be most effectively done and without the insight that parliamentary colleagues on all sides might be able to offer in respect of these issues.

This loan guarantee scheme is one part of a suite of measures. I am putting forward this idea to make the point on transparency partly because I am calling for greater transparency and discussion on all of the measures and how they join together with all our other collective goals, for example, those goals identified at European level such as biodiversity, climate, environmental risks, cultural heritage and labour standards. We are allowed to incorporate these issues. I understand that they may come in indirectly via the European eligibility certificates and criteria but I feel we can do more here in Ireland and there is an insight that we can give here. Can the Minister of State address and accept amendment No. 1 and perhaps indicate if he plans to bring forward reports and further information on these issues? I thank the Leas-Chathaoirleach.

I welcome the Minister of State to the House and I welcome this important Bill. It is important that people know about it and what it means to them. It will mean we can extend the loan scheme to small businesses, farmers and fishers. It extends the loan guarantee period to at least 2022. It is being rushed through because of the advice from the Attorney General that we need to complete this before the end of June in order that businesses can access it. It is focused on helping who have been dealing with Brexit in particular. I always favour anything that helps the small to medium enterprise sector and of particular interest to me are primary producers, of which there are many in my county and many other rural counties, as well as anything to help farming and fishing communities, which are struggling.

There will be need for clarity on the maximum interest rate, which might encourage people to take on the loans. It is important that the Government supports credit unions in this too. I have spoken here on that before. They know communities and small businesses best. Their service is probably better than that given by most big banks, unfortunately, now that more and more banks are closing down and switching to services by machines instead of personal service. I welcome the Bill but seek clarity on interest rates and a commitment that the credit unions be part of the roll-out.

I very much appreciate what Senator Higgins is trying to achieve with her amendment but this is about putting in place an appropriate scheme to access finance for SMEs. I want to flag an issue that I have encountered. I will not name it, but I refer to a business involved in the hospitality sector across several counties which has made applications through similar schemes, namely, the Strategic Banking Corporation of Ireland, SBCI, future growth loan and the Covid credit guarantee scheme. The business was refused by two banks for the schemes. It appealed it to the Credit Review Office, which found in favour of the business and instructed the banks to provide the loans, yet the banks have still not done so. That seems to defeat the purpose of our schemes and what we are trying to do here as a Government, which is to provide finance to small and medium enterprises. It also defeats the purpose of the Credit Review Office. If it is there, it must be able to make recommendations that are actually implemented. I seek reassurance from the Minister of State that we can actually tackle this. It is very important, particularly as we come out the other side of this Covid crisis, that we ensure the businesses that are viable and are determined to be such are supported and that we as a Government get what we want implemented by the banks. I would appreciate it if the Minister of State could touch on this matter in his reply.

I echo Senator Cummins's point on access. It is a key point. This is one measure in a whole range that have been brought forward in the last year to support businesses. This one in particular has been changed to include the farming and food processing sectors, which is very welcome but the key thing is to be able to get access to it. The banks need to be held accountable for that. I encourage the Minister of State to keep engaging with the Minister for Finance on that in order that we ensure it gets down to people. From an agricultural perspective, farmers are never slow to borrow money to invest in their land and put money back in. After the challenges of Brexit in recent years, they are still willing to take risks and invest locally.

I ask the Minister of State to engage on that.

As for the shortness of the debate, I can understand the frustration. We had a good debate on Second Stage of the Bill last week. The key is to get the scheme to businesses and the people who need it as quickly as possible. We have sought a motion in the regard for the Bill's earlier signature by the President. I understand Senator Higgins's concern but the key is to get the money to people quickly.

Like previous speakers, I would prefer if we had much more time to go into much more detail on the Bill but the main focus is to get it enacted in order that businesses can access much-needed finance. In many cases, businesses are dying because they cannot get access to funds, and it is critical that they get that finance. We had a good debate on Second Stage of the Bill.

In regard to Senator Higgins's amendment, which seeks to include social and environmental criteria, I had presumed from listening to the Second Stage debate that the Bill was sufficiently broad such that these types of issues would be included in any event. I thought there would be no need to include a provision specifically for social and environmental criteria because they would be covered in the broad thrust of the Bill. I hope the Minister of State will outline that to us.

There is no doubt about the way farming has gone and many types of business are moving in that direction. They want to do their best under the new environmental regulations and so on and to be environmentally friendly. I had hoped that would be included in any event in the broad sense of the Bill, and that the types of project that Senator Higgins has in mind, which she did not specify but we all know what they would be in some cases, would be included and the financial institutions would treat them favourably. One would have thought that if they did not do so, there would be a place where businesses could appeal their application. I hope the Minister of State will confirm that to us.

I thank Senator Higgins for tabling the amendment. She tables a similar amendment to most of the finance-related Bills that come before the House. I can understand, to a certain extent, where she is coming from in arguing that we need this type of reporting. As someone who works in the SME sector, I have some understanding of how difficult and restrictive it is at the moment to access credit. Having tried to deal with the mainstream banks for the past 14 months in negotiation terms, I know it is very difficult to go through this process.

The greatest impact that we in the SME sector have is social. It is about the jobs we create in communities. The types of business at which the Bill is targeted have a very significant impact on society. As we deal mostly with agricultural primary food producers, I do not dispute that the environmental issue is of importance, but surely the funding will be used on environmental schemes, so one would think a combination of issues will be at play. While I accept the thrust of Senator Higgins's amendment, as I do every time she tables such an amendment, I am not in a position to support it. As someone who comes from that sector, I know about the frustration of trying to access credit at the moment. Credit is critical now from an agricultural point of view because of Brexit, not to mention Covid.

I agree. Many SMEs have shown incredible adaptability and have been making very significant changes. They are transitioning and we need to support and fund that. One of the problems is that people often get loans only for what they are doing already rather than what they can and want to do, and that is something we need to examine.

We also need to examine our procurement policies and how we reward SMEs that enter new areas. That will be part of the just transition funding that we need to consider.

In response to colleagues, I point out that my concern is SMEs. I include social enterprises in that. I believe the Government does as well, though I do not know to what extent social enterprises have benefitted from these schemes.

Another concern is that, without the proper scrutiny, too many of these schemes go to the bigger, surer thing rather than the SME or the company that is trying to do something new. We saw that in Home Building Finance Ireland. That is why the public wants more scrutiny of these areas. That was meant to go to small developers, yet €200 million of it went to developers who advanced purchase agreements with investment funds. We saw the visa dividend scheme, the funding that comes from cash for visas, which is questionable in itself. More than 20% of the money from that scheme is going to investment funds. There is a concern about SMEs getting squashed out.

Another concern I have and speak about in my amendments to this Bill is the inclusion of mid-caps. Why not have this relatively small scheme with €29 million liability and €50 million in total just for SMEs? Mid-caps, according to the definition on the Department's website, have €1 billion to €2 billion in assets. Let us go after the SMEs and maybe even have a scheme specifically for the "S" in "SMEs", the small businesses and enterprises which have done incredible work at local level and been key to the community. I agree they have a social and community development role and I worry that we have had numerous schemes which we have underwritten and we have heard from people across the House that, when it comes to the crunch, SMEs are still being denied funding and loans. These schemes are framed too widely and are not delivering for the core businesses that make up the fabric of the communities and that are on the main streets of towns across Ireland.

I am looking for more thought and engagement, including engagement on all of these schemes with everyone across the Parliament and the Oireachtas. Will the Department please stop keeping all of this in-house and simply presenting it to us for rubber-stamping? Can we have more scrutiny of all of these schemes as they come through so insights can be given and we can have more debate? Specifically, the recovery and resilience strategy certainly needs to come before these Houses.

I thank Members for the lengthy discussion we had last Monday. My understanding was we had spare slots. There was plenty of time left. I certainly did not cut the debate short and I spent all the time here answering everyone's questions, including about credit unions. There was nobody ducking and diving. This is very much being scrutinised and I am happy to do it.

This is similar to debates we had last July and September for very good reason. We are trying to support SMEs. As Senator Casey said, SMEs are under an awful lot of pressure and this will get finance to them. The criteria around size relates to an EU definition of small and medium businesses. We went through the statistics last week of the companies drawing this or funding like this down. More than 6,500 have been approved for the credit guarantee at the moment and 4,500 have drawn it down. They are the companies we are trying to reach.

My reading of the proposed amendment is to put in stricter criteria which will not, in my view, assist companies who need help today because of Brexit drawdown funding. I understand the necessity for us to work with all our SME community around the social and environmental agenda, the labour agenda and many others but this relates to borrowings. They are borrowing and paying it back, with added costs. This is not the State investing in a company or giving away a grant. All that has strong criteria. The criteria used here for our part of the guarantee, the 24%, is the exact same as the European Investment Bank, EIB. Our national bank criteria are the same as the EIB portion. It is 56%, 24% and 20% here. We are facilitating companies with their borrowings to invest in businesses that are active and open today. Social enterprises are allowed once they show they are impacted by Brexit. If Senators have concerns about any particular one, I ask them to give us a shout and I am happy to tease it through with them.

Senator Cummins asked about a company I am not familiar with. If the Credit Review Office reviews it and says it should be lent to, that normally happens. I would be happy to look at that case because that is what the Credit Review Office is.

I made the point last week in the House that we did not have the credit guarantees or credit review offices in place quick enough after the last crash. They came into force in 2013 and they were very beneficial. I am glad they are in place. I thank the Houses for their support over the last year in getting these schemes put in place quickly. They will be monitored. We will keep an eye on where the funding is going, as currently happens.

Reference was made to Housing Building Finance Ireland, HBFI. I dealt with a number of small builders who would not have been able to build houses without that funding. It did what it was meant to do, in most cases. It is probably at a later stage that companies go off and enter into agreements, leases and so on, not generally when they are drawing down funding. I am happy to debate the house funding issue, but it is not part of this Bill. This Bill does not deal with investment properties or houses. There is a miscommunication around what is needed in housing to make it happen. We need to have a really long conversation about that, because there is a lot more to the story than some people in this House are trying to make out.

On the point raised by Senator Garvey, the maximum interest rate is 3.75%, but the majority are under 3%. As I discussed with Senator Ahearn in this House last week, 94% are under 3%. Credit unions are open to this as well. I did address the issue last week, but I think the Senator had left the House.

Amendment put and declared lost.

Amendments Nos. 2 to 6, inclusive, are related. Amendment No. 3 is a physical alternative to amendment No. 2. These amendments may be discussed together by agreement.

I move amendment No. 2:

In page 4, to delete lines 15 to 20.

This amendment relates to mid-caps. I know that it is a small part of this fund, but it is a concern for me. I know too that there are issues because some of this is targeted.

Yes, it is 5%. My concern is around the SME focus. I understand from engaging around this issue, that it relates to agri-businesses on the Border and so on, but I am concerned still about where the loans will go. It relates to the point I made earlier about whether our SMEs are getting the loans. In other words, will small businesses get access to these loans? I am also concerned that the mid-caps which can access this funding are companies which are based in Ireland or have a branch in Ireland. My concern - this relates to an area where we have not seen risk analysis - is in regard to the creation of reasonable expectations. The Minister of State will be aware that in parallel with this debate is the constant conversation about the introduction, potentially, of investor protection mechanisms under which companies may seek compensation in regard to changes in policies, one of the grounds for which is that they have been invited, offered an inducement, given a support or been encouraged to engage in an area of investment. I sought to have the following addressed, but I do not think it has been included. How do we ensure that those for whom we are underwriting loans are clear that that should not be considered as constituting a reasonable expectation if, for example, the policy in the area of agri-business or industry in which they are involved changes over the next two, three, five or ten years? That is my concern and it is part of the general piece which is the lack of risk analysis in regard to the schemes. I want us to have stimulus schemes and for us to be able to support businesses. I agree with, and called for, a stimulus support in 2008 when we went for the austerity model of engagement. We need stimulus, but the risk that we create if we bring in potential investor protection mechanisms, which could allow for suits in regard to compensation where an expectation was created or seen to be created by the State having offered support, is an unnecessary risk.

Again, one of the problems with the investor protection mechanism and the investor court system, ICS, that is potentially being brought in under the Comprehensive and Economic Trade Agreement, CETA, is that they make something good - our support to business - a potential liability for the future. That is not something that I want to see happen.

With colleagues on the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, I have had correspondence with the Department. As far as we can see, it does not appear that a risk analysis has been done. We have been told that what might happen in future cases is hypothetical, but everything is hypothetical. I was on the boards of small companies before joining the Seanad and we undertook risk analyses. A risk analysis is needed in this context.

I will not oppose the Bill. I would like it to be more clearly targeted. I am concerned that the Minister of State spoke about me adding more criteria. As I understand the matter,-----

I am sorry, but I must put the question.

Certainly. I was just going to say that I believed there were already environmental and social criteria from the European side. We would simply be matching those. That might be the appropriate approach.

The Senator and Minister of State can discuss this matter privately. My apologies to Senator Burke, who had indicated.

As it is now 2 p.m., I am required to put the following question in accordance with the order of the Seanad of this day: "That amendment No. 2 is hereby negatived in Committee, that section 2 is hereby agreed to in Committee, in respect of each of the sections undisposed of, the section is hereby agreed to in Committee, the Title is hereby agreed to in Committee, the Bill is accordingly reported to the House without amendment, Fourth Stage is hereby completed, the Bill is hereby received for final consideration and the Bill is hereby passed."

Question put and agreed to.